Is your life screwed because of student loans?
Posted by Frugal on August 25th, 2008
Reading through the stories posted at StudentLoanJustice.Org, I feel that these people have been totally abused by the student loan system. Debts that cannot be discharged through bankruptcy are simply nightmares. Why do we even have such things?
This story is under-covered by media and politicians. There is obviously no money in helping these poor people who are in a perpetual debt of student loans. And so, most people don’t cover it. I wonder how many percentage of young people’s lives are screwed because of this corrupted loan system.
Reading through the stories of victims at StudentLoanJustice.Org, my heart goes to everyone of them. Many of them have paid tens of thousands of interest dollars towards the loan already, and yet the balance of the loan is still in tens of thousands. And there are some people who had paid off the loan years ago, or had the debt dissolved as part of the bankruptcy proceeding due to extreme hardship, only to find out several years later that the debt is back, AND with huge amount of interest and penalty. Unable to prove the discharge of the debt or the paid-off statement on their debt, they are stuck with collection agency and wage garnishment.
Here is one example in a victim’s own words:
By Kelly
In 1982 took a student loan out for 2000.00
1989 filed bankruptcy chap.7 included student loan and credit card.
in 1998 filled bankruptcy again , part of process was search for all outstanding debts…..1982 student loan did not show.
2005 ECMC sends notice of collecting $10,000 wage garnishment fees and interest.
Here is why this is evil….this debt was first dissolved in legal federal bankruptcy….verified in a search for debts years later, then surfaced mysteriously in 2005 ???
WHY? here is why…..
I have worked for Government for 6 years now and am 4 years from retirement.
I already have a wage garnishment that take almost half my pay (arrears)
I am a homeless father of 5, who cannot afford to rent a room where my children can visit me.
I am a 20% service connected disabled veteran of the USMC
I cant do anything but try to appeal to God and websites like this to stop
this evil, greedy, and attacks.
If an anytime along the way I knew I HAD to pay this I would have made arrangements to do so rather than let the interest grow
but THEY HID THE DEBT SO PAPERWORK ON IT COULD BET LOST AND INTEREST COULD GROW So Bankruptcys on Student loans back in 1989, was a sleeper scam.
I think we should legally and mathematically define what is financial hardship and limit the amount of time for repayment, or else these student loans can never be discharged. To be paying a student loan for more than 15 years is destroying someone’s life. The money should have never been lent in the first place (so that colleges or professional schools couldn’t profit from innocent youth) and these people won’t be made as working slaves to Sallie Mae.
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August 25th, 2008 at 2:22 pm
Thank You ~thank you~ *thank you* for your posting on this topic. I am forwarding a link to 2 friends of mine who are students at CalPoly. One in particular has been feeling like maybe he should get a loan – right now he’s working a night job to pay for his degree and he’s got $10k+ in the bank. He gets all sorts of pressure to cave and get a student loan – mostly from other students who have loans (usually they have about $40k in loans for all 5 years). The other also works the night shift at a local store to pay his way through without going into debt.
August 25th, 2008 at 5:33 pm
Are people really complaining about student loans?! These loans are the cheapest rate loans, many subsidized by the government for the sake of providing funding to help people achieve a higher standard of living through education. Furthermore, student loans can be deferred for people who are not currently employed or those who are pursuing further education without going into default status and the monthly payments can be adjusted so that it is affordable.
August 25th, 2008 at 7:44 pm
We have billions, soon to be trillions, of dollars to bail out poorly run financial institutions but nothing to help students with debt.
August 25th, 2008 at 8:13 pm
Cry me a river. Loans are a deal with the devil. Know what you are getting into. There are three sides to every story. You’ve only told one.
August 25th, 2008 at 8:18 pm
Fools! They should have bought a house with no money down, refinanced it to cash out 40k and used that money to pay for their college. Sit back, relax and watch the bank take a hit and you walk away scott-free!
August 26th, 2008 at 12:03 am
I have to agree with LC and Romeo 61. I had student loan too after graduating from UCLA during Senor Bushie era with no freaking job. I was able to pay it off by PAYING OFF THE DAMN BALANCE before interest was ever kicked in. How? By asking my father to pay off the balance so I own him just the balance
I paid my father off with frugality (eat at home instead of Mickie D).
Cry me a river. If you can’t afford it because you got no backup, don’t borrow. Try living like a Somalian once in a while and you’ll see how easy it is to fill up your bank account.
From a 7 figure dude that still enjoys In-N-Out and Taco Bell.
August 26th, 2008 at 12:47 am
Chris,
Why should hugely indebted former students listen to you? You were obviously born with a silver spoon in your mouth, found a way to shirk your own responsibility, and yet feel that you are in a position to offer advice? My friend, you garner absolutely no respect as any kind of authority on this issue. I suggest you find another issue to comment on, such as which is better- a red or silver ferrari.
Dick.
August 26th, 2008 at 5:19 pm
Dick,
Silver spoon? Ha…hardly. I drove a salvage Dodge Daytona while in UCLA. My father makes about $15/hr at that time. My mom makes $9/hr as well. We were living in a 900 sq ft condo in San Jose that was worth around $100k at the time of the first housing market correction. Bush/Quayle team was great….NOT!
Guess what buddy….I earn my 7 figure net worth through hard work, a bit of luck, and prudent saving.
Of course, you can’t figure that out, can you.
August 26th, 2008 at 5:22 pm
I also have to add this….I was prudent with spending as well during my years at UCLA while watching kids flaunting their Bimmers. USC being spoiled? Try UCLA.
Headline burger meal was a luxury for me at the time.
Next time, do a bit of research before accusing someone of being well off.
August 27th, 2008 at 9:02 am
Another point to this discussion would be analyzing the cost benefits of the college degree & loan situation. If you want to take out 60k of loans to get an underwater basket weaving degree, then you should live with the consequence of having to live in poverty to pay for that 60k if you can not find a job that pays enough for basket weaving skills to live comfortably. There are so many people in college getting worthless degrees and whining when they get out and dont get paid enough to pay back the loans they took out. Seemed like a good idea during school, 4 or 5 years of easy classes and parties every night. On the other hand, I took out a loan and studied all the time to get my engineering degree. It paid off in the end and I can easily pay off my student loan now. However, why would I – the money is so cheap that I can invest my cash and make more money than the interest Id save by paying my cheap college loan off. The point is, think about what degree you are getting and if it is worth the money. Shouldn’t this be obvious? Entitlement is ruining this country. Just like the previous post on IM bailing people out of their mortgages they cant pay. Doesnt anybody use their brains these days? Everybody is a victim….a victim of their own stupidity.
August 28th, 2008 at 8:45 pm
I have to disagree that student loans screw people over. I was only able to attend a prestigious public university because of my student loans. My family grew up poor, and going to college was a life-long dream for me. I am thankful for the student loan system, which is the only way I could have achieved that goal. The monthly payment is quite managable and the interest tax deductible. Of course these are all through the federal gov’t.
I think the problem is some lenders are willing to give out endless sums of money. And people have a difficult time conceptualizing the amount they will have to pay off, plus interest. I am putting off going to graduate school at the moment because I simply cannot afford it. The student loan payments would have been with a private lender and at an atrocious rate. I am horrified at the amount these lenders are willing to loan to people.
I can understand if someone becomes disabled or unable to work that it could become a terrible burden. But in other cases, people should take responsibility for their actions.
August 28th, 2008 at 10:29 pm
People should re-think the whole education investment. I mean is it really worth all the time, money, opportunity cost lost, etc. To get a degree which may or may not result in a wage slave job? I say people need to think about devoting their early years to more entrepreneural activities including but not limited to financial planning and case in point EVALUATING MORTGAGES. Do away with educational subsidies ie.Sallie mae, and we’ll see how the free market prices these loans and how the free market also evaluates the value added of these so called “educations”. Early investmenting, coupled with early business formation would yield a higher rate of return in my opinion.
August 29th, 2008 at 5:10 pm
To some of the posters like LC, Chris, etc.:
I hear what you’re saying, I used to think the same way. I took out student loans to pay for a lot of my tuition at an Ivy League school and the rates are absurdly low because they were all gov’t subsidized. In fact I consolidated them a few years ago and locked them in at less than 3%. I can easily pay off the entire balance now because of I have a very high income but I just pay the minimum since the interest is less than I get on my savings anyway.
HOWEVER – the people with student loan problems largely took out PRIVATE STUDENT LOANS. Either they weren’t eligible for subsidized loans or maxed them out and still needed more. PRIVATE STUDENT LOANS are a COMPLETELY different beast. The interest rates are absurdly high and many of them are not capped. They CAN NOT be bankrupted either so the lenders rarely give much in the way of deferments, rate decreases, etc. They don’t have to since you can’t repudiate the loan through bankruptcy. Most of these loans are charging 9%-plus right now and I’ve seen people paying as high as 15%. Its ridiculous. I would never have gotten into a private student loan but I was fortunate enough to have enough financial aid and scholarships on top of my subsidized loans to pay for most of my tuition. A lot of people aren’t that lucky, either they can’t make up the balance because they are too poor, or they are not “poor enough” in the first place and can’t get subsidized loans and financial aid.
August 30th, 2008 at 2:15 pm
Very interesting subject. I currently owe about 18K in student loans. I remember rent, credit card food purchases, and a FEW parties. I have my degree (expensive paper on the wall) UCLA, but still drive a car that has 156,000 miles on it. Hmmm . . I still pay rent, I have a $200 secured credit card, and I still drive a car with 156,000 miles on it.
Don’t take the loan or credit card, unless you want to be a financial slave to the current US economy. An education can be achieved at the library and THEN purchased online.
Save that penny, save, SAVE!
August 30th, 2008 at 7:35 pm
I agree with Chris, I don’t have pity on people who have student loans, I have them and I don’t pity myself, however I am working 2 jobs to pay them back. I think people who take them out should be responsible enough to know, the cost of paying them back.
The question I need to have answered is the one that deals with the “low rates”
I am lost as to why people who have full ability to pay off a loan NOT DO SO? low rates yes, but are your really investing what you could use to pay the debt off? Sounds like someone telling me NOT to pay off my house because of LOW interest, sure its low but last time I checked people with paid for houses typically don’t get foreclosed on, with that said I am paying off everything I can. I don’t want to be a slave to payments even if its 0%
guess i just answered my own question lol
August 31st, 2008 at 1:57 pm
Hi Anitra,
“Tax deduction” is the main driver behind why people don’t pay off their loans (mortgage, student loan, etc). This so-called “tax deduction” concept adopted by our very own government is why there are so many credits and leveraging going on in this country.
Some people assume they can generate more return per year than say a 5%/30yr fix mortgage on a home. Hence, there’s no reason for them to pay off the loan at all. However, they failed to realize that there are RISKS involved with every money making scheme (including our lovely DJIA, Nasdaq, and SP500 indexes) and that there is absolutely NO guarantee that those money making schemes will make more return than your average loan APR per year(case in point…this year
). I too find it amazing that they would rid themselves the standard deduction ($10k+ for married filed jointly in ’07) for mortgage, student loan, and other Schedule A deductions that they can take so that they can risk some of their earned principles on these money making schemes.
Oh well, I guess all those Walter Updegrave and financial gurus have won the battle of convincing people to put the money where their mouths are.
September 1st, 2008 at 11:41 am
Patrick says “An education can be achieved at the library and THEN purchased online.”
That might make sense if you were otherwise going to the bottom-of-the-barrel college but if you have the chance to go to any even halfway decent school you jump on it. Your advice has to be some of the worst I’ve ever seen on the internet. Make way for a nation full of retards, as if we’re not already starting to fall behind other countries when it comes to well educated professionals.
September 2nd, 2008 at 1:56 pm
I went to college and borrow money for it. No regrets
Borrowed $16K and paid it. Making a very decent income as a result of college.
Use college, don’t let college use you.
September 8th, 2008 at 11:50 pm
Most civilized countries don’t require students to go thousands of dollars in debt to pursue higher education. This one places them in a sort of indentured servitude that can’t be discharged by any degree of hardship.
Students here are fed to the same Joe Sixpack mill that chews up people naive enough to get ARMs. True, it probably no longer makes sense to go to college, except in a vocational sense. For an education, in the old-fashioned sense of the word — probably not, unless you can glad-hand at an Ivory League school and prepare for a lifetime of calling in favors.
Unfortunately the piece of paper proves that you are middle-class. Without that proof you are denied even the lower levels of management throughout your working life unless you’re lucky enough to get some breaks and have an entrepreneurial personality.
A healthy nation would support an educated next generation and not eat them outright, and by that I don’t mean just supporting Jobs That Done Pay Good like engineering.
September 11th, 2008 at 5:58 am
My problem with student loans is that if you have end up with private loans and make a mistake you are pretty much out of options. I have student loans in collections that I can do nothing about to get them into good standing. The federal programs all offer rehabilitation programs so you can correct your past mistakes.
I have no issue with having to repay the loans and understand that I am responsible for them but do have a problem being stuck continually with accounts in collections. The loan balance is roughly $22,000 and I do not have the ability to pay it in full or family members to ask for the money.
I guess my thought is that the private lenders should be required to offer rehabilitation programs similar to the federal loans. That would encourage me to work harder to get the loans back into good standing and continue to make payments. Making ongoing, never ending payments for the collection agency to take your money is really discouraging.
October 11th, 2008 at 10:01 pm
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