A lawsuit has been filed to challenge common banking industry policies that make it difficult for undocumented students to finance higher education, the New York Times reported today. The case was filed in San Francisco federal court, with the California League of United Latin American Citizens participating as a plaintiff. Most student borrowers rely on loans backed by the federal government, but undocumented students are not eligible for federal loans. Those wishing to borrow must turn to private loans, which generally carry fewer protections — and, often, higher rates — than federal loans. No laws prohibit lenders from making loans to undocumented borrowers who possess identifying information like a Social Security number. Still, this is an area where banks tread very lightly. Among five of the nation’s largest issuers of private student loans, two — Discover Bank and Sallie Mae — said that they made loans to undocumented students under some circumstances.
