Last week, I told my tale of education and how I accrued student debt. I’ve got mad cred academically, but as a result, I’ve got bad cred financially. Actually, my credit score isn’t that bad, but it isn’t great, either. This week, I’ll share with you the second part of me education / student debt journey. This is the part where I try to pay my loans. Fail. And try again.
The Debt Hits the Fan
Once I graduated with my Ph.D., it was time to start paying my loans. I had a good job. I was married and had access to a second income. I was ready to start paying. I consolidated my loans with the U.S. Department of Education (USDE), as is recommended. Fortunately, I could consolidate all of my subsidized and unsubsidized loans since all of them were federal (versus private loans).
Consolidating had the great benefit on having one payment a month, not — oh I don’t know — 20+ payments. Every year is considered a separate loan when you take out federal loans. Which means there is the possibility of having multiple loan servicers because you have multiple loans. Worse, it used to be the case where you could not only have multiple loan servicers, but they could sell student loans to other lenders at their whim. That practice ended in 2010, four years after my education journey ended. Many of my loans had been sold. It took me a few months to track them all down because I had no idea who owned my loans. I was on the phone a lot. And I still missed one.
I only know I missed one because when USDE consolidated my loans, the errant loan found me. But because I didn’t include this loan in my “list of loans” to USDE, it wasn’t consolidated. You can only consolidate once. No exceptions. So despite my efforts, I ended up with two payments. One to USDE and one to Nelnet. But I started paying because I wanted to pay my debts. And because I was married, my loan payments were high. Between the two loans, I was paying close to $1,000 a month. My husband-at-the-time paid the higher of the two payments, for which I am grateful.
Grace (Under Fire) Period
After about a year or a little more, I decided to defer my payments (via forbearance) because we bought a house. We bought at quite possibly the worst time and needed a while to adjust to our house note. Forbearance is only available systematically for federal loans (versus private loans). I was able to postpone payments for several years, but my loans were still accruing interest. Definitely a bad decision on my part, but I just couldn’t afford to pay the loans at the time.
*Cue violin* Then I got divorced and my financial situation changed drastically. I continued to take advantage of forbearance for as long as I could. And the interest kept rolling in. At the time, I was under the erroneous belief that my student loan repayment — when it would come due again — would consider my debt load in the calculation of the monthly payment. It doesn’t. I have no idea how I came to that belief, but I was absolutely confident that would be the case. I suspect it had something to do with the multitude of people I talked to over the years at USDE, many of which gave me vastly different information and misinformation. Loan payments do consider “discretionary income” – income above the poverty line (for your family size). And I’m grateful I qualify for the program where consideration of discretionary income is part of my repayment plan. That program is called income-based repayment and anyone can request it.
Back in the $addle
For a few years after my divorce, my student loans became a specter in my life. Something lingering around my psyche constantly, but out of sight enough that I could pretend it wasn’t there. Well, it was there. And it came back to haunt me. My continued attempts to live in deniaI almost sent me into default. But I didn’t default. I thought about it very seriously, though. Paying my student loans puts me in a position where I can’t save for anything – not for retirement, not for a house. And I am not alone in this predicament.
The main reason I didn’t default is because I am my deeds. I didn’t want that kind of “free ride” behavior to be part of my legacy. I didn’t want to be a tangle or tear in my ancestral wyrd because I chose not to pay my debts. So, I’m back to paying high payments every month. Not quite $1,000, but more than $800. The good news is my Nelnet loan will be PAID OFF next year. Hot damn! That will give me a little breathing room to start saving again.
I thought my story would be done this week, but since this is such a huge part of my life right now, I have more to say. Next week, I’ll talk (or maybe rant) about larger issues that have led me down this debt-driven path. And then I’ll be done – I promise!
Do any of you have stories about grappling with student debt. How are you managing your payments?