NEW YORK (MainStreet)—Is the student loan crisis putting recent college graduates at risk of becoming lunch for predatory lenders before they can pay off their student debt? Maybe, if these twentysomethings find themselves trapped in a payday loan.
The Federal Deposit Insurance Corporation’s February 28 report on student loans says that student debt has tripled between 2004 and 2012, with 44% of all borrowers having loans that are yet to reach repayment status. Nearly 30% owe between $25,000 and $100,000, and 43% of all 25-year-olds had student loans in 2012. The value of outstanding loans is approaching $1 trillion, about 9% of the Gross Domestic Product. Payments on those loans can cut into living expenses.
Enter online payday loans, with triple-digit interest rates, balloon payments that call for the entire principal to be paid back in two weeks in addition to demanding that borrowers provide their checking account and bank routing numbers as a condition of the loan, giving the lenders access to their money.
“Often, the Website is really run by a company that plans to sell their data to a lender,” Saunders says of the lead generators. “It is illegal to deceive prospective borrowers by leading them to believe that that they’re applying for a loan when in fact their private information will be sold to the highest bidder without their consent.” The lender who bought the data will then contact the prospective borrower.