#private loans

[lostlegendaerie]

Fuck it! US Private Student Loans Guide!

DISCLAIMER: while I have worked in private loans specifically for five+ years, this isn't ‘financial’ advice and is just a heavily summarized guide on how to navigate them. Yes, these loans suck, but complain to your legislators not me. I’m just trying to help you know what you’re doing. Additional info for each section is under the cut!

1) Who are you and who are all the companies constantly running around with my money?

I work in loan SERVICING, which is basically the billing department. If you’ve got a new company asking you for money, it's probably a new servicer and your debt is still owned by the bank. We enforce the terms in the promissory note, the document you sign telling the bank “yeah I'll play by your rules if you give me the money.” If your loan defaults, you’ll get contacted by a third (fourth?) party, but how that works is beyond my wheelhouse. The bank or your servicer should be able to confirm what happens in case of default.

2) What am I looking for in a ‘good’ loan?

Generally, you’re going to want SIMPLE instead of compound interest, a FIXED RATE opposed to a variable one, and you’ll want to go for FULL DEFERMENT while in school and make manual payments when you can. Also ask up front about stuff like if disability forgiveness or co-signer release (getting your parents off it) is offered.

3) This loan sucks! How do I make it better?

Student loans are NOTORIOUSLY hard to get out of, unfortunately. If the interest rate/payment relief options suck, you can try to REFINANCE where you take out a new loan to pay off the old one. This gives you a new promissory note, interest rate, and terms/conditions. If you’re trying to erase the debt entirely, ask for the promissory note (if they can't provide a copy, we have to forgive the debt. I've only seen this happen ONCE.) or try to go through social security disability.

DO NOT USE FREEDOM DEBT RELIEF OR OTHER SERVICES. DO NOT. THEY ARE SCAMS.

More in depth information for each point!

1) Lenders and Servicers

The lender is the person who provides the funds in the debt - the bank who pays the school or the hospital or the home contractor fixing your sink. The servicer is the company that is your point of contact when you need to make payments, ask for payment relief, or otherwise manage the loan that exists. Think of us as the mechanic (we keep the car running) where the bank is the manufacturer (they make the car). Some different servicers are SoFi, Zuntafi, Great Lakes, Nelnet and Firstmark Services; their names will be on the billing statements. Some different banks are Citizens, US Bank, NorthStar; their names will be on the promissory note and the disclosures.

Sometimes banks do sell the debt, however! A couple years ago Wells Fargo sold an enormous chunk of their loans off somewhere (an investment group, maybe?) but! The promissory note will still be the EXACT same if your debt gets sold. You’ll only get a new promissory note if you refinance the loan yourself.

2a) Interest Accrual and Rates

Interest is how banks profit off the loans they give out and/or ‘ensure they don't end up with a loss if the loan defaults’. (It's profit.) Most, but not all, loans calculate interest with the simple daily interest formula, shown below:

[(Current loan balance) x (interest rate)] divided by 365

If your loan’s balance is $10,000 and your interest rate is 6% you’ll be charged $1.64 each day. SIMPLE INTEREST means that this interest just kind of floats around on the account until a payment comes in and pays it off, where COMPOUND adds that interest to the balance at the end of the month/day/whatever. Compound charges you more over the life of the loan.

FIXED INTEREST is a set percent that doesn't change, where VARIABLE will change usually based on whatever the economy is doing. There’s a minimum and maximum value to the variable interest rates, so if you’re doing a variable ASK WHAT THE MINS AND MAXES ARE. A fixed rate might be 8% and a variable might be 3.25% the day you take it out, but that variable could have a maximum interest rate of 25% so be VERY, VERY CAREFUL. If you get stuck in a real bad variable interest rate, your best solution is probably a refinance.

2b) Deferment and Payment Allocation

So interest is gonna be accruing on your loan from the day the money leaves the bank. Sucks. And you may not be able to make payments while you're in school, so opting to DEFER your payments will stop them from billing you so you can skip a month or whatever without penalty. At the END of that deferment, though, whatever interest that accrued will be added to your current balance. If we use the example from above (10k loan with 1.64 daily interest) four years of school will add $2,400 to your balance and then your daily interest will jump up to $2.03 a day.

Solution? Make payments of what you can while you’re in school to chip away at that floating interest. Usually when you make a payment, it’s gonna go towards the interest first and then the rest drops the balance. (E.g. if you make a $20.00 payment ten days after your loan is disbursed, $16.40 will go towards interest and $3.60 towards your 10k balance). There is NO PENALTY for making extra payments or making early payments, but it might make your bills look a little weird if you’re being billed each month for just the interest.

