Student Loans
I told Jen today that when I have a problem I don't know how to solve, I blog about it because somebody on my friend list is likely to have an idea. So with her permission, I'm going to post this information here. Any suggestions are appreciated.
1. The Setup
A few months ago, Jen got the sort of job toward which one pursues a higher education, at a reasonable entry-level salary. But like most of her over-educated, underemployed generation, that investment costed too much.
2. The Problem
She owes almost $1,000 a month-- more than half of her salary-- in the form of repayment of private student loans. After that, she has to pay an additional approximate-1/4 of her paycheck toward her credit cards, which were used to fund her education. Gas, phone, insurance and groceries then put her over budget. And, heaven forfend that her car would break down or she would need to go to the doctor, because she would not be able to.
3. The Debt Consolidation
She has tried to get debt consolidation through four different companies. The last time she applied was with two joint co-signers.
A. These are the same co-signers with whom she got her student loans
B. Their credit is really good. Although they're not wealthy, they're stable and reliable.
C. The loan company assured her they would be sufficient as co-signers.
But when she sent in the paperwork they rejected it again.
She can't get a forbearance on about half of the private student loans. For the other half, they might give a forbearance, if she first pays a $45 application fee just to ask if they will. Even if they do, they want her to pay a monthly forbearance fee that doesn't even get credited toward the balance. She would essentially be trapped in debt that, mathematically, can never be paid.
4. The Co-Signers
As most of you know, one cannot file for bankruptcy on student loans. I occasionally try to gently slide a new concept into the conversation-- the concept of paying for food and health care before paying debts. I'm not sure if garnishments would start immediately, or what. I just wanted to sort of roll that thought around. But no. For Jen, the idea of "not paying" is inadmissible in the conversation, because it would ruin the credit of two of her most important loved ones and relations.
5. What She Needs
Somehow, she needs to pay $500 a month toward these loans instead of $1,000.
May I vent for a moment? I have long been suspicious of higher education. I am currently engaging in it while looking at many grads around me in horror, and wondering what the heck I am doing. If you ask me, she got a bum deal.
I can think of a lot harsher descriptors for higher education, but "a bum deal" is the kindest descriptor that comes to mind. It's not like she majored in philosophy or art history! It was Computer Science and Linguistics. Quite a one-two punch in the age of search engines. If that does not make sense as a value proposition for a responsible member of society, I invite you to try to find one.
Comments
tlatoani on Feb. 26, 2010 4:18 AM
Comment 1: those are pretty damn big monthly loan payments for someone who hasn't completed a graduate program.
Comment 2: argh. And they're all private? Really? Because that means they can't go under the federal consolidation program.
Comment 3: ruining the credit of loved ones is not appropriate. You could see whether they're willing to cover part of it now, effectively converting part of the debt into a personal debt that will still need to be paid back but won't show up on records. Or, alternatively, whether they can help her refinance it in another way.
Comment 4: Don't overgeneralize about the lack of value of higher education. My undergrad and law degree were worth every penny, as is also true for many of my friends and colleagues. I wouldn't have this job if I had pursued your path. Jen, for whatever reason, wound up with large debts (and private loans, which are a fuckover on all levels) at a time when the job market sucks hard. I'm sure she isn't alone, but she isn't typical either (over the past decade, as opposed to during the current recession). Having said that, we could do dueling anecdotes all day, and it won't help you or Jen to get closer to figuring out how to solve the problem at hand.
So... what about getting a different repayment plan, with a longer term? That could allow her to make smaller payments now, and then speed it up later when she has more income.
le-bebna-kamni on Feb. 26, 2010 5:34 AM
Comment 1: I went to school for 8 years. At least a third of that was spent dropping most or all of my classes in a semester because I didn't have health insurance to cover necessary medication and doctors visits, and so I spent a lot of time sick. But since I can't simply plan on getting sick *before* the tuition refund cutoff, I'm still stuck with the debt but not the credits to show for it.
Comment 2: No, they're not all private loans. The Federal loans are currently in forbearance and are not included in the calculation. However, I was never able to use up my Federal allowance because there's a limit to how many credits you can attempt and not complete before they stop giving you aid. Hence, most of the funding is private. :(
Comment 3: If they could cover it, they would -- trust me. My parents took out a second mortgage for me when I had medical (and related financial) issues about 7 years ago. But my family is working class, and there's a big limit to how much they can help out. If they can't qualify as cosigners on my loans, what hope do they have of taking out personal loans on my behalf?
Comment 4: My loan companies are bastards -- heck, most of the financial institutions out there seem to be at the moment. I don't know why, but they seem to think that letting me default is better in the long run than actually being willing to work with me on payments. No, they don't do graduated repayment or income-based repayment. They only do that for Federal loans. Maybe I'm just not asking nice enough...?
I'm stumped. I'm resourceful -- I've gotten through some pretty hard times, and only once had a genuine blot in my credit history (see medical incident referenced in #3). But it's pushing the bounds of my creativity. I was actually wondering today what it would take to get a job as a stripper without having to work for one of those places that expects you to do "extras"...Of course that *would* require me to get over my inhibitions with public nudity. ;P
tlatoani on Feb. 26, 2010 8:33 PM
Ok, now you're distracting me with the stripper thing. ;-) I'm thinking of ways to extend open source payment models to stripping. Maybe if enough people agree to put up cash...
In a sense, though, you may be on the right track. If the cash shortfall is $500/month, your easiest option might be to address it by getting a second part-time job that pays that much (or a bit more to cover taxes). At the end of the day, that's not THAT much money over the course of a month. Stripping would be pretty good for that from a cash/hour perspective, but there are options between that and minimum wage which would strike a decent balance and might look better on your resume
le-bebna-kamni on (None)
le-bebna-kamni on Mar. 4, 2010 1:00 PM
I think my prospects of taking on a second job are very slim, given how long I had to search just to get this one. Or didn't you know that both Walmart and Best Buy rejected me at the peak of their holidays hiring season? ;P
And from a mathematical perspective, $500 is pretty hard to come by. Assuming 20% taxes, I would have to make $625 a month to get my $500. At minimum wage (which seems to be most of the part-time work available, barring scarce but coveted contract work) that works out to be just a little under 25 hours a week. While doable, I wouldn't exactly call that *easy*, especially because my job involves travel and I can't always guarantee I'll be in this part of Michigan (or even Michigan) to work that second job.
But I'll keep looking for ideas to cut costs and add income. I've already implemented one idea for cutting $60 out of my budget, and I'm working on another to potentially add a couple hundred to my income. Also, if you know of contract programming work, please pass it along, as that would definitely fit into my scheduling needs. Thanks for your thoughts!
caradina on Feb. 26, 2010 2:24 PM
I WISH I had some advice for you...but all I have is commiseration. I completed my Grad degree in 2005 and have been searching for work ever since. I'm saddled with HUGE amounts of debt and HUGE payments as well. The loan companies are horrible and they will ruin you if you don't pay. I honestly wish I hadn't done the grad degree, because I would have very little debt (my undergrad was on scholarship) and would have the same job I have now. *sigh*
Part of the issue is the economy. She, like myself, and like alot of other people, isn't making what she's worth. If she were, the payments wouldn't be such an issue. I do know that the garnishments don't start immediately. They have to take it to court to garnish her. The problem is, if she stops paying they WILL attack her co-signers and it will badly hurt the credit of all 3 of them.
One thing she may want to look into, which I have had some luck with, is to call your lender and basically tell them how it is. She may qualify for a "Debt Burden Forbearance" or have an option to pay only interest for a year while she seeks better pay. I've managed to not make any payments on my loans yet this way, but I suspect that this reprieve is not going to continue much longer.
I guess we all need to start praying with a fierceness for some sort of government bailout for student loans. There are so very many people in this situation, I can't see how they cannot address it eventually if they want to see our generation go anywhere in life.
drkelso on Feb. 26, 2010 10:35 PM
Yuk...best wishes towards getting it figured out. Huge kudos to her for being stubborn about wanting to protect the integrity of her co-signers. Not many people these days seem to care about that.
Couple questions...You mentioned the degree was in computer science. What is the current job market like where she lives? Is there a better job market in a different larger city? I'm a .NET web programmer and have found that, unfortunately, the best jobs are in the larger cities. On the plus side, there still are those types of jobs. A .NET contractor working for a recruiting company can easily make $35-$45 an hour. I've been doing that for the past five years.
Which leads to my next question. Did she get programming background in .NET, C++, or Java that she can use to find a better job? If not, I highly recommend that she visit her local library, get eBooks from O'Reilly, BitTorrent, etc and start catching up. Even if it's not exactly what she wants to do, it is where the best jobs are right now. She doesn't need college to learn those and get into something better. Self-initiative and learning the lingo goes a long way for getting those positions.
Good luck
le-bebna-kamni on Mar. 4, 2010 12:41 PM
This is very useful advice, and I'll definitely keep it in mind. I'm primarily a Java programmer (at least when it come to paid work...not many people pay for Python ;P), and I can fake C++ when I need to. I also own my own copy of Visual Studio 2005, although I haven't used it much because I don't normally use Windows. Still, if I could make that much, my problems would be solved. I'll keep an eye out for other openings and brush up on .NET.
And the job market is horrible here...but I am in a big city. lol I have tried searching for work out of state, but so far haven't had any takers.
Leave a Comment