Yesterday, Marney White wrote an unflattering op-ed on the student loan industry. He believes predatory credit card and student loan lending is THE 2008 sleeper issue.
Wait, wait.. Didn't congress just pass a bill helping student borrowers?
Yes and no. S. 1762 passed on July 20, 2007 and offers minimum benefits for future borrowers of public loans. Absolutely nothing in S. 1762 provides assistance for borrowers of private loans, and offers no help for current and former borrowers still paying on existing loans. The big thing to note is that S. 1762 does not help borrowers of private loans, and that accounts for the majority of student loans dispersed today.
But this diary is not about Marney White's article, or S. 1762. This diary has to do with my own student loan experiences; it is a story about being human, making honest mistakes and being preyed upon by the powerful and wealthy.
Please join me over the fold.
I come from a broken family like many of us do. My dad was a PhD and my mom a loving housewife. My older siblings graduated from top universities with honors. They didn't seem to be affected by our familial turmoil as I was, though. Of course none of them were gender dysphoric from an early age, either. Coming to terms with being transgendered was an arduous process, especially growing up in rural Georgia I was picked on in grade school and shoved around and beaten up in high school. Not fun times, which is why I eventually quit high school in the late eighties.
A few years later a beautiful, wonderful young woman came into my life and encouraged me to finish high school and enroll in college. She was my hope and life for several years and has a lot to do with who I am today.
I passed my GED exam with a 98, after having been out of school for 5 years. I felt proud and began looking towards the future. I knew I needed a good education in order to be successful.
Looking back I have no regrets about going to college, but I realize now how important it is for light to be shown on the student loan industry. I don't cherish writing so much about my personal affairs on a public blog, but I feel it's this important.
...
When I applied for college in 1993 I had no idea what I was getting myself into. I attended a smaller private Christian school because I thought it would be the only place I could go to with a GED. I didn't realize their tuition was much higher than other places and (if I can be perfectly honest) was too immature to find out.
The college financial aide office made paying for school criminally easy. I had to fill out a FASFA, and a few weeks later was asked if I would repay my loans when my SAR came back.
In the dozens of visits to the Financial Aide office, nobody told me the exact conditions of my aid (which included Pell grant, Hope and Subsidized and Unsubsidized student loans.). Nothing was said about deferment or forbearance, or that there were no consumer protections for the loans.
I was signing a deal with the devil and didn't know it at the time.
My loans, like most student borrowers, were used to pay for tuition, fees and books. They were also used for paying rent, car expenses, food, and other things having nothing to do with my education. I was given several thousand dollars, which I'd never had before. Free money, so it seemed.
Absolutely nobody explained the seriousness of what I was getting myself into.
A few years passed and while I was out of school, I wanted a little extra money to pay for music equipment for an old band. So I went to a local lender who specialized in small loans (this was before the pay-check loan services so prevalent now). On a small $200 loan I was required to submit to a full credit check and background investigation. It took two weeks to be approved.
After my FAFSA went through I was immediately approved for $25,000 of credit, which could be used for anything. Checks were dispersed directly to me, not the school. There was no oversight involved; as long as the school received their money they didn't care where the rest went or how I would eventually pay it off (or wouldn't).
Eventually, I learned of forbearance though my lender(NelNet). I was not making much money and wasn't sure I could begin paying back the by-then several thousand dollars in loans. The customer service rep suggested I go into forbearance, which meant I didn't have to pay my loans right then.
Again, no mention was made of what a forbearance really was, or how it would cause my interest to grow over a longer period of time. I was offered forbearance over the phone, though I had to sign a paper and return via mail after the fact. It was that easy.
By the late nineties I'd borrowed $23,000 in student loans to pay for classes mostly taken at a private Christian college. That would have paid for a down payment on a house, or bought two cars. But I had almost two years of college to show for it - no degree and no career. The total loan had already grown to $30,000 by then, and since I was still not in a position to make minimum monthly payments I was forced to continue taking forbearance. Doing so was always as easy as dialing a toll free number. Nowadays you don't even have to sign a form afterwards - your verbal request is enough. But this change in policy didn't take place soon enough.
I received mailings from NelNet almost every other week. Always the same thing.. each envelope contained info on a separate loan. I had a stack of Nelnet mail over a foot high in one year. All the same thing - no bills, no payment requests, just a summary of what I borrowed and current interest being accrued.
In the midst of these mailings I overlooked forbearance paperwork, which caused my loan to go into repayment. I opened Nelnet letters every month - always the same thing, so I must have filed the forbearance letters away without actually reading it. I'm human.
180 days later I finally realized what had happened. I called Nelnet's toll free number, was immediately connected to a CS rep (as usual), and explained why I was calling. They said no problem, it happens - and asked me to look for a new notice being sent that day. And they put my loan back into forbearance right then. Poof.
Unfortunately, Nelnet reported to credit bureaus that I was 180+ delinquent on my account, even though a simple phone call & forbearance request resolved the problem. That 180+ delinquency still shows on my credit report and will be there till this loan is completely paid off. My credit score was in the upper 600s, and is now in the mid 500s all because I didn't call a toll free number and ask the magic question.
It's now 2007 and after consolidating my loans I have begun paying them off. I have 60 months of new forbearance available to me. Nelnet was eager to let me know of that during consolidation, and had the audacity to ask if I'd like to use it.
My original principal grew from $23,000 to $47,000 in just 15 years. That's over 100% interest I have to pay back on a federally guaranteed loan. That this is legal amazes me. Furthermore, even if (hopefully when) I pay my entire balance off, I still have a nasty 180+ delinquency showing on my credit report which Nelnet refuses to remove (despite their resolving the problem by offering forbearance to me over the phone).
I have no qualms about paying off my original principle (even if I wasn't quite ready for school at the time) - but the rest is legalized theft from incorporated loan sharks.
If something where to happen to me I have absolutely no consumer protections under current law. My loans are not dismissable under bankruptcy law. Loan companies have offices in Canada to pursue delinquent borrowers, so moving north isn't an option either. The only escape I have is to succumb to exorbitant interest and pay the entire federally guaranteed balance off, or die.
The federally guaranteed status of student loans (including private lenders like Nelnet and Sally Mae) is important because these companies are not taking any risk in making loans to students, yet charge sky-high interest as though they were.
Had I to do it all over again, I would have waited to go to college. At 21 years old I was too immature and not focused on the larger picture. I'm grateful for how far I've come in life and realize I have a long way yet to go. I am in process of paying off my student loans and if I work hard (and am lucky) I may be able to buy a small home someday. I might already own that small house if it weren't for the inherent greed of predatory student loan lenders.
My story is not as severe as most victims of predatory student lending. Many others can be found here.
I'm just amazed that student loans are still given away like poison suckers at a bank.
Nobody should need to mortgage their lives away for a good college education.
Updated I hate to have to point this out, but because I went to a Christian community college does not mean I believe in christofascism. I don't. If anything, I noted that because it underscores the hypocrisies of Christians by playing part to usury.