3) Why are these loans so horrible? Can’t I find anything to help me?

Blame Reagan and the republicans who enabled him.

No, but really. The problem with these loans is that those promissory notes are VERY legally binding and have lots of fine print in there designed to make it as hard as possible for someone to skimp out on their debt without having their credit score decimated. Some lenders might even dip into your paychecks if you're crazy behind or default; again, that's not my wheelhouse and I've only maybe seen that once. Your best bet is just to pay it off as fast as possible (again, no penalty for paying the loan off early) or refinance into better terms.

And I get it. I really do. I hate how we’ve made so many incredibly important things in our society locked behind a paywall that charges poor people more to climb than the rich. But if you’ve made it this far, please don't turn your anger at me for not giving you the answers you want. The best I can do is vote for people who are willing to crack down on predatory lending, keep fighting for student loan forgiveness… and at my own job, make sure that my coworkers aren't making mistakes.

If you have a more specific question, I can try to answer as best I can without breaking any information privacy laws. And take care, okay? You are never fighting alone.

[reduanur]

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Is this conversation helpful so far?

[carsonjonesfiance]

I think Biden stopped taking the online anti-voting Left seriously (if he was ever aware of them) when the people that spent 4 years saying Obama’s drone usage made him worse than Trump in order to make their Both Sides arguments made nary a peep when Biden stopped nearly all US drone operations.

[mostlysignssomeportents]

Private equity plunderers want to buy Simon & Schuster

Going to Defcon this weekend? I'm giving a keynote, "An Audacious Plan to Halt the Internet's Enshittification and Throw it Into Reverse," on Saturday at 12:30pm, followed by a book signing at the No Starch Press booth at 2:30pm!

https://info.defcon.org/event/?id=50826

Last November, publishing got some excellent news: the planned merger of Penguin Random House (the largest publisher in the history of human civilization) with its immediate competitor Simon & Schuster would not be permitted, thanks to the DOJ's deftly argued case against the deal:

https://pluralistic.net/2022/11/07/random-penguins/#if-you-wanted-to-get-there-i-wouldnt-start-from-here

When I was a baby writer, there were dozens of large NY publishers. Today, there are five - and it was almost four. A publishing sector with five giant companies is bad news for writers (as Stephen King said at the trial, the idea that PRH and S&S would bid against each other for books was as absurd as the idea that he and his wife would bid against each other for their next family home).

But it's also bad news for publishing workers, a historically exploited and undervalued workforce whose labor conditions have only declined as the number of employers in the sector dwindled, leading to mass resignations:

https://lithub.com/unlivable-and-untenable-molly-mcghee-on-the-punishing-life-of-junior-publishing-employees/

It should go without saying that workers in sectors with few employers get worse deals from their bosses (see, e.g., the writers' strike and actors' strike). And yup, right on time, PRH, a wildly profitable publisher, fired a bunch of its most senior (and therefore hardest to push around) workers:

https://www.nytimes.com/2023/07/18/books/penguin-random-house-layoffs-buyouts.html

But publishing's contraction into a five-company cartel didn't occur in a vacuum. It was a normal response to monopolization elsewhere in its supply chain. First it was bookselling collapsing into two major chains. Then it was distribution going from 300 companies to three. Today, it's Amazon, a monopolist with unlimited access to the capital markets and a track record of treating publishers "the way a cheetah would pursue a sickly gazelle":

https://pluralistic.net/2023/07/31/seize-the-means-of-computation/#the-internet-con

Monopolies are like Pringles (owned by the consumer packaged goods monopolist Procter & Gamble): you can't have just one. As soon as you get a monopoly in one part of the supply chain, every other part of that chain has to monopolize in self-defense.

Think of healthcare. Consolidation in pharma lead to price-gouging, where hospitals were suddenly paying 1,000% more for routine drugs. Hospitals formed regional monopolies and boycotted pharma companies unless they lowered their prices - and then turned around and screwed insurers, jacking up the price of care. Health insurers gobbled each other up in an orgy of mergers and fought the hospitals.

Now the health care system is composed of a series of gigantic, abusive monopolists - pharma, hospitals, medical equipment, pharmacy benefit managers, insurers - and they all conspire to wreck the lives of only two parts of the system who can't fight back: patients and health care workers. Patients pay more for worse care, and medical workers get paid less for worse working conditions.

