Do you want to know what the most romantic thing I’ve ever heard in my entire life was? For my friend’s wedding anniversary her husband paid off all her student loans. I’m getting teary-eyed just thinking about it. You may argue how is that romantic? To which I say, you clearly are a lucky SOB who doesn’t have any student loans to pay off. So this article need not concern you, and I hate to waste any more of your time that you could be spending at the country club or watching someone wash your yacht. A yacht most likely anchored in the same marina as billionaire conservative activist/ proponent of guns in schools to protect from possible grizzly bear attacks, and current US Secretary of Education, Betsy DeVos- boo, but we’ll get to her later. So without further ado here are 10 things you need to know about student loans, except the student loans part is crossed out, and written over it in crayon is *the national student loan debt crisis!
1. Cheery Fact #1: Student Loans Ruin Lives
In 2006 total student loan debt was under 500 billion, it is now over 1.5 trillion, eclipsing credit card debt and auto loan debt. Only second to mortgages. Over 44 million Americans have student loans with a mean balance of $30,000 and a median balance of over $17,000. Student loan debt is a national crisis and college tuition is out of control, student debt collection has turned into a multi-billion predatory industry that destroys lives. That last sentence reads like the plot of a bad sci-fi movie, but sadly its all true.
2. You Can’t Make Any Mistakes When Paying Your Student Loans, Or You Will Face Some Of The Most Aggressive Debt Collection Practices Out There
Student loans are the most collectible kind of debt, it’s nondischargeable in bankruptcy, companies will garnish your wages, intercept your tax refund, sue you in court, etc. It’s kind of like the Italian mob of debt collecting, except if they kill you, someone still has to pay off your student loans.
Florida suspended nearly 1,000 licenses of health care workers just because they were behind on student loans. And on Feb 16, 2016, Fox 26 featured a story about Paul Aker, a man who was arrested by the US Marshals office for not paying his student loan debt. I know, terrifying. I hope that legendary story involving a keg stand that night at the beta house was worth it.
3. Why Paying Back Student Loans Is So Hard
Short answer, the Department of Education was not designed to be a massive bank.
Long answer, the main reason why paying back student loan debt is so hard is because of how student loans are managed. For a long time, the government partnered with banks to make low-interest loans to students, that way if a student defaulted on their loans, the government was responsible not the banks.
In 2010 this changed when resident hottie/ former president Barack Obama cut out the banks, and students started borrowing directly from the government. This led to the Department of Education becoming the biggest bank in America in terms of loans. But since that is not what the Department of Education was designed for, they began to outsource to companies called loan servicers.
4. What Are Loan Servicers
Loan servicers collect your money, make sure you’re paying on time, and are responsible for explaining all your repayment options to you. At least that is in their job description, but poor loan servicers are at the root of the problem for the majority of students who find themselves delinquent or in default.
In 2016 the IT team found more than 500 complaints filed against the national loan service company, one borrower from New Hampshire even called the repayment structure, financial terrorism. That sounds a little extreme-ist (dark pun intended,) until you look at one of the loan servicer companies, like Navient for example. Navient handles 300 billion in student loans, and ¼ in student borrowers, yet Navient had to settle a lawsuit because it was found out that Navient was overcharging active student-duty service members, and misreporting information about thousands of disabled borrowers, which in turn damaged their credit, and in some cases Navient double-charged them.
5. What is Income-Based Replacement VS Forbearance
Okay kids, this one is really important so listen up! There are two ways you can pay back your student loans either through an income-based replacement plan, or a forbearance plan. Loan servicers are going to try to tell you a forbearance plan is the best way to go, heck it might even sound better in the moment, but trust me when I say these companies don’t have your best, for lack of a better word, interest at heart.
In the long run, you’ll be happy you went with the income-based replacement plan. Why? Because an income-based replacement plan lets people with lower incomes pay smaller monthly payments, while a forbearance plan means you stop making payments temporarily, but you pay higher interest rates later. Forbearance may seem like the easier option, but down the line, you will be royally f**ked due to these high-interest rates. Kiss that beautiful apartment in San Francisco goodbye since not being able to pay your student loan debt has destroyed your credit. Lifehack ladies- I only date men with a 700 credit score.
In 2017, the CFPB (Consumer Financial Protection Bureau) claimed Navient AKA the devil incarnate amassed $4 billion in interest charges from student loan debt, again that figure is JUST IN INTEREST. Navient rebuked this claim, but the CFPB filed a lawsuit against them for “failing borrowers at every stage of repayment.”
6. Can You Switch Financial Servicers
Unfortunately no, you have no ability to switch your financial servicer, the Department of Education, the country’s largest creditor, picks for you. Which high key sucks since borrowers are being lied to by student loan servicers because it is in their financial interest to do so. Wan, sad face emoji.
7. Loan Forgiveness Programs
It’s not just the shitty loan servicer companies that the Department of Education keeps hiring, it’s also how terribly they manage or should I say mismanage student loan forgiveness programs. Congress passed a public service loan forgiveness program in 2007. To qualify for loan forgiveness the person must have a federal direct loan or a family education loan, must work 10 years at a nonprofit organization or work for the federal, state, or local government, and make 120 monthly loan payments. If the person meets all these requirements, the government forgives the rest of their loans. In 2017 almost 30,000 people submitted an application to have their loans forgiven, but because of massive incompetence by the Department of Education, only 96 were approved. Yikes.
8. What Do Student Loans Have To Do With Trump
The Department of Education has been in shambles for years, TBH the last time student loans were lit was 1958, but under the Trump administration, it has turned straight-up evil. After Trump appointed mega yacht owner Betsy DeVos to Secretary of Education, within two years DeVos has slashed protections for borrowers and blocked state regulations on loan servicers. A recent report from the Department of Education’s inspector general blasted the department, finding the student loan unit failed to adequately supervise the companies managing student loans. This was a huge deal because the report also found evidence that officials were aware of the widespread service error, but were reluctant to penalize these companies.
Not only did the Department of Education not penalize these companies, but they gave them more business, insisting they were not leading on borrowers. Um, okay (in a sarcastic tone.) DeVos can do this because after Trump appointed her Secretary of Education, he put budget director Mick Mulvaney in charge of running the CFPB, Trump elected Mulvaney in an effort to make the bureau “more efficient.” When really all Mulvaney has done is stop the bureau from going after these predatory companies.
According to an article titled “CFPB official who quit in anger opens new student loan watchdog,” on americanbanker.com, “between July 2011 and August 2017, the CFPB’s student protection unit handled 50,700 private and federal student loan complaints and almost 9,800 debt collection complaints related to private or federal student debt. It spurred enforcement actions across the U.S. government that led lenders including Wells Fargo, Sallie Mae and Navient—as well as the now-defunct for-profit chain Corinthian Colleges—to return hundreds of millions of dollars to consumers.” But thanks According to the Brookings Institution, “almost 40 percent of U.S. student borrowers will default on their loans by 2023.”
9. Who Is Helping You
Before you lose all faith in humanity, let me tell you about a national treasure, Seth Frotman. Frotman worked for the CFPB, but in 2018 he quit his government job. Although it was hard for Seth to walk away from his position, he said in an interview, in regards to what has become of the CFPD under the Trump administration, “the federal government hasn’t just walked away from the fight,” “they’re arming the other side.” So like a boss Seth quit with a legendary resignation letter, part of the letter to Mulvaney read, “you have used the bureau to serve the wishes of the most powerful financial companies in America. The damage you have done to the bureau betrays these families and sacrifices the financial future of millions of Americans in communities across the country.”
Frotman has now started a nonprofit called the Student Borrower Protection Bureau, based in Washington, it won’t have the same power as the CFPB, but according to the article “CFPB official who quit in anger opens new student loan watchdog,” on americanbanker.com, the goal of the Student Borrower Protection Bureau is to “publicize the cost of debt and delinquency on communities across the country.” “The nonprofit has established partnerships with New York City’s Department of Consumer Affairs and the San Francisco Office of Financial Empowerment and the Attorney General of the District of Columbia. He [Frotman] announced the Student Borrower Protection Bureau will partner with state and local policymakers, think tanks, law enforcement and universities to help alleviate what he calls an insurmountable student debt crisis. Frotman said his goal is to create policy and litigation strategies to tackle the crisis from the outside. Currently, he has three full-time employees and 10 people in his fellowship program, which will organize professionals working in related fields to produce research surrounding the debt crisis. The SBPB has received financial support from the Sandler Foundation, among others.”
10. What Can You Do
Now that you know you’re getting bamboozled by loan servicers, what can you do to protect yourself? You need to make sure these companies that are handling your loans aren’t screwing you over. You next need to talk to your elected officials and make sure they’re going after these companies, because the Federal government may not do anything, but your state officials might. Six state’s Attorney Generals are suing loan servicers, so talk to yours.