After denouncing the corporation’s unethical business practices, the United States Student Association made the decision to boycott Wells Fargo by withdrawing all organization funds from the corporation.
The nation’s largest and oldest student run organization since 1947, the USSA advocates for student rights and affordable education by organizing grassroots movements and lobbying local, state and federal legislatures. According to USSA president Tiffany Loftin, the organization made the decision to boycott the bank after legal investigations into the corporation’s operations unveiled cases of predatory lending, racial discrimination and mortgage fraud.
Earlier this month, USSA hosted a demonstration along with a host of affiliated organizations at Wells Fargo’s corporate headquarters in San Francisco. Loftin said the organization wanted to put more pressure on the bank for their past injustices along with making current Wells Fargo customers aware of their allegedly unethical practices.
According to Loftin, Wells Fargo unfairly profits off of student loans by setting interest rates at unrealistic levels. Loftin hopes USSA’s decision to cut off ties with the corporation will help make students more aware of the potential risks when entering into private loans.
“We want to shed light on predatory lending practices on the corporate level. Wells Fargo’s interest rates go as high as fourteen percent,” Loftin said. “We believe students our age should not be taking out loans with interest rates that are that high. Making sure we won’t do business with them anymore is important, because our values do not align with the work that they do.”
Following its decision, USSA reallocated their organization funds to Amalgamated Bank, a credit union that Loftin claims is more progressively minded and reasonable in terms of student lending. According to Loftin, Amalgamated Bank provides its services to a number of non-profits, labor unions and progressive organizations and USSA believes that Amalgamated Bank’s services align with the organization’s values.
Amalgamated Bank President and CEO Eric Lebow said the bank strives to support students and workers by lending to a range of advocacy and lobbying organizations.
“Amalgamated Bank is pleased to stand with students and to be the bank for the United States Student Association. Providing banking services to organizations like theirs is consistent with the Bank’s mission of supporting organizations aiming to improve lives of students and working people across the country,” Lebow said in a statement.
While Loftin and the USSA condemned debt in the form of private loans, Wells Fargo Spokesperson Erin Downs said it is important to keep in mind that the majority of student debt comes in the form of federal loans.
“As of September 30th of 2011, for example, 84 percent of outstanding loan debt was federal loans and only 16 percent were for private loans,” Downs said in an email. “In regards to new loans, statistics show that 94 percent of new loans are federal loans therefore the overall percentage of outstanding fed- eral loans continues to increase.”
According to data from Finaid.org, the amount of private student loans is expected to increase at a rate of 25 percent annually as federal loan limits remain at a constant level, and the amount will likely surpass federal loan volume by 2030 unless federal loan limits increase annually. Private student loans are by typically far less accommodating than federal loans, according to a study released by the National Consumer Law Center.
“Private borrowers do not have the protections that government borrowers enjoy, including caps on interest rates, flexible repayment options, and limited cancellation rights. There are reports of private loans with interest rates of at least 15 percent and often much higher,” the study stated.
Contrary to USSA’s allegations, Downs said Wells Fargo ensures students choose reasonable options for loans they will be able to pay back in the future.
“In general terms, Wells Fargo is committed to doing what is right for our customers and upholding sound underwriting practices,” Downs said. “We approve student loan applications where we believe the borrower has the ability to repay the loan according to its terms. With education finance customers, we consider a range of appropriate factors, including a customer’s future ability to pay.”
USSA’s statement serves as a platform for the increasing number of college students accruing immense debt in the slow-recovering national economy. According to the Federal Reserve Bank of New York, the total amount of student loan debt reached 900 billion dollars at the end of last year.
A version of this article appeared on page 1 of January 31st, 2013′s print edition of the Nexus.