Beware and Bewise
By Lauren Zaddack
Other examples of how student loan affected the lives of other students...
Story 1….Jeremy Cooper took classes at several schools before graduating with an associate degree in Web design from Bryant and Stratton College in 2004. Borrowing $45,000 in federal and private loans, Cooper says he hasn't been able to get a job in Web design because, "Everything that I had learned from my degree became obsolete even before I graduated because the technology moves so fast." Since graduation, Cooper has fallen behind on his private loan payments, and his private debt has nearly doubled to $88,000. Despite working full-time day and part-time night jobs and scaling back his expenses to the bare minimum, Cooper says he does not see a way out of default.
With federal loans, borrowers such as Cooper may be able to find relief in one of the government's income-driven repayment programs, which cap loan payments according to your monthly paycheck, says Mayotte. "There just aren't a lot of options out there" for private loans, she says, though some lenders do offer extended and temporary interest-only repayment plans.
It's possible to dismiss student loans through bankruptcy, but only if the borrower can prove he has made a good-faith effort to repay the loan and that continuing to pay prevents him from maintaining a minimal standard of living.
Story 2….Joel Winston borrowed $50,000 to pay for his undergrad education at the University of Michigan in Ann Arbor. Graduating in 2003, Winston made on-time monthly payments until one night in 2006 when he received a call from a credit recovery company stating that his private loan was in default.
"I called and said 'Do you have a mistake here?' and they were like 'No. We don't. You need to figure out how to pay this, and if you don't, we can garnish your wages and take your tax returns,'" Winston recalls.
If there's a mistake, the borrower should find out what payments the lender is saying it didn't receive, then submit proof that those payments were made, says Mayotte.
If the conflict can't be resolved, file a claim with the Department of Education's ombudsman for federal loan issues or the Consumer Financial Protection Bureau's ombudsman for private loan issues.
After two internal investigations, Winston's lender corrected its mistake. Winston filed a lawsuit over violations to the Fair Debt Collections Practices Act, which regulates how collections companies may contact you regarding the debt. He reached a legal settlement that he applied to his loan balance.
"You have to keep meticulous records. You have to keep all of your files," Winston says. "If you feel that something has happened, be patient. Ask nicely. Be polite. Do not get upset with the people over the phone because those are the only people right now that can help you."
But I thought student loans is considered a good kind of debt?
Graph of Student Debt
The graph bellow shows the debt on campus from 2003-2013
- The total estimated loan debt in our country is one trillion dollars.
- The average millionaire reads one non-fiction book a month!
- The total estimated student loan debt outstanding is more than $1 trillion.
- Of the total outstanding student loan debt, approximatly $85 billion is past due.
- Nearly 30% of student loan borrowers wind up dropping out of school, and more then 50% of borrowers at two-year-profit colleges never finish.
"Student Loans Aren't Just for School Anymore." - Daveramsey.com. N.p., n.d. Web. 09 Nov. 2014. <http://www.daveramsey.com/blog/student-loans-not-just-for-school>.