So while there was no question that a PRH takeover of Simon & Schuster would be bad for writers and readers, it was also clear that S&S - and indeed, all of the Big Five publishers - would be under pressure from the monopolies in their own supply chain. What's more, it was clear that S&S couldn't remain tethered to Paramount, its current owner.

Last week, Paramount announced that it was going to flip S&S to KKR, one of the world's most notorious private equity companies. KKR has a long, long track record of ghastly behavior, and its portfolio currently includes other publishing industry firms, including one rotten monopolist, raising similar concerns to the ones that scuttled the PRH takeover last year:

https://www.nytimes.com/2023/08/07/books/booksupdate/paramount-simon-and-schuster-kkr-sale.html

Let's review a little of KKR's track record, shall we? Most spectacularly, they are known for buying and destroying Toys R Us in a deal that saw them extract $200m from the company, leaving it bankrupt, with lifetime employees getting $0 in severance even as its executives paid themselves tens of millions in "performance bonuses":

https://memex.craphound.com/2018/06/03/private-equity-bosses-took-200m-out-of-toys-r-us-and-crashed-the-company-lifetime-employees-got-0-in-severance/

The pillaging of Toys R Us isn't the worst thing KKR did, but it was the most brazen. KKR lit a beloved national chain on fire and then walked away, hands in pockets, whistling. They didn't even bother to clear their former employees' sensitive personnel records out of the unlocked filing cabinets before they scarpered:

https://memex.craphound.com/2018/09/23/exploring-the-ruins-of-a-toys-r-us-discovering-a-trove-of-sensitive-employee-data/

But as flashy as the Toys R Us caper was, it wasn't the worst. Private equity funds specialize in buying up businesses, loading them with debts, paying themselves, and then leaving them to collapse. They're sometimes called vulture capitalists, but they're really vampire capitalists:

https://www.motherjones.com/politics/2022/05/private-equity-buyout-kkr-houdaille/

Given a choice, PE companies don't want to prey on sick businesses - they preferentially drain off value from thriving ones, preferably ones that we must use, which is why PE - and KKR in particular - loves to buy health care companies.

Heard of the "surprise billing epidemic"? That's where you go to a hospital that's covered by your insurer, only to discover - after the fact - that the emergency room is operated by a separate, PE-backed company that charges you thousands for junk fees. KKR and Blackstone invented this scam, then funneled millions into fighting the No Surprises Act, which more-or-less killed it:

https://pluralistic.net/2020/04/21/all-in-it-together/#doctor-patient-unity

KKR took one of the nation's largest healthcare providers, Envision, hostage to surprise billing, making it dependent on these fraudulent payments. When Congress finally acted to end this scam, KKR was able to take to the nation's editorial pages and damn Congress for recklessly endangering all the patients who relied on it:

https://pluralistic.net/2022/03/14/unhealthy-finances/#steins-law

Like any smart vampire, KKR doesn't drain its victim in one go. They find all kinds of ways to stretch out the blood supply. During the pandemic, KKR was front of the line to get massive bailouts for its health-care holdings, even as it fired health-care workers, increasing the workload and decreasing the pay of the survivors of its indiscriminate cuts:

https://pluralistic.net/2020/04/11/socialized-losses/#socialized-losses

It's not just emergency rooms. KKR bought and looted homes for people with disabilities, slashed wages, cut staff, and then feigned surprise at the deaths, abuse and misery that followed:

https://www.buzzfeednews.com/article/kendalltaggart/kkr-brightspring-disability-private-equity-abuse

Workers' wages went down to $8/hour, and they were given 36 hour shifts, and then KKR threatened to have any worker who walked off the job criminally charged with patient abandonment:

https://pluralistic.net/2023/06/02/plunderers/#farben

For KKR, people with disabilities and patients make great victims - disempowered and atomized, unable to fight back. No surprise, then, that so many of KKR's scams target poor people - another group that struggles to get justice when wronged. KKR took over Dollar General in 2007 and embarked on a nationwide expansion campaign, using abusive preferential distributor contracts and targeting community-owned grocers to trap poor people into buying the most heavily processed, least nutritious, most profitable food available:

https://pluralistic.net/2023/03/27/walmarts-jackals/#cheater-sizes

94.5% of the Paycheck Protection Program - designed to help small businesses keep their workers payrolled during lockdown - went to giant businesses, fraudulently siphoned off by companies like Longview Power, 40% owned by KKR:

https://pluralistic.net/2020/04/20/great-danes/#ppp

KKR also helped engineer a loophole in the Trump tax cuts, convincing Justin Muzinich to carve out taxes for C-Corporations, which let KKR save billions in taxes:

https://pluralistic.net/2020/06/02/broken-windows/#Justin-Muzinich

KKR sinks its fangs in every part of the economy, thanks to the vast fortunes it amassed from its investors, ripped off from its customers, and fraudulently obtained from the public purse. After the pandemic, KKR scooped up hundreds of companies at firesale prices:

https://pluralistic.net/2020/03/30/medtronic-stole-your-ventilator/#blackstone-kkr

Ironically, the investors in KKR funds are also its victims - especially giant public pension funds, whom KKR has systematically defrauded for years:

https://pluralistic.net/2020/07/22/stimpank/#kentucky

And now KKR has come for Simon & Schuster. The buyout was trumpeted to the press as a done deal, but it's far from a fait accompli. Before the deal can close, the FTC will have to bless it. That blessing is far from a foregone conclusion. KKR also owns Overdrive, the monopoly supplier of e-lending software to libraries.

Overdrive has a host of predatory practices, loathed by both libraries and publishers (indeed, much of the publishing sector's outrage at library e-lending is really displaced anger at Overdrive). There's a plausible case that the merger of one of the Big Five publishers with the e-lending monopoly will present competition issues every bit as deal-breaking as the PRH/S&S merger posed.

(Image: Sefa Tekin/Pexels, modified)

I’m kickstarting the audiobook for “The Internet Con: How To Seize the Means of Computation,” a Big Tech disassembly manual to disenshittify the web and bring back the old, good internet. It’s a DRM-free book, which means Audible won’t carry it, so this crowdfunder is essential. Back now to get the audio, Verso hardcover and ebook:

http://seizethemeansofcomputation.org

If you’d like an essay-formatted version of this post to read or share, here’s a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2023/08/08/vampire-capitalism/#kkr

[eyepatchdate]

my parents paid off one of my loans yayyyyyyyyyyyyyyy

[steveharrington]

reading reddit threads about financial aid and student loans never fails to make me want to chew drywall …… everyone speaks so confidently with fully incorrect info and acts like they’re so knowledgeable in the student loan process while saying just. false statement after false statement

[dontmean2bepoliticalbut]

[himblebo]

All I want in 2025 is to be able to move out

[screamingiminlovewithyou]

I would love to not be broke as fuck….like I have a FULL TIME JOB!!! A hard job. A job that requires (ignoring desantis on this one) a bachelors degree. A job that requires you to continually recertify and educate yourself. One where you’re consistently evaluated. Yet I still have to live with my sister and can barely make ends meet because of ridiculous rent prices. I just WANT TO BE FINANCIALLY FREE!!!!!!!!!

[britneyshakespeare]

you know someday i'm gonna feel so good when i have my student loans paid off

that ain't gonna be soon, trust me, but i think about it

[godsperfectprincess]

hell of a morning (i got my financial aid offer) (it does not include my best friend direct unsubsidized loans) (i do not have 40k to pay for school out of pocket) (i have a negative 1500 student aid index) (it should have included at least any government student loans) (i qualify for them) (i did not qualify for the reduced tuition based on GPA when i applied to college) (i do now) (i do not know of they will recalculate) (i do not have 40k to pay for school out of pocket)

[wacklemons]

oihhhhh the horrorsq

[lilbugprincess]

I'm officially two weeks away from visiting my partner and I feel like I'm going to explode having to wait. I just have to get through A LITTLE BIT LONGER and I can hug him again!!!!!!!! But it'd be really nice if I could JUST HUG HIM NOW!!!!

[bikananjarrus]

i need all student loans and interest rates to crash and burn and die horribly

[navree]

once again in that mode of reminding myself that i do need to not feel schadenfreude if nonvoters/democrat bashers suffer as a result of the consequences of their actions now that republicans are in charge like they asked for

[steveharrington]

this major plot point in gossip girl about dan’s financial aid getting “denied” and his fafsa getting “rejected” ohhhh don’t piss me off. dan needs to come to my financial aid office i’d check out his SAI and let him know to fix his ATB and he’d be all good. i’d get him his pell grant and his subsidized loan and any applicable state grant funding because i’d know for sure he did his fafsa before priority. and while we’re at it……assured scholarship bc i know his class rank and sat score are stellar