Question:
Dear Steve,
When I initially enrolled in college as a young man, I utilized student loans to get my Bachelor’s and Master’s degrees.
I paid them all off following a payment schedule that seemed normal and fair. I later returned to school to get my Ph.D., the next step in my chosen field of Psychology.
I again utilized student loans for some of the costs and fees involved. However, I successfully graduated and fully intended to repay the loans drawing on my early experience of paying back student loans.
In 1996, I was offered a plan to consolidate my loans into one total of $56,430 to be serviced by Sallie Mae. Instead, I took advantage of a period of forbearance right after graduation, not realizing that the payment plan going forward would be very different from my previous loans.
My story has much, but I will cut to the chase. I am now 77 years old and managing a student loan balance of almost $300,000, which continues to grow through exploding capitalizing interest at 9%!
I am baffled that no consumer options are available in every other type of credit: mortgages, auto loans…even the IRS. I could have settled my loan for a substantially smaller amount than my current insanely crazy balance.
I have been in the IBR program. Unfortunately, these programs have the inescapable trap of capitalizing on interest. I have been struggling with payments over the last 26 years with no possibility of paying back the ever-growing balance within my lifetime.
I have been told I can have my balance canceled upon death! Really?! Why have no simple creative, practical consumer options been considered?
Paul
Answer:
Dear Dr. Paul,
I can sum this up without six sessions. It sucks, and it is grossly unfair.
I hate using such blunt language, but under every political administration, the entire student loan situation is best summed up with the word clusterfuck.
Under the new Biden announcement, your Income-Driven Repayment (IDR) payment will most likely go down. But, as you noted, you will probably die before the debt is eliminated.
But that’s not the complete answer. What the final rules will be on the new Biden student loan forgiveness announcement is up in the air. You might receive credit for payments made before the entry into the IBR and give you enough credit to forgive your loans.
My message to you is one of acceptance and patience.
You will have to accept the current system is not perfect, reasonable, or fair.
If your income has changed since you last certified your annual IBR participation, contact your servicer for a lower payment.
Be patient while different sides fight about the Biden student loan forgiveness proposal, and let’s let it all shake out.
If the resistance to the proposed forgiveness does not win in the inevitable court case, then I would bet you will probably find your loans will be discharged sooner than you expect.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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Thanks Steve. I appreciate the feedback and comments. I remain confused about why, over all these years, there have been no efforts to provide other options…what I call normal “consumer options” that are available in every other venue where credit is offered and managed and ordinary wage earners can resolve debt. I have attempted several myself including a bankruptcy in 2009; later, requests to refinance with a condition that the accumulated, clearly predatory, interest amount be waived or at least substantially reduced; and finally, efforts to settle for a reasonable amount. Servicers continue to cook the books adding on to interest balances apparently preferring the final solution of death to close the file! Makes no sense to me. And so it continues…. Thanks again…
I completely agree, and several here think the bankruptcy changes of 2005 should be rolled back even further to allow consumers the fresh start they are entitled to under bankruptcy for all student loans.
It is not the practice of public student loan creditors to file lawsuits. The most they would do is an offset of 15% of Social Security only. They will not offset other retirement monies. Lower-income seniors can get on an income-based repayment plan and pay zero dollars per month.
Hi,
I’m in similar state student loan wise. I had an associates degree paid for by my employer when I was in my 30s. In 2010 I started going for a graphic arts degree on-line. My job at the time included some use of graphics program. However less than a year later I was laid off from that job. I was thinking about quitting there school. I was out of work for over a year and a half.
The tuition was $10,000 a year. Since when I was working my salary was under $30,000 a year. When I contacted the school I was told that I would get loan forgiveness. I ‘graduated in
2015. The interest has me up over $70,000 in debt. I’m 69 and out of work since being put on furlough in April 2020. Till the end of 2021 I was getting unemployment in addition to Social Security and my 1 pension check of about $180 a month. No more unemployment now.
I was told the same thing, that my debt would end when I die. I would like to be working again. The present income is forcing me to go into my savings to survive now. The loan administrator told me about Biden’s loan forgiveness bill. That I may drop about $20,000 worth of the debt. But I’m still nervous about my situation.
Brian,
Do you owe private student loans or federal student loans?
Actually, there is great relief about to come online for you. If your loan is a Direct Loan (from Dept of Education), they are doing an IDR recount. You get credit for all payments (regardless of payment plan), forbearance time (if you have at least 3 years worth), and any deferment (prior to 2013). You do not get credit for any time in default.
If you consolidated in 1996, your loans are at least 26 years old. If you never defaulted, than with the IDR recount, your full balance should be forgiven ON THE SPOT once the recount is completed (they’ll start in a few weeks). How’s THAT for awesome.
Check studentaid.gov to see if you have FFEL or Direct Loan. If FFEL, consolidate immediately!
You’re gonna beat this loan!
Josh,
You are more optimistic than I am. Legal challenges are rumored to be underway already to be filed, and we have yet to see what the proposed rules are or when they will become effective.
If the lawsuits on this proposed rule delay implementation until after a political administration change, this can all go, poof, before it begins. See https://www.courthousenews.com/student-loan-forgiveness-plan-has-a-scotus-problem/
But that’s just my take on this. I would not bet either way at this point, but I love your enthusiasm.
I’m not talking about the magic forgiveness just announced. I’m talking about IDR recount, which doesn’t have or concern congressional authority, since it’s the department’s responsibility to dole out the law (like IBR repayment). I’m not worried about this one.
Ah yes. https://studentaid.gov/announcements-events/idr-account-adjustment
A bit more on this, “To fully address past issues with IDR payment counting, FSA will do a one-time revision of IDR-qualifying payments for all Direct Student Loans and federally-managed Federal Family Education Loan Program (FFEL) loans. Any months in which borrowers made payments will count toward IDR, regardless of repayment plan. Payments made prior to consolidation on consolidated loans will also count. This fix is necessary to correct for data problems and past implementation inaccuracies. Any borrower who has made the required number of payments for IDR forgiveness based on this payment-count revision will receive loan cancellation automatically. Additionally, FSA will count months spent in deferment prior to 2013 toward IDR forgiveness (with the exception of in-school deferment) for this same population of borrowers to address concerns that, prior to that date, its data cannot distinguish IDR-eligible deferments from other deferments.”
Josh, do you have clients that have received this automatic forgiveness yet?
No one has gotten this yet because they won’t start the count until mid to late September and claim it will be completed by January 1st.
Fingers crossed, it doesn’t get as screwed up as everything else seems regarding student loans.
But when this does roll out it’s nice to know forgiveness is automatic and yet another application doesn’t need to be made to yet another servicer.
Asked question about student loan forgiveness.
I just answered your question.