I had the honor of attending and participating in an interesting event last week at the Pueblo chapter of the NAACP. Focused on predatory lending, the meeting featured research from our friends at the Center for Responsible Lending on payday lending and student loan debt in Colorado.
Using data collected by the Colorado Attorney General’s office, Ellen Harnick, director of CRL’s western office, showed how payday loan customers, on average, paid 117 percent APR. Other datapoints Ellen highlighted for the group:
- Four in 10 of the Coloradans who paid off a payday loan took out another loan on the same day
- Average borrowers spend 299 days per year in payday loan debt
- Communities with a majority of African-American and Latino residents are seven times as likely to have a payday lending storefront than predominatly white communities
Even with our 2010 reforms, which lowered the cost of payday loans and set up a minimum six-month term, these expensive loans still lure Coloradans into a cycle of debt.
The conversation shifted to student loans as Ezekiel Gorrocino, a CRL policy associate, shared information on how student debt is now larger than credit card debt. CRL’s research shows for-profit colleges in Colorado contribute significantly to the student debt problem.
Althought “student debt” evokes images of young grads trying to pay off higher education expenses, Ezekiel said many people saddled with these debts are not former students. In many cases, those shouldering the burden are parents and grandparents who signed onto the loans.
CRL’s research says there are programs to help students repay their loans, but many times the loan services who are hired by the federal government to help borrowers don’t put students into these programs. A possible remedy, as proposed in the past legislative session by Representative Winter and Senator Moreno, would be to have these student loan servicers regulated by the Colorado Attorney General’s Office the same way we regulate servicers for other types of loans.
Based on what they heard, many community members in attendance engaged in discussions about what can be done. They agreed better financial education and specific information regarding payday loans and student debt is needed in their community. As we put together our Opportunity Report this fall, I look forward to digging deeper into these issues and finding solutions for Pueblo residents.