“Dear Steve,
I have a loan through Sallie Mae that is the subject of many a sleepless night, and if I knew then what I know now, I would have run screaming and NEVER taken out this loan.
I graduated from a state university not quite a year ago and took out $42,000 to cover school, books, and living expenses. Because this was a second degree, I had to cover all the expenses myself.
Now that I’ve been out in the real world, I can’t find a job to save my life. With two Bachelor’s degrees, I can’t even get a job at Wal-Mart.
I recently called Sallie May to put my account back into forbearance (which I had done once before to the tune of $150). When I got an operator and told him the nature of my call, he immediately told me that Sallie Mae was no longer offering forbearance and that I needed to pay $400+ dollars to bring my account up to date.
As it stands now, I’m a substitute teacher. I make just a little over $10 an hour, but I don’t get paid on days when I don’t get called into work. $400 is about what I make in a month, and the summer is fast approaching. This guy on the phone was adamant that the reason I was upset was because I “wasn’t getting what [I] wanted” and was throwing a hissy fit. Furthermore, he kept reiterating that it’s not Sallie Mae’s fault that I can’t afford the $400 payment (because, I’m sure, the 9.25% interest rate has nothing to do with it…) and that by asking for anything less than $400 a month I was doing a disservice to myself since the interest would “just keep going up” (nice to know that Sallie Mae cares…).
When I once again explained to him that $400 is my monthly income, he asked me what I *would* be able to afford. When I told him that $150 a month would be manageable until I find steady employment, he laughed at me and told me not to bother! That $150 a month wouldn’t do me any good! The nearly $10K in *interest* that’s accrued since I graduated *less than a year ago* has been capitalized and added to the principal, so I now owe them $53K+! I don’t want to shirk my responsibility to repay my loan, but I’m staring a default right in the face.
Honestly, if I were teaching full time, $400 a month would not be impossible, but no one is willing to work with me until I get on my feet. Instead, I get threats and constant phone calls trying to bully me into payments I simply don’t have, and there’s no middle ground. Do I have any recourse or options at this point?
Rachel”
The Answer:
Dear Rachel,
You have unfortunately learned the hard way what I have been saying for years, student loans are minefields and not automatically “good debt.”
Sallie Mae is not what I would call, an accommodating lender. While they offer an “income-sensitive” repayment plan you must still make at least the monthly interest payment. In your case, I’m not sure if that is the $400 per month they keep throwing back in your face, but it sounds like it.
To repay your student loans in ten years your payment would have to be around $680 per month. Even if you just made the $400 monthly payment, you would not be reducing the amount you owe one penny.
Student loans also can’t be discharged in bankruptcy, with an exception, a Chapter 11 bankruptcy may discharge certain student loans in some cases.
The student loans have you boxed into a corner that can only be remedied with more income. You will have to do whatever you can to make money and pay the ^@(^#%#@ or face massive collection fees, wage garnishment, and worse.
The only solution I can think of is the student loan forgiveness program for teachers. But you would have to be a full-time teacher for five consecutive academic years in a “low-income” non-profit school, and then you could qualify for a federal loan forgiveness program.
