Debt

One of the reasons I chose to go to Pitt was because it was cheaper than my other options. It was also in a better climate (for my tastes), had more options for me to explore, and it felt like the place I needed to be.

Of course, I took out student loans.

I have a total of seven loans with Sallie Mae. Data ranges from 10/26/2009 – 11/29/2011

Loan Original Current Amount Owed Total Payments Interest rate
1-01

5,000

$5,583.50

515.32

3.0%

1-03

5,000

$5,270.90

509.78

3.0%

1-04

3,500

$3,651.18

336.47

3.0%

1-05

6,000

$7,244.74

1,306.55

9.75%

1-06

3,500

$3,743.36

517.90

6.875%

1-07

1,700

$1,929.69

380.68

9.875%

1-08

7,000

$7,615.85

1,526.80

10.125%

$31,700

$35,212.68

5,093.50

 

Upon doing this tedious work, I have realized that since November 1st, my interest rates have risen! Where there used to be 6.75%, 9.75%, and 10% there is now 6.875%, 9.875%, and 10.125%!

I consider myself lucky because I have a job.

I had a lot of trouble finding a job and making payments since I graduated. (I’ll save my sob story for later.) I ended up on interest only repayments.

Interest only thing confuses me. Regularly I find myself faced with screens like this:

A screen shot of a page from my Sallie Mae account displaying the difference between that is labeled as "accrued interest" and the minimum payment due for an "interest only" loan.

Damn.

If my interest is more than the payment, isn’t it not an interest only payment? Isn’t it like a “less than interest” payment? To be safe, I pay above the accrued amount rather than the ‘pay this amount’ amount. But, when I do this, I have to allocate the extra to someplace specific. This is cool, because I can work on paying off my scary loan the most quickly. The downside to this is not knowing if all the interest is really being paid off each loan! I’m hoping to embark on a complex, tedious mathematical tracking of my individual loans to see what happens. I say hoping because I will likely forget. Unless I add it to my finance spreadsheet. I do love fidgeting with my finance spreadsheet. In general, I find the Sallie Mae website to be especially unhelpful because it doesn’t show me these things. I have to figure them out myself, which is rather pedantic and probably not the best use of my time.

Due to the angst my loans have caused me over the years, I found myself really inspired by Lawrence Weschler’s article in The Stranger calling for people to stop paying their loans. InsideHigherEd also had a brief piece mentioning it in their ‘Quick Takes’ section. The franchisation of the Occupy Movement (which I don’t judge the way I do TEDx) has led to Occupy Student Debt, which doesn’t make such a dramatic call for action as Weschler does. Rather they point to a Change.Org Petition calling for Sallie Mae to cease requiring Forbearance Fees if one is unable to pay their loans.

As someone who used the forbearance option quite heavily in my less employed days, I can tell you that when you can’t afford a 200/month loan payment, you certainly can’t afford the forbearance fees.

I found the idea of just stopping loan payments quite enticing. I recognize that I borrowed money and I should pay it back. This isn’t about whether or not higher education should be affordable (it should), it’s about the fact I made a promise to pay back money I borrowed (borrowed is the key word). The interest, even the higher rates, are somewhat reasonable. Interest accruing at quite a rate (even before graduation!), with high forbearance fees, and little to no wiggle room is ridiculous. When I was looking at money saving options, I did not qualify for anything Income Based. They told me, at the time, that my options were “income based,” “interest only,” or forbearance. They said they would figure out how much I would owe with IB, and if it was below IO, I’d have to pay IO. I’ve heard varying experiences from various people I know. Finding a job, any job, within the short period of time they give you post-graduation is nearly impossible–much less one that affords you the ability to pay your loans.

The Onion brings attention to one of the most fundamental problems of looking for a job: they don’t exist where you need them to. Post-graduation, as many people do, I considered the worth of moving in with my parents. It would be cheaper than living on my own. I wouldn’t have to pay rent. I also wouldn’t have a job. Clarkdale, Arizona is a lovely place, but it’s not exactly the employment rich land I needed. (Getting a job with an HPS degree that isn’t ‘graduate student’ is actually quite difficult, with more employers searching for people with specific degree types for entry level positions.)

In short, loan payments are hard to make, due largely to the inability for people to find employment that affords them luxury of paying rent and loans–not to mention the misc expenses of things like utilities, food, medical care, and beer. (I had this interesting situation where I could have had a job if I had better clothes, but I couldn’t afford better clothes because I didn’t have a job. In the end someone I know lent me ten bucks to get an outfit that I wore every day for two weeks until I got paid the first time. P.S. ‘Beer’ is a joke there.) This sort of living also causes stress, depression, and ulcers.

Yay, ulcers.

So, while I would enjoy not having to pay the $700/month I ought to be paying on my loans, I don’t expect that to be the case. I expect to pay back everything I borrowed (and then quite a bit more). But I also expect people to not be dicks about it. Taking a stand against a broken system is an important thing to do. Words stop being enough, and action comes into play. Financial action has been a successful tool of protests all over. Not paying loans seems like a great idea to take a stand. It’s a dangerous stand, but if others would do it, I would not only be willing (and scared), but I would be happy (and scared out of my wits) to participate. The system of lending and borrowing is not broken, the companies that run this system are.

Then my reasonable side asked me “What happens when you don’t pay your loans?” I made some calls and did some digging. Here’s what I found out.

After not paying on my loans for 45 days, the guarantor will take over. A guarantor has the right to garnish from your wages. Therefore, even if I stopped paying, I would be forced to pay and kick my credit score in the head. This option is really only useful if you don’t have any wages to garnish. Basically, us employed people can’t stand in functional solidarity with our less-employed brethren.

The guarantor for my loans, I learned, is HEMAR Insurance Corp. of America. They don’t have a website, but they do have an office in Sioux Falls, ND. According to this 1994 article, HICA is a subsidiary of Sallie Mae. I didn’t spent the energy to confirm this. It seemed hard to do.

So, if I stopped paying on my loans, Sallie Mae would transfer them to another part of Sallie Mae and then garnish my wages. Fun.

However, there is still hope for people who do not have loans with Sallie Mae–or guarantors that are not the corporation who also owns the loans. If enough of you, i.e. millions (not one million, but plural of millions), all stopped paying AT THE SAME TIME it would be hard to manage that much buying of debt and theoretical money being passed around.

But, really, are millions of us ready to do that?

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2 thoughts on “Debt

  1. I think millions of people clearly are ready to stop paying their loans. The problem is a type of collective action problem. If some people do, but not enough, the some people get screwed.

    People hate paying loans and have little sympathy for big banks. The lack of a good way to coordinate and the stiff and (reasonably swift) consequences are the what keeps this from happening.

  2. There are a lot of people who have (both voluntarily and involuntarily) stopped paying on their home mortgages in the US during the past 5 years. Each state has different laws about the consequences. Some of those consequences have a ripple effect on your income tax. It’s very complicated and the banks are the clear financial winner in every instance. I would say that they are the moral loser, however, since corporations are not people 🙂 I guess morals don’t count.

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