MONEY MONEY MONEY

My private student loans gain about $10-13 each day.  After our move is complete, I need to focus on making about $15 -20 each day, minimum!

I completed a long, boring survey yesterday that was worth over $13 in e-rewards money.  Eventually that will go towards another Upromise reward which will be put towards my student loans.  I have a current balance of $49.06 and need $60 for a $20 reward or $120 for a $50 reward.

I saw the below photo circulate on FB a lot the past few days.  The comments on this photo piss me off.  I know most of the people are either ignorant about the predatory nature of student loans or were just trolling but it’s sickening that people can be so judgmental and just downright horrible.  I know too many people who will pay 200-500% of their original principal on their student loans.  I’ve seen a lot of similar “Sallie Mae does math” posts like this on OccupyStudentDebt.com.

Math with Sallie Mae

If I made just the minimum payments on my private loans alone, Sallie Mae expects me to pay over 235% of my original principal.  This woman was probably like me and didn’t know her loans were gaining interest while she was in school.  Then that interest gets capitalized, added to your principal and for a long time you’re paying interest on that unpaid interest!  This grows your loans astronomically!  Interest is capitalized once again whenever you enter a new repayment plan and sometimes after taking a forbearance or deferment and depending on your loan terms, could capitalize quarterly or yearly.  Maybe this lady was unemployed and couldn’t make payments for a while and wracked up a bunch of late fees or was even in default.  Maybe she fell for her servicer’s lies and signed up for two years of interest-only payments like myself and my co-signer fell for!

I’ve been paying for 3 years and this is what my Sallie Mae math would look like:

Borrowed: $79,000
Paid back to date: $13,000
Still OWE: $96,000

“Forgiveness is not an occasional act, it is a constant attitude.”
― Martin Luther King Jr.

It just sickens me that so many people will attack this photo without knowing how predatory these student loans are or they blame ignorant students and borrowers instead of blaming lenders like Sallie Mae for raping and pillaging our youth and young adults just starting out in life!

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7 thoughts on “MONEY MONEY MONEY

  1. I’m definitely sympathetic to the burden student loans put on people just starting out in life. I think it’s a problem to be addressed. That said, lenders do need to charge interest, and a lot of it, to compensate for the fact that a lot of the money is being paid years and decades into the future. Taking that photo for example, a dollar borrowed 23 years ago needs to be paid back with roughly two dollars now, just to account for inflation (and even not factoring the profit that needs to exist for lenders to make the lending worthwhile).

    So I try to strike a balance between understanding the lender’s needs and those of the borrower. I’m empathetic with people who are struggling with debt due to student loans, but I’m also understanding of the needs of lenders, who play an integral role in helping us attend colleges whose tuition are beyond what we can bankroll.

    • While that’s an interesting point I haven’t heard before I have to point out how predatory student loans are. Because there is no risk to the lenders (student loans not dischargeable in bankruptcy), they know they will make their profits even if people have to pay for the rest of their lives…and so they can lend mortgage-sized student loans and colleges will continue to raise their tuition rates knowing the lenders will be there to lend as long as it remains risk free. The risk falls solely on the borrower and that’s not how loans were designed to work. Who in their right mind would lend $80,000 to an unemployed student who is majoring in a flooded art field and probably has a less than 20% chance of finding a job making more than $30,000?

      Then most students don’t fully understand the terms of the loans, especially the part about interest accruing while they’re in school, which capitalizes when they enter repayment if unpaid. Paying interest on interest = massive profit. Are 2-4 years (or more) of interest accrual ever capitalized on mortgages? I honestly believe lower interest rates or even simple interest would fully account for inflation and profit.

      I have to question why we even need lenders in the business of making profit off one’s education…something I see of value to our country and should not cost as much as it does. But higher education these days is the sole means to “success.” (I have to scoff at that fallacy because I went to college to become successful and all I’m successful at is being in debt.) If we really want to pay what our degrees our “worth” then colleges should take the weight and allow grads to pay a certain percentage of their income for 10 years or so after graduation. Or we can just stop borrowing and only buy what we can afford, so only the wealthy are educated.

      • I agree that students and parents need to better understand what they are signing up for with student loans. And I think in past comments I’ve agreed with your idea to introduce risk back to lenders via bankruptcy.

        However, the obvious consequence to that approach would be that many students will no longer have access to student loans, as lenders no longer feel the risk is worth the potential reward. While this may prevent some students from pursuing degrees that they want desperately but ultimately may not be beneficial to them, it will also prevent some students from pursuing degrees that they want desperately and would ultimately be beneficial to them (and, perhaps, society).

        Another likely consequence is for lenders to only support degrees they believe will have a good chance of resulting in a high paying job: STEM, pre-med, pre-law, etc. This may sound like a good idea to some, but it surely dilutes the diversity of studies in our educational system. After all, while it’s not likely that English or history majors will earn high salaries, it’s important that some of our best minds pursue degrees in those fields (and not just those whose parents are wealthy & prudent enough to save for tuition).

        In short, the benefit of introducing risk into lending (fewer predatory loans) is also a major detriment (fewer loans overall, and disproportionately fewer to those students whose field of study has worse job prospects).

        I think your idea of paying a percentage of one’s income post-graduation has some intriguing possibilities, but it also poses a real problem for universities. That is, if 10% of a history major’s salary over 10 years doesn’t pay for the cost of education, why offer the degree in the first place?

  2. I honestly believe that restoring bankruptcy protections will lower tuition and make college more affordable. Colleges will be forced to lower rates when lenders are no longer willing to lend mortgage-sized debt otherwise they’ll be forced closed if they can’t get students to enroll. Bankruptcy protections have been in place for student loans in the past and I haven’t heard any reports that lenders were less willing to lend to English majors.

    What is the cost of education? Some people believe education should be free. I know it definitely shouldn’t cost as much as it does today. If I knew I’d be paying a lifetime of debt for a worthless degree, I never would have gone to college. I guess we need to stop ingraining our youth with the fallacy that college is the only way you’ll be successful. I don’t know the ultimate solution, but something’s got to change, that’s for sure.

  3. Drastically lowering the cost of education cannot happen in a vacuum. The admirable goal of cutting the cost of education at a university by a meaningful metric, say even 25%, would result in drastic cuts to various departments. Hard choices would have to be made. If one is to argue that universities should be paid by 10% of salaries of their graduates over a decade, and we want to drastically reduce costs as well, isn’t it logical that the disciplines that produce the lowest earners would be likely to bear those draconian cuts?

    I agree that college is no silver bullet and it’s certainly not the only way to be successful. Perpetuating that myth doesn’t help anyone. However, I do believe there are still bargains to be had in higher education: namely, an in-state school (ideally leveraging a community college for the first year or two).

    • The in-state/community college route doesn’t always work out when there are for-profit schools feeding off the hopes and dreams of young adults. I went to an in-state school for two years before attending a for-profit and I still have so much debt.

      If I possessed the knowledge I have now when I was 18, I probably would have done things a lot smarter and would only have minimal debts. Perhaps personal finance and loan education in high school is one way we could combat the current crisis.

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