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Monday, August 30, 2010

30 something and in Default


I rode the emotional roller coaster with all of my student loan lenders today. Since I started taking stock of all my loans including their balances and monthly payment amounts, I said to myself “why stop there?” So I called Sallie Mae and found out what type of loans I had – private or federal.  I had a slight glimmer of hope in my tone as I had read about extended repayment terms being able to lower payments.  So I asked the rep if any of the loans qualified for extended repayment terms. The rotten fruits of my labor are in the chart below.


Ugh. Now, I’m even more depressed. Two of the loans don’t have a cosigner and are already at the max repayment term so I have no choice but to default on those loans. Not because I don’t want to pay, but because I can’t afford to pay. Unfortunately, those 2 loans are also federal loans so they’ll probably end up garnishing my wages and my professional license could be in jeopardy (seems ridiculous b/c I need my license to make money and if I don't have it I can't pay you anyway). But right now, my focus has to turn to the loans that my parents are cosigners on. I absolutely can’t default on those and those are the loans with the highest payment amounts. The only loan I’m not worried about is Access Group as that balance is reasonable and I can afford the $60 a month payment even if I end up working at Target. I'll see what I can do about paying that balance off in the next 9 months (270 days) – which coincidentally is how long it will take for the two federal loans to be considered “in default.”

I stumbled upon some decent resources so I could know what to expect during the default process: The US Department of Education Debt Collection Service publishes a guide called Guide to Defaulted Student Loans and Defaulting on Student Loans on www.Finaid.org.  FinAid.org also has information on Student Loan Debt Settlements. I was quite surprised to find Student Loan Borrower Assistance as it provided the most useful information. Definitely bookmarked that site. I also have to say I was super excited when I stumbled upon IBRinfo.org.

IBRinfo.org was created by the nonprofit, nonpartisan Project on Student Debt to help student loan borrowers learn about two new federal loan programs: Income-Based Repayment (IBR) and Public Service Loan Forgiveness (PSLF). Like the tension build up before the slaughter in a horror-film, I ecstatically filled out IBRinfo's web-based calculator. I put in all the information, which I conveniently had at my finger-tips thanks to my nifty spreadsheet (softly play music from Jaws). I eagerly pressed calculate and awaited my fate (volume of Jaws music increases). Then suddenly, the fatal bite from the unyielding student loan beast – “Based on the information you have provided, you would probably not qualify for IBR.” Damn! Damn! Damn James! On a whim, I kept increasing the number of dependents to see how many kids I would have to have in order to qualify. 3? No. 4? No. 5? No. 6 – Ding! Ding! Ding! Correct!! I would have to have 6 kids in order to qualify for a payment of $640!!! Does this reinforce a welfare mentality or what? Because if I had 6 kids I certainly would not be able to have a job other than my own reality show about having 6 kids and not being able to afford anything (I must note that reality shows pay WAAAAAYYYY more than any career in the legal profession so this is now a viable option for me; I wonder if I can get my husband drunk enough).

I would almost be better off with 6 kids and taking a lesser paying job (but seriously, is $86K a lot these days? That’s before taxes and deductions – after all that is taken out I’m bringing home about $57K THEN all the bills start). Just another reason why I can’t afford to be middle class.  I am living the statement that Today's generation will most likely NOT be  better off than their parents.  Forget the 20 somethings - what about the 30 somethings!!

5 comments:

  1. Ironically, when you wrote about increasing the dependents, I had a flashback of playing with the LINK card calculator to see if I could get one just for the hell of it. I included all of my "dependents" at the time, including my elderly grandmother and uncle. I had to increase the number to about 6 or 7 as well before they would offer up benefits. The gov is crazy. How do you give moms money for the more kids they have? Maybe they should give more money for the more EDUCATION you have...

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  2. You don't get it. Reducing the payment period reduces the declared income stream to the corporation's balance sheets. Defaulted student loans cannot be discharged (easily) and therefore can be carried as a capital asset on the books.
    Its really simple. If discharge were easy, financial institutions would have to increase its actual capital to avoid FDIC takeover.

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  3. Anonymous - your point about even defaulted student loans being carried as capital assets and not being written off is true as far as it goes, but that's not why the loans were made nondischargeable in bankruptcy. The reason at the time was deep public resentment at kids taking out $20-30,000 (a lot in those days) in student loans, getting an education that could make them a good living (e.g. law school), and then doing what's now called a 'strategic default', declaring bankruptcy promptly (before much income or assets) and, essentially, thumbing their noses at the (mostly less well-educated and less fortunate) taxpayers. I had a partner who skipped out on $35k of loans in the early '80s - it was a scandal when his name hit the New York Times along with a list of many. The firm made some arrangement with him so that he paid up, and paid the firm out of his next bonus, but there was also sentiment to fire him.

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  4. I hate Sallie Mae. They blow up my phone and mail and then when I finally do return their call I get nothing but argument. I was on a repayment program and called to tell them I was relocating for work and my bank account info had changed. They deleted me from the wrong system and my payments stopped. When I called to get it corrected, the jackass said I could not be put back on the program even though it was their mistake. I asked for a manager and he refused to put one on. I finally got through to the actual person that took my original call about moving and she fixed the entire situation in less than 5 minutes. They aren't there to help the are there to try to intimidate you into paying the full amount by means of threats. Oh, and that unit collections manager Mark Lytle is a joke. Before Sallie Mae he was a parking enforcement office at Ball State University. What does that tell you about the experience factor?

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