Weekend Economists Thanksgiving Leftovers November 29-30, 2014

[Demeter]

4. How I Beat Predatory Sallie Mae at the Student Loan Game By Stefanie Gray

http://www.alternet.org/education/how-i-beat-predatory-sallie-mae-student-loan-game?akid=12501.227380.oGCSt_&rd=1&src=newsletter1027620&t=23

Beginning when I was an 18-year-old university student, I took out four Sallie Mae “Tuition Answer” loans worth about $36,000 between 2006 and 2008 – which was more than twice as much as I earned working my way through college – so that I could attend the City University of New York’s Hunter College. It’s a relatively affordable school, but due to the deaths of both of my parents when I was younger and the fact that my job at a local clothing store paid only $7 per hour, I still needed money to make ends meet. I felt uneasy signing the paperwork, but my school’s financial aid office was plastered with posters and pamphlets depicting smiling students whom Sallie Mae had allowed to follow their dreams and I was under the impression that they were benevolent. I had no idea that, without a cosigner, I’d end up with credit card-like interest rates, amongst a multitude of other problems.

Most people think of Sallie Mae as a purveyor of federally-backed student loans with low, government-mandated interest rates, regulated deferred payments and hardship waivers. And, looking back, the differences between the federal student loans and private, bank-backed student loans that Sallie Mae services were definitely blurry – listed in the same pamphlets, referred to as “Sallie Mae” loans, marketed in the same way. You could even say that Sallie Mae bases the reputation of its other, more predatory student loan products on the strength of the reputation of the federal loans everyone knows them for. (Perhaps that’s why reports surfaced in mid-November that the Obama administration may remove Sallie Mae from federal loan-servicing.)

But after I finished my undergraduate degree in 2009 and earned a Masters degree in geography in 2011, I wasn’t able to find work. The field of computerized mapping had previously been booming, but entry-level tech jobs had dried up. I couldn’t even get a job housekeeping at a local motel. And unlike federally-backed student loans – which give borrowers the option of income-based repayment plans or deferring payments altogether in cases of financial hardship – private lenders, like the ones behind the loans Sallie Mae gave me, are under no such obligation and have no incentives to offer any repayment flexibility. So, with no income and my private student loan payments, interest and fees, I was headed for default.

Sallie Mae’s collectors called me up to 10 times per day, even on weekends and holidays. I begged their representatives (and recorded the conversation on camera, as shown in the CNN documentary Ivory Tower) to make my payments affordable so that I could begin to pay them back rather than default. They refused. The only option Sallie Mae offered me to avoid default and subsequent financial ruin was to pay a $150 fee every three months to put my loans in “forbearance”. But interest – more than $1,100 per month on my $36,000 in loans – would still have continued to accrue and that $150 wouldn’t be applied to either the interest or the growing balance. It was mind-boggling.

Bankruptcy wasn’t even an option, thanks to the government’s 2005 “reforms”: you can now only use bankruptcy to discharge student debt in cases of extreme hardship, such as total and permanent disability. It would’ve been easier to get out from under my debt if I’d amassed it through using credit cards irresponsibly or even gambling, rather than taking out student loans to finance my education...

READ ON TO FIND OUT WHAT HAPPENED...