I need to take a minute to talk about student loans.
Since senior year of college, they have been a dark cloud looming over me. I have about $95,000 worth of debt for getting my degree. I take full responsibility for this. I signed up for college, knowing that I couldn’t afford to pay for it. I decided to go to a four-year, state university. I signed up for loans, knowing that I would have to pay them back after graduation. I chose a degree that is severely devalued in today’s world. (That’s a blog post for another day). I know that I put myself in this situation.
However, I recently realized that because my payments are so low, due to my income based repayment plan (IBR) that Obama put into place, I am only paying off the interest on my loans. Mind you, interest is still accruing every, single, day. When I realized this, I emailed my loan servicer and asked to reallocate my automatic, monthly payments to pay off the principle rather than the interest. All I received back was an email saying that my request could not be processed. So I called my loan servicer, because they encourage borrowers to take control and talk to the service providers. After talking to them I felt like I had just been slapped in the face.
I asked why I couldn’t repay more principle than interest. He said there is no possible way around it; it is government mandated that borrowers pay interest first…. while still accruing interest. My IBR lowers my monthly payments, but hasn’t been going to principle for the past ten months. I asked the agent on the phone, “So at this rate, I’m never going to pay them off.” To which he replied, “Yeah, I mean it would take you forever.”
He told me that most borrowers who are on the IBR Plan are working towards loan forgiveness, which happens if you are a “public servant” and making payments in full, on time, every month for ten years. Basically, if you work for the government, you might get a break on your loans. The other way to have the loans forgiven is to pay your IBR payments, on time, in full, every month, for twenty years. That sounds okay, right? But wait! Not everyone is eligible for IBR. Your monthly income, household size, spouses’ income/debt, etc. all play a part in your eligibility. So I asked him, “Right, but if I continue to advance in my career and my income increases every year, eventually I won’t be eligible for this plan, and therefore they won’t be forgiven, and I still will have very little, if any, of the principle paid off, correct?” Correct. He said, “You’re biting a bullet either way. You can have low payments now, when you’re first starting out, but still accrue interest and not pay principle, or you can you have higher payments monthly and never be eligible for forgiveness.”
Let’s not forget that my parents very graciously cosigned on $65,000 worth of my loans. I do not want them to be on the hook for that amount of money, for my education. I looked into releasing my cosigner, but that only applies to private loans; mine are publicly funded. I will be paying them back and paying those loans in full, but I can’t even pay my own right now.
So what am I supposed to do now? Recently, I negotiated my way from a 7% raise at work, to 15% (humble brag). If I switch to graduated repayment, (where your monthly payments increase every two years), my raise is essentially negated, but I pay the loans off in ten years, assuming I make every payment. It’s not a terrible situation, but it makes trying to be a successful, independent adult, extremely difficult. I’ve thought about getting a second job, at least so I have some “fun money,” as I’ve already cut the amount I put into savings every month by about 70% upon moving out of my parents’ house. I’ve thought about nearly emptying my savings account to pay off some loans in full, but there are still loans to be paid off at that point, and I’m still in the same boat, except with less financial security. Standard repayment, is not doable on my income. I don’t know what to do.
I’ve been paying more than the minimum amount, on time, without complaint, every single month since entering repayment period and it has gotten me nowhere. I feel confused, duped and frustrated. It feels as though I am being punished for trying to be responsible and at this point, I cannot see any light at the end of the tunnel. The looming dark cloud just grew exponentially.
I want to get this information out there for anyone else who might be in the repayment process. Pay attention to what you’re signing up for and do your research. Honestly, think twice about going to graduate school, or try and get as many scholarships and grants as possible. If I could do it over again, I would avoid having my parents co-sign if at all possible. The full degree is in my name, the full bill should be too.
Below are some more helpful links to information about student loans.