Citigroup is pulling out of the business of making student loans. Discover and Sallie Mae are buying Citi's 80% stake in the Student Loan Corp.
The deal follows Congressional action earlier this year that largely cut private lenders out of the federal college student loan program. The federal government hopes to save money by making loans directly and ending taxpayer guarantees of private student loans.
Discover, best known for its Discover credit cards, will acquire Stamford, Ct.-based Student Loan Corp. for $600 million. Sallie Mae, of Reston, Va., is the nation's largest student lender and will manage about $200 billion in federal student loans after the deal closes.
The news will not cause much gnashing of teeth among former students still making payments to Citi.
"My husband and I are both self-employed, and in this economy sometimes it makes things somewhat tight," Emily of Arkport, N.Y., told ConsumerAffairs.com. "The second, and I mean second, the loan is one day overdue they start calling and harrassing me (sometimes up to 16 times a day) my husband and our co-signers. It is insane."
"I am now 9 months pregnant and have had to be on disability for a few months now because of it and I called asking for a few month extension. Just until the baby was born and we could get back on our feet. She told me to make my co-signers pay and there was not one thing they could, or would, do for us. Ridiculous!" Emily said.
A consumer who asked to remain anonymous said Citi was completely unsympathetic to borrowers' problems.
"If you run into financial problems, stay the hell away from Citi ... I've been unemployed since 2008, and I've exhausted every option I have for repayment and my finances are depleted. I am filing for bankruptcy in the hope that these loans can be dealt with before I consider my life as hopeless and commit suicide."
More debt
College students are, in general, carrying much more debt than in previous decades. A recent study found that 67 percent of the U.S. bachelors degree graduates last year had student debt, averaging about $23,200 per indebted student. While most of that debt is in safer, lower-interest federal loans, a significant amount is in private loans that can carry interest rates of over 18 percent.
That study also found that nearly 3 million American students took out private loans last year, up from less than 1 million just four years before.
For-profit college students are already burdened with the highest average debt loads in the nation, at $32,650 nationwide, versus $22,380 for private non-profits and just $17,700 for public colleges.
