Loan programs designed to help (or exploit) laid-off college grads

The combination of soaring student debt loads and a tough job market has a lot of companies and colleges looking to help students who are struggling financially.

BridgeSpan Financial introduced a cynical new product called SafeStart this week and let me tell you: It is horrible.

Here's how it works. Pay $40 to $60 for every $1,000 in federal student loan debt you're accruing and then, after you graduate and can't make your payments, they'll make them for you. Then you have five years to pay them back, interest-free.

The problem is that the program must, on average, be a complete ripoff. In order for the business to work, the company has to take in more than it pays out -- by enough to cover its financing costs, marketing budget, administrative expenses, and earn a profit and pay taxes.

So if you our your student feels tempted to use SafeStart, here's a tip: Borrow less money and attend a less expensive college.

The other thing that's so bad about SafeStart is that it would really only be useful for private loans because the new Income Based Repayment system allows federal loan payments to be capped as a percentage of income -- and low-income or unemployed students will not have to make any payments at all. But SafeStart can't be used for private loans!

In other news, the USA Today reports that "Bellevue University, a private university in Nebraska that primarily enrolls adult students, says students who are laid off can have tuition, fees and loan obligations deferred for up to six months."

That's great except what happens in six months when you still can't afford the tuition and fee obligations?