Figuring out how to pay for college is far more difficult for most people today than it was two decades ago. The skyrocketing cost of college has made it difficult for students and their families to both pay for school, and stay on top of living expenses. And it turns out that current and former students struggling to pay back the thousands they have in student debt present the perfect opportunity for predatory payday lenders to make a quick buck.
Payday loans intentionally trap financially vulnerable individuals in cyclical debt quagmires. The Consumer Financial Protection Bureau (CFPB) found that one in five new payday loan borrowers takes out at least ten loans, often in an attempt to pay off the original payday loan. Typical payday loans are for less than $500. Borrowers receive the loan immediately upon giving lenders access to their bank accounts, and providing sensitive information such as social security numbers. In turn, lenders collect what’s due, plus interest, on the borrower’s next payday. On average these loans carry insane interest rates of nearly 400 percent. When compared to the standard credit card interest rate of no more than 30 percent, payday loans charge a whopping 13 times more. Since lenders can take payments directly from a borrower’s bank account, borrowers can face hundreds of additional dollars in bank penalty fees from lenders’ repeated attempts to debit payments.
Payday lenders target and exploit individuals who are most strapped for cash and promise a quick and easy solution to all their financial woes. Unfortunately, there is no better pool of financially struggling individuals to make millions off of than college students, their families, and individuals trying to pay off their student debt. And these loan sharks have not missed an opportunity to hone in on their prey.
Cursory online searches for immediate help with student debt are rife with payday loan ads for lenders like easyazloans.com and Payday Loans Cash Advance which target college students who are waiting for a financial aid disbursement, money from home, or who don’t earn enough, and offer a chance to “get ahead and be completely prepared for the new semester” by taking out a payday loan to pay for books and supplies. Another ad prompts readers with information about grants and scholarships—but leads to a large, flashy messages with pictures of flowing $100 bills saying “Apply Now!100% Online; Fast Approval: No Paper Work; Get Your Cash: Spend As You Want.”
Have you had trouble with payday loans? Share your story here.
Payday lenders pose a very real threat to the financial security and well-being of students and those with crippling debt. If you have student debt and have been targeted or have fallen further into a debt trap because of a payday lender, share your story and let us help amplify your voice to create change. To learn more about the payday loan debt trap, watch this video from the CFPB below: