Originally published at: https://boingboing.net/2018/05/17/debt-traps-2.html
Originally published at: https://boingboing.net/2018/05/17/debt-traps-2.html
Been paying mine off since 2004. I’m sure I’ve paid them twice over by now. I just paid off my largest this year.
Do college students not understand interest and compounding? That’s the way debt works. If you don’t like it, don’t borrow money.
I think it’s more about how governments no longer understand the concept of not eating your seed corn. I am thankful I went to a state school back when they did.
Also, avoid the loans with bad terms. (Like variable rate loans)
The crap loans you should pay down first while making minimum payments to the rest.
One of the greatest gifts I was given by my family was being able to graduate a 4-year college with no debt afterward. And I’ve been financially independent since graduating, way back in 2000.
Now, I got financial aid and a scholarship, but I also got help from family. Being able to start off my post-collegiate working life on my own 2 feet, and not already having debt? So good.
“We’re not legally required to disclose when we change your interest rate, as per the contract.”
Student loan contracts aren’t much better than one-sided tech service EULAs, and can be changed at a whim by the creditor.
For example, a friend of mine took out a loan for graduate school and faithfully paid the agreed-upon amount by cheque for more than a decade. Eventually he moved abroad to teach but kept paying faithfully (because, yes, he does understand interest and compounding).
Then one day the debt was transferred to someone else (perhaps Navient) who told him that going forward the payment would be going up substantially and that he’d have to pay it by wire transfer (adding $20 each time). He said that wasn’t what they had agreed to and they cited some BS clause buried in the contract and said it was their terms or nothing. Being out of their reach he told them “I’m glad you said that. Nothing it is. Call me back if you change your mind.” They never did, even though he stopped paying.
It is a great gift and you’re fortunate, but not everyone has been so lucky. Even so, there was a time when one could still graduate from a public university with no debt. Between higher tuitions and fees and fewer financial aid grants those days are long gone.
Yes, balloon mortgages, personal loans, non-subsidized student loans and other variable rate vehicles leave you with a big long term bill to foot. But saying that a person should avoid having a car, a house and a higher education or just settle for this is sad. The practices shouldn’t be this profit focused.
Good for you and your family for being able to save up that much money. If you’re required an above high school (secondary school) education to get a decent job and your family cannot invest or save tens of thousands of dollars you don’t have that option. It’s nothing on you. You were lucky and had an awesome family. That’s not a majority of teenagers in the world.
Collage students may not, but good news: collage graduates sure do! Well, at least after a few years.
If you have that level of control with Navient. But you might not.
Natural inclination is that of the $1200 she pays, minimum payments would go to the lowest interest loan components and the lion’s share would go to that 11% interest loan. But these loan systems were set up by wolves, so most of her $1200 goes towards the lowest interest rate components and that 11% loan just sits there, fattening Navient’s bottom line.
I would look around for any way possible to consolidate my student loans into another type of loan with lower interest. Probably via a credit union. The issue is finding collateral or some way to secure that loan so that you can do it. Or get parents to help and have them put up the collateral, but you are on the hook for the payments. Then, the complexity would be greatly reduced and the rate would be lower.
Unsecured loans are around 10% right now. But consolidation type loans are around 6 to 8%, have to shop around. Might be able to find one that beats Sallie Mae’s rates. And then, it’s possible to do it even in pieces: negotiate a credit union loan specifically for that 11% component, and the credit union works with Navient to apply the payment to that 11% loan’s principal, leaving the other ones alone. So, she would have two payments, but now not be paying as much interest and getting out from under the loans faster.
I went through something similar when paying my loans off in the mid 2000’s. After years of overpaying, to drop that principal as much as possible, I finally paid my last $10,000 (that were at ~6% interest) with my home equity line of credit which was around 4% at the time. Obvs if you don’t own a house, you can’t do a switcheroo like this.
But there are other switcheroos out there. I’d rather dump part of my 401k and take the tax hit than feel like I’m getting fucked by a high interest elephant every month. It’s not on-paper wise because they say your 401 will outpace any loans under 12%, but still… the BAD FEELING of writing Navient checks every month, vs. the GOOD FEELING of no Navient at all.
I would even go so far as to buy a car, get a low rate on the loan, sell the car somehow and instead of paying the car loan, pay Navient so that I can realize a 3 or 4% interest rate via that car loan for the same amount of money. If you can do it under the lender’s nose. They might come collecting if they find out the car changed hands.
the tldr; is really: look around at all your options. Don’t just take their BS. Give it back to them and get yourself into a better situation.
Which is why I refer to it as “one of the greatest gifts I’ve been given” – I def. don’t take it for granted. Now, I disagree that college is the only path to a decent job, but for many jobs yes, it is a requirement these days.
Yes, just work a grunt job so that you have the money. That’s what my father did in the 60s. He worked part-time and used that income to pay for tuition, board, and materials at his state university.
Fast-forward to today and things are vastly different:
Growth in tuition costs outpaced inflation long ago and continues at this breakneck pace.
Wages have stagnated to where you would have to work full-time to cover tuition, board, and materials at a state school, at resident pricing. Now, I worked when I attended university—about 15-20 hours per week. I cannot imagine working forty hours while carrying a full course load, even if the university’s class schedule allowed for such an arrangement (and for most majors, they don’t).
And all of that is assuming you manage to find an employer willing to give you a full-time job that would necessarily confer benefits. Many students instead get by working two part-time jobs and relying on food assistance and (if they’re lucky enough to live in a state providing it) Medicaid.
I repeat: we are not in the 60s or 70s anymore.
My friend left the country and defaulted.
Friend of mine read about some shady lenders not having retained or gathered in the first place the proper paperwork.
I don’t know the process, but you can demand a signed copy of your agreement. If they can’t produce it, the debt evaporates. It didn’t work out in his case, but I guess for some it has.
Completely worth a shot.
ETA: This article may have useful info on this? https://www.usnews.com/education/blogs/student-loan-ranger/articles/2017-09-06/how-to-dispute-a-student-loan
Not only is annual student loan interest deduction capped at $2,500, but it phases out at AGI between $65,000 and $80,000
They made it illegal to use bankruptcy to get out of these loans, it was only a matter of time before they made it illegal to pay them off as well.
Time machines solve everything, but if you don’t have one, there is about $1.4B in student loan debt with an average interest rate of 8%. There’s a generation of people whose number one expense is paying down their loans when their parents, at their age, were buying houses.
If you think that people have taken on debt irresponsibly, I guess I’d ask how telling irresponsible people to be responsible has worked out for you in your life. Does it consistently turn them around? Does it dig us out of the situation we are collectively in?
Because the fallout from the student loan situation is going to affect more than just the people who took out loans, just like the fallout from the housing collapse affected more than just those who lost their homes.
The culture of “personal responsibility” is looking the other way and saying, “It’s not my problem if someone else poisons the well.” It’s absolute fucking insanity.
There’s a generation of people whose number one expense is paying down their loans when their parents, at their age, were buying houses.
So much wisdom buried in this quote:
- Parents who could count on pensions after putting in the 30 years (pensions are no longer existent for most of us, but we’re still paying them for the previous generation).
- Parents who could afford college tuition, without scholarships or loans, by taking on a part-time job (self-explanatory)
- Parents who could afford a down payment after working just a couple years (housing costs have risen drastically while wages have barely kept up with inflation).
Totally. I’d do everything I could to erase that debt, possibly even sell and arm or a leg, maybe both. I didn’t say it had to be my own arm or leg.
Yes! The system works!
FTFY. You commuters know what I’m talking about