The greatly exaggerated tales of forgiveness and more

Contrary to popular belief, student loan forgiveness is extremely rare.  First, these loans are not discharged in bankruptcy, the conditions to do so are close to impossible.

Secondly, while the Public Service Loan Forgiveness program was started ten years ago, it was only this month that the first people on it became eligible to apply for forgiveness.   And that is only to apply, there is no guarantee they will get have their loans forgiven.  The criteria are so limited that only a tiny percentage of the people who have these loans can even apply for forgiveness under this program.

The odds of completing ten years of qualifying payments on the Public Service Loan Forgiveness program are very small.  First you must obtain a public service job that is included in the program.  Then you must stay on an income based repayment plan for ten years.  These plans must be reapplied for annually.  If your income goes up, or your number of dependents goes down, you can be kicked off the program.  And there goes any chance of loan forgiveness.

Many people have already paid back what they borrowed, yet still owe thousands of dollars.  The way the interest is compounded on these loans makes the amount owed grow at an incredible pace.

It is these higher amounts that are usually quoted when the possible amounts to be forgiven are mentioned.  Some say “These people borrowed the money, they should pay it back.”  Many have already paid back what they borrowed and more, yet are expected to keep paying and paying for years.

The Department of Education said in a letter, a person’s age or whether they are “experiencing financial hardship” are not taken into account when deliberating loan forgiveness.  Common sense and conscience should dictate that if the individual is already a senior citizen, with no possibility of getting a better job, or a job at all, this should certainly be considered!

Also, currently if a student is under 24 years old and wants a federal student loan, at least one parent is required to cosign.  Then if the young person can’t pay, the lender can go after their parents.

There is no guarantee that a college degree will result in a better job.  But these days, unless the student can get a full scholarship, or has wealthy relatives, college will result in thousands of dollars of debt.  This can take decades to pay off, if it is even possible.  Some senior citizens are dying, still owing on student loans.  The system is overdue some real change.  People who can’t afford to pay, and whose situation is unlikely to change, need real loan forgiveness.  Many simply don’t have the money to ever pay off these mountains of debt.  They should not have to go to their graves with student loans still hanging over their heads.

Today

So here we are.  Not much has changed in the eleven years since all standard consumer protections were stripped from student loans.  For specifics on that, visit my website: http://www.keepjessicaafloat.com and click on About Student Loans.  I am encouraged that many good people are trying to change the laws, which are terrible.  A woman who used to work for Sallie Mae, (one of the largest collectors of student loans) is now regularly giving money to Student Loan Justice.  Check out Student Loan Justice on Facebook, they are working hard to try to change things.  It is striking that a former Sallie Mae employee recognizes that the laws are so bad, that she is giving money to try to change them.

Recently when I told a conservative that the student loan people go after the incomes of spouses of people who have student loans, he was surprised.  I met a young woman whose student loan payment was doubled after she got married!  On the application form for a payment plan, there are blanks to fill in all your spouse’s information, including their gross income.  You are also expected to send in your most recent tax return. It doesn’t matter that you likely didn’t even know your future spouse when the loans were taken out.  It is taken for granted that their income will go toward paying them.  I believe this is a factor in why so many young people are raising families without getting married.  I read recently that people are borrowing less money for college. This could be related to the many student loan horror stories out there.  Unfortunately, it also likely means that many prospective college students are being priced out of the market.  College costs need to be lowered, and standard consumer protections, including bankruptcy, need to be restored to student loans.  And this needs to be retroactive, for the millions already caught in the trap.

Bankruptcy and Student Loans

This article by the founder of Student Loan Justice is excellent and shows just how bad the system, and situation have become.

http://www.latimes.com/opinion/op-ed/la-oe-0310-collinge-student-debt-bankruptcy-20160310-story.html

A right to debt relief from crushing student loans

Something unusual happened in late February. Commentators on the right and left, liberal Thom Hartmann and conservative Ike Brannon, published essays on the same day, Feb. 22, saying the same thing: Americans should have the right to discharge their student debt in bankruptcy proceedings, just like all other loans. Perhaps this historic convergence means we’re finally ready for change.

Our bankruptcy system goes back to the 18th century. When the founders — many of whom suffered at the hands of British creditors — wrote the Constitution, they specified that Congress had the authority to create a uniform, federal bankruptcy system, listing that power ahead of the power to declare war, to raise an army and navy, and to coin currency.

It wasn’t until nearly 200 years later that Congress targeted student debtors, making bankruptcy uniquely unavailable to them. The rationale was that students were fleeing, en masse, to bankruptcy court promptly upon graduation. But we now know that less than 1% of student loans were being discharged in bankruptcy court at that time.

Absent bankruptcy protection, the student loan industry functions without checks and balances. Lenders have no reason to seriously evaluate a prospective borrower’s ability to repay a loan, because they can make more money on defaults than on loans that remain in good stead. If a debtor lacks the funds to pay interest, lenders have collection powers that would “make a mobster envious” — in Sen. Elizabeth Warren’s words. They can extract huge sums from clients, often many multiples of what was originally borrowed.

Talking about student loans

I’ve been working on trying to change the student loans laws since 2010.  For a long time I was just writing my representatives and to newspapers.  Writing or even calling senators and congressional offices is an exercise in frustration, but we need to do it.  Usually when I write my representatives I get a form letter back that starts off something like “Thank you for writing about student loan interest rates…”  I don’t think I’ve ever written about interest rates, although it would help many people to lower them.  Better yet, cap the total amount that can be charged.  I’ve read accounts of people who have paid off more than the original debt, yet still owe more than they borrowed!  This is wrong.

I think calling is more effective at getting representatives’ attention.  One time when I called, the aide remarked “We are getting hundreds of these calls.”  I was so startled at hearing that, I couldn’t think of a good response.  I wish I’d said something like “So tell the senator to work on making meaningful change to the system!”  If there is a next time, I’ll do better.

I didn’t go public, not even telling my friends that I had student loans, until early 2015.  That was after weeks of insomnia and fearing becoming homeless.   I’d been paying on my smaller student loan account for years, but couldn’t afford the payments on the larger account.  Then I was told that I would have to make payments on the larger account, even though I couldn’t do that, plus pay rent and buy food!  When I tried to tell the student loan rep that, he talked over my words, until I finally hung up in frustration.  That was when I started a website and asking for financial help.  I never in a million years thought I’d do that, but it’s amazing what a person will do to avoid becoming homeless.  You can see my site at  keepjessicaafloat.com.  If you’re trapped by these nightmare loans, and have the knowledge, or a techie friend like I did, I encourage you to start a similar site.  At the least, it will help make more people aware that the student loan system needs a major overhaul.

The government keeps coming out with more payment plans as if that solves the problem.  But nothing short of student loan forgiveness is going to do that.  I’m not talking about the folks who can comfortably afford to pay their student loans off and still be able to afford to retire.  More power to them.  But especially older former students, those 50 and above, who can’t afford their loans, let’s get real.  Chances of them finding well paying jobs and being able to pay these things off, without considerable financial hardship, are slim to none.  I recently heard from a woman in her 60’s.  She’s struggling to make her payments, and they’re not even covering the interest!  So her debt continues to grow.  Nobody should have to live like that. .  And there are younger people in situations that keep them from being able to afford to pay.   People who can’t afford to pay and whose situation is unlikely to change need student loan forgiveness. Nothing else will do.

Still here

Haven’t been posting lately,  because I’m having trouble thinking of something to write about that I haven’t already covered.  The system is terrible.  People who can’t afford to pay without considerable hardship are being forced to pay anyway.  Old loans from decades ago are being vigorously pursued, even though they were canceled, supposedly, by the statute of limitations.

Most people not affected by student loans have no idea what a nightmare they are.  Our government keeps talking along the lines of “Hey, we’ve got all these great payment plans!  Something for everyone.”  Yet even with the plans, millions of people have to pay more than they can comfortably afford.  AND continue to watch the debt grow, since they charge interest on the interest.  It is a type of hell, paying thousands of dollars a year, yet watching the debt continue to rise.

Many Americans take pride in our country.  I’m a veteran, and love America.  Yet we are the only country on earth, that I know of, that leaves people in debt for decades to further their education.  I’m not talking about the folks who find a great job and can easily pay their student loans.  I’m happy for them.  But life doesn’t always turn out like you plan.  Read my blog post, My Story, for an example.  For the millions of Americans who can’t afford to pay, there is NO meaningful relief.  There needs to be student loan forgiveness for people who can’t afford to pay, and whose situation is unlikely to change.

 

My Story

I married and had kids late.  My husband earned good money.  I was a stay at home mom, raising our two daughters, and his two kids from his first marriage.  Then he decided he didn’t want to be married any more.  I hadn’t had a regular paying job in years, so it took months to find a low paying secretarial position.  I felt fortunate to have that.  I already had a college degree, a BA obtained in the 80’s.  I’d quickly paid off the small loans on it. When I was in my 40’s and my girls were in elementary school, I decided to go back to school for my master’s degree.  I thought it would lead to a better paying job and improved quality of life for my family.

I worked very hard for nearly three years, parenting, full time job and a graduate program.  I started looking for a professional job six months before graduating.  I figured within six months to a year, I would have a professional job.  I had a plan to pay off my loans early, well before retirement.

But I couldn’t find a job.  I looked for years.  When I hadn’t found a professional position within a few years, I searched for ANY better job.  No luck.  My loans were on financial hardship forbearance.  I simply didn’t have the money left over from basic living expenses to pay on the larger student loan account.

I did begin paying the smaller account, a Perkins loan, a year after graduation.  Perkins loans were only made to low income borrowers.  I will have the Perkins loan paid off a little more than a year from now.

But there was no way I could make the payments on the larger account.  The interest continued to mount, by thousands of dollars.  Finally the servicer told me that I could no longer postpone payment.  I said that I couldn’t make those payments, plus pay rent and buy food.  The guy would even listen to me.  Every time I started to say something, he interjected “You’re out of forbearance,” over and over.  He wouldn’t even let me get a word in.  I finally hung up the phone, sick at heart.  I was informed by mail that my first payment, for hundreds of dollars, was due in two weeks!

Friends helped me out, and I was able to avoid default.  If you default (don’t pay) on these loans, they pile on more fees.  And they can just take the money, by garnishing your wages without a court order.  The student loan lenders are apparently not concerned whether or not you will have enough to live on, they just want their money.

My friends’ help dropped off after a while.  I lived in fear of homelessness.  With the student loan payments, I was barely able to pay my rent.  And I couldn’t manage to save enough to move.  I would have insomnia for weeks at a time.  I wrote and asked them to lower the principal.  Now in my 60’s, the odds of finding a better paying job are slim, to say the least. I got back a form letter saying “We don’t negotiate on the principal.”  I wrote begging for a break on the interest.  At this writing they have added over $12,000 in interest charges!  Another “no” to that request.

Fortunately, I was able to move in with a friend, so did not become homeless.  I am paying hundreds of dollars a month to student loans.  Some of that money, for my future survival, should be going into retirement savings.

I became aware, as I researched the student loan situation, that there are many thousands, if not millions, of seniors in similar trouble.  I decided to try to do something to improve things for others like me.  That is the reason for this blog.  Please share it, and encourage others to do so.  I believe that most Americans have no idea how bad the laws are.  Read my earlier posts and/or do your own research.  Thanks for reading.

 

 

An open letter to my representatives

An open letter to our elected representatives

I am writing to appeal for help for seniors who have student loans they can’t afford to pay. It is estimated that the number of American citizens who are 60 or older with student loan debt is over two million.

I’m a military veteran who got my BA with the help of the GI bill. I easily paid off the student loan debt from that degree, which I earned in the 1980’s.

Years later, as a single parent of two elementary school aged children, I went back to school for my master’s degree. I was in my 40’s at the time. I thought I would get a better job and improve life for my family. I had a plan to pay off my loans early, well before retirement.

Despite years of looking, I never found a better job. I’m now in my 60’s, and still working as a secretary. I can’t afford the payments now, and sure won’t be able to afford them after retirement. Seniors who have these loans are not likely to find better jobs and suddenly have a big increase in their incomes. Yet, if we can’t come up with the money, under current law, the lenders can garnish our paychecks and Social Security.

This is not right. People should not be hounded until death or plunged into poverty for these loans. Since I was fearful of becoming homeless if garnished, a friend helped me start a website asking for help (keepjessicaafloat.com). I’ve noticed many appeals for help with student loans on crowd funding sites and You Tube. Sometimes life doesn’t turn out like you plan. People who genuinely can’t afford to pay these loans off should not have their lives ruined just because they went back to school!

I’ve been writing to you, our elected representatives since 2010. I have also called your offices. An assistant who answered the phone told me, “We are getting hundreds of these calls.” Yet, still nothing has been done for people like me. Often when I’ve written, the only response has been a form letter saying “Thank you for your letter on student loan interest rates…” You, our representatives, seem to believe that everybody who has these loans is in their 20’s. You also seem to think that 25 year repayment plans are not a hardship. Both of these statements are wrong. Lives are being ruined because of these harsh laws. There needs to be loan forgiveness for people who can’t afford to pay and whose situation is not going to change!

Sincerely,

Jessica Hopkins