“The ISA industry promised that its product would be safer and better, but day after day, we see that these private student loans are every inch as dangerous as what came before them.'
When former Purdue University student Matt Wilmsen decided to try a new loan-financing program that would help him avoid traditional student debt, he didn’t expect himself to be constantly grappling with the servicing of his loan for his $29,000 in student debt.
The West Lafayette, Ind.-based university’s Back a Boiler program, launched in 2016, offers ISAs to students seeking alternatives to traditional federal and private student loans. His total monthly payment for the two ISAs is nearly $600. Payments on federal student loans have been suspended since March 2020. Unlike federal loans, payments towards private loans like ISAs cannot be paused by the government.
A Purdue spokesperson said that the college switched loan servicers because Vemo Education had transferred servicing operations to Launch. Since Launch did not originate ISAs for new students, and only maintains accounts with existing students, Purdue had to suspend the program until it found a replacement.
When Wilmsen graduated in May of 2020, he had a six-month grace period prior to make his first payment. He knew that payments would come due, so he uploaded his job offer with his salary and other information to the payment portal. But when the six months were up and he tried to initiate payments, he said he was ghosted. He asked multiple times about how payments would be processed.
He was happy to pay back what he owed, but the pressure of paying so much off over a short period of time was heavy: “At one point, I was paying $661.22 per month.” He was then transferred to a new loan servicer who works with Purdue, Launch Servicing, which he said is now undercharging him instead, sending Wilmsen down another rabbit hole of worry, as he’s worried about being hit with penalties later on.
In 2020, the Student Borrower Protection Center and the National Consumer Law Center filed a complaint with the Federal Trade Commission, alleging that Vemo engaged in deceptive marketing practices, and miscalculated students’ starting salaries and income growth, making ISAs seem cheaper and more attractive.