Question:
Dear Steve,
I attended an expensive film school in NY about 5 years ago and I took out a bunch of loans (private and federal). Even with working through school I still ended up with over $200,000 in debt (about $75,000 in private and the balance in Federal.) I’m currently paying around $600 in private loans/month and nothing in Federal due to my tiny income.
The problem is that I’m always broke and the balance on my private loan has actually gone UP over the last few years despite making regular payments. It’s possible that I’ll suddenly make a fair amount of money and be able to knock out a huge chunk of that balance but if that doesn’t happen, eventually the monthly payments will grow to the point where I can no longer afford them.
I believe my loan is owned by Access Group but operated (?) by ACS. I’ve spoken to both about my concerns but they basically just said: “yeah, that’s totally going to happen and there’s no thing we can do.”
I don’t like the idea of skipping out on a bill, but my education cost me so much that I’ve ironically been unable to pursue the trade I went to school for because I’ve had to earn money to pay off the loans I incurred while studying for that trade!
Plus, I ain’t getting any younger. If I could save $600 a month, I might be able to even retire at some point and maybe stop living like I’m in undergrad.
Should I stop paying my private loans? I understand that they can eventually garnish up to 15% of your disposable income (not that I have any disposable income) but 15% of my income is about half of what I’m paying now and if I’m eventually going to have my credit ruined anyway by a rising balance that I can’t pay, shouldn’t I just get it over with now and save myself some money?
Thanks so much for all the work you’ve done on this with others. It’s a lonely, terrifying world when you go to school to be an artist and then suddenly have to deal with numbers like this.
Doug
Answer:
Dear Doug,
Film school! I wish I could count all the film school students who have come to me over the years. It’s been a boatload.
I’m not trying to cast blame on you at all. In fact what you did is what most people do who follow the conventional wisdom of needing an expensive education to accomplish a creative goal.
You didn’t do something stupid, you just bought the hype. And the sales job and hype are designed to accomplish one goal, make sales for the school which often puts the creative and inspired student in deep debt.
You want to make a cheap but amazing film about something, make it about that. It’s the pit so many great people like you stumble and fall into.
The repeated tragedy of these situations was best summarized by your statement, “my education cost me so much that I’ve ironically been unable to pursue the trade I went to school for.” Yep, so many people with amazing dreams have been kneecapped by the reality of having to earn to pay for the education necessary to pursue their dream. And it typically means having to abandon the dream to earn.
So you probably want me to get off my damn high horse and get down to dealing with the loans. On the private loans it sounds like you are on some sort of reduced payment program that isn’t even covering the interest. Otherwise the balances would not be increasing.
Hopefully on the federal loans you’ve already dropped these into a Direct Loan to consolidate them and opted for an income driven repayment plan. This will give you the lowest, or no payment, and keep your loans out of default.
I love the advice the ACS person gave you, “yeah, that’s totally going to happen and there’s no thing we can do.” Now there is some damn honest truth.
The goal of the private lender is not to get you out of debt but to maximize their income and keep you treading water. On the same day you are talking to a representative at the private lender, other departments are cutting deals and making allowances.
The different collection and servicing departments are ignorant of what other departments are doing and offering. I would say they are intentionally setup this way. I mean if the initial collection department knew the 90-day-late department was slashing debt and cutting rates they’d just pass the person along if they felt connected to them.
Customer service people at student loan servicers and collectors are not negotiating with you to put together a plan that works for you, they are regurgitating the options they have to offer. And if that means the script says to drop people in legal and sue them when they can’t afford to pay their loan, then that’s what they will do. It’s not personal, it’s a process.
Is defaulting on your student loan debt a fun adventure, hell no. It’s stressful, confrontational, and scary. But when faced with the reality of not being able to afford your loans then you at least have to be aware of what defaulting on the debt you can’t pay may offer. You should read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.
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