The Student Loans Nightmare And College Costs – A Book Excerpt
COLLEGE STUDENT LOANS ARE REACHING A TRILLION DOLLARS IN DEBT, BUT THERE IS HELP AVAILABLE
I am prompted to write about the student loans nightmare currently in full force in our country due to several recent personal stories from students I interviewed. First of all, the news coverage about the looming trillion dollars of debt from student loans is scary enough. But based on actual personal stories I have been told, it is much worse than it appears to be far worse than most people can imagine.
I will began by telling you actual college student loans nightmare stories and student loan successes, as well as solutions to their problems.
There are at least four stories I would like to share with you from students or graduates I have recently spoken to who wanted advice about college student loans or were featured in the media.
This will help you to understand the problem with college student loans for college and university students so that you can help your family members, friends, neighbors and associates avoid a horrible and costly school loan mistake. Once the mistake is made there is very little that can be done to remedy it, but there are options when student loans become unbearable or you get into default status. There is also an option to get an education with little or no schools.
First of all here are some of the examples of recent interviews I have had or media stories I have heard about student loans:
- My first story is about a young girl who ended up on the front of yahoo news who thought her student loans would be forgiven due to a terminal illness.
Well, they were forgiven with a caveat. She was told by the government that her whooping $150,000 of college student loans were forgiven. Then she got a tax bill from the IRS. They explained to her, that because it was “like a gift” she now had to pay $75,000 in taxes on what they considered a gift. Most people on the yahoo boards were surprised to find that American students were borrowing upwards of $150,000 to go to college. Especially since most entry level jobs cannot support a payment anywhere near that level of debt.
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- The next was the young girl who was all over Dateline television and internet news who went to medical school and borrowed an astounding $250,000 in student loans.
She was sent a bill for over $500,000 when she finished her medical residency in family practice medicine. She was told that interest accumulated on the loans while she was in residency, and that interest was added to her principle. She later admitted that she did not read the fine print.
Her biggest problem was finding a way to pay for the loans on a monthly basis. The loan payments were far in excess of what she could afford. After a massive media campaign, she was able to get the government to renegotiate her loans — the payments ended up being something like $900 a month until she reaches 70 years old.
- This is an actual story of someone who came to me. I will call her “Rita” for privacy purposes. She took out $70,000 in student loans to go to an expensive private university for graduate school, but could not find a job for 3 years after she graduated.
Her dad paid her way through college. She thought if she went to this expensive private university for graduate school, she would get all sorts of great contacts and land the perfect job. It did not happen. But, thanks to the Obama administration, they drafted legislation that enables students to pay 10% of their income in loan payments on federal loans. She eventually landed a job but had it not been for the new legislation, she would not have had the money in her budget to make monthly payments. The job was low paying.
Alternatively, her friend did not pursue the 10% option and her check is being garnished for her school loan payment, leaving her almost no money to live off. The federal government currently has Earn As You Go or Income Based, repayment plans.
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- My own relative shared her financial aid award letter with me. She was told her mom made too much money for a subsidized loan, and was offered an unsubsidized loan. The unsubsidized loan would require interest payments during college, either paid by her or accumulated and added to the principle later.
I told her to throw that letter away and that we would help. I figured she would have owed about $40,000 in four years going to a public state college and living at home. The interest added after graduation would have been extra. That is ridiculous. Many of you have parents or other relatives who can help with tuition, if so, don’t be shy about using them. Accepting help can save you from a lifetime of loan payments, and the misery that comes with them.
- This is a recent story from someone who asked if I could help her with information. I will call her Max. She borrowed money to go to college and graduate school, ending up with an additional $40,000 in accumulated “interest” after graduation; it was added to her existing principle of $35,000. Max had an unsubsidized loan.
When Max finished graduate school, she found a job quickly. When her student loans were due she got a call from Sallie Mae and they asked if she could pay $1,000 per month on her loans. She told them “no way”, and was then asked if she could pay $750. She said “absolutely not; I don’t have near that much money left after my basic bills are paid.”
She could not understand why the payment was so high and they told her she was being charged an additional $40,000 in interest while her school loan payments were in deferral, while she was still in school. I gave her several websites that could potentially help her.
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Here are websites that can help you or people you know to avoid school loan nightmares, before or after college.
U.S. Department of Education; School Loan Repayment Plans:
The Consumer Financial Protection Bureau (includes many resources about school loan protections—also Student Loan Forgiveness):
This is a Section on Federal Loans and Private Loans:
Compare College Cost:
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Help Paying for Student Loans (If you are current or in default, this page will help you become current with student loans so you can clear your credit or return to school.):
Apply for a new direct consolidation loan with the U.S. Department of Education:
Try to get help from your loan servicer first, if they will not help, try the federal ombudsman.
For Assistance: Contact the “Federal Student Aid Ombudsman Group at the U.S. Department of Education — Only if your loan servicer will not help you.
SUMMARY: The utilization of student loans to afford university is essentially one’s own double-edged sword. The four years of tuition relief will be nothing compared to the near endless accumulations of debt and your own desperate searches for a salary to cover it with; salaries not so commonly found in today’s economy, especially at entry-level positions. By employing the tips found in this book, you can focus on nothing but where to get a jump-start on your career after graduation-free of the economic burden so many others will possess. There are many student loan forgiveness programs including the governments income based repayment program, as well as organizations that have programs.
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author, Lois Center-Shabazz
author of, Live Rich Save Money! Series