A new report released Thursday on the private student lending industry offers a bit of deja vu.

The report entitled “Too Small To Help: The Plight of Financially Distressed Student Loan Borrowers,” notes regretfully that “unlike the lenders that made these loans” — potential beneficiaries of the government’s TALF and TARP bailouts — “the borrowers are ‘too small’ to help.”

Private lenders like Wells Fargo, Citi and Sallie May all relaxed their standards as the economy expanded and offered private loans to more students at lower-tier schools — students often already maxed out on federal loans and unlikely to able to pay up. Creditors made and sold loans to borrowers, but with the specific goal of selling them to investors. Loan products were thus developed for the repackaging rather than to provide the most affordable and sustainable products for borrowers.

The study notes that lenders are inflexible with student borrowers, refusing to settle or cancel a loan even if the debt-holder dies. For example, the DiGregor family were hounded by debt collectors sicced on them by Sallie Mae after their son Tony died before graduation. Collectors only stopped calling to threaten the DiGregors after their senator got involved.The report says the government should require lenders benefiting from bailout funds to work with borrowers, restore bankruptcy rights to student lenders, and increase industry regulation.

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