It seems more people are contacting me these days who look at suicide as a way out of primarily private student loan debt. I’m sure you have the same visceral reaction as I do and feel everyone needs to be talked off the ledge. But in the hard light of day, considering suicide as a way to deal with student loans isn’t an uncommonly considered solution in the face of no other good solution. For the record, I’m not endorsing suicide as a way out, just acknowledging what others are feeling.
Let’s look at some of the recent reader feedback on this. Take the new lawyer with $100,000 in student loan debts who can’t find a job paying more than $40,000 a year. Her private student loans only have one real option, forbearance / deferment. Under that approach the payments are waived but the interest continues to make the balance due larger. The temporary respite from current loan payments only makes the repayment problem worse in the future. “I guess my question is whether I should try anything else before committing suicide,” the reader asks.
John said, “My student loans are almost $42,000 dollars. I frequently think about suicide; thinking about my son is the only thing that has so far kept me from committing suicide.”
Michael said, “Suicide as the option to get out. Do not want to work the rest of life thinking about this debt. If I cannot be free, I would prefer to be dead. I am going to die anyway.”
Student loan debt now exceeds the total owed in credit card debt. In 2005 under what creditors heavily lobbied as bankruptcy reform, the bankruptcy law was changed to not allow private student loans to be discharged in a consumer bankruptcy.
But until recently, private student loan lenders were dishing out loans like free cheese. There was significantly less regard to the ability to repay based on traditional lending criteria. Just look at the drop in acceptable credit scores approved after the bankruptcy reform bill went into force in 2005. “Hey, Bob they can’t get out of them anymore, lend away.”
Or how about we look at the cross section of private student loans across all ranges of credit scores. If lending was based on risk alone, the years 2005-2008 should not be relatively flat. Since 2008, lending standards in the private student loan market have tightened. Lenders are not able to easily sell off the student loans they originate, so they have more “skin in the game” when it comes to the borrower’s ability to repay. More skin equals more reasonable lending criteria.
And once attention was placed on the student borrower ability to repay in 2009, look what happened with loan volume that required a co-signer. It rockets up.
And which types of programs are co-signes on the hook for? Take a look.
It’s not the students that are now trapped in this dark pit of student loan debt. The co-signers are being dragged under as well.
Let’s turn back to the underlying problem with the dead end private student loans and why some consider suicide as a way out.
As the Consumer Financial Protection Bureau has noted, private student loan lenders set people up to fail with debt that can’t be discharged in bankruptcy. The private student loan lenders pushed students into lives of terminal debt slavery without much apparent regard for the borrowers.
Recent CFPB and Department of Education research found:
- Most private loans have few options for payment modification or forbearance. Most private loans have variable rates, making estimates about future debt payments difficult. Prior to 2010, federal law did not require a disclosure showing the actual interest rate on a borrower’s loan until after the lender documented the loan, approved the credit, and readied the check for mailing.
- Some lenders bypassed school financial aid offices and marketed loans directly to students. As a result, in many cases, the school could not review the borrower’s financial need, compare it to the loan amount, or even verify that the borrower was enrolled. Many lenders also lowered the minimum credit score required to receive a private student loan so that they could originate and then sell off more loans. Many students did not understand the differences and features between federal and private loans. They ended up using riskier private loans before exhausting their safer federal options.
- Defaults on private student loans have increased since the financial crisis. Based on the CFPB’s sample, there are now over $8.1 billion in defaulted private loans, representing more than 850,000 distinct loans. Congress amended the bankruptcy code in 2005 to make it tougher to discharge private student loans. Borrowers reported their lenders were unable or unwilling to modify or adjust repayment terms.
Faced with loans that may never have been appropriate or affordable, an unwillingness for lenders to make reasonable repayment adjustments, and the non-dischargeablility of these private student loans, it’s easy to see why some people feel trapped and without hope. You can certainly understand why some consider suicide as their only way out.
Maybe there is some hope for those considering suicide as a reasonable way out of private student loan debt. “Our findings reveal that students were yet another group of consumers that were hurt by the boom and bust of the financial crisis,” said CFPB Director Richard Cordray. “Too many student loan borrowers are struggling to pay off private student loans that they did not understand and cannot afford. Moving forward, we must do our best to leave the next generation in a better place than we are today, rather than buried under a mountain of debt.”
“Subprime-style lending went to college and now students are paying the price,” said U.S. Education Secretary Arne Duncan. Potentially, some help may be on the way.
If you are as concerned as I am about this situation I invite you to sign this Change.org petition for meaningful private student loan reform.