Debtors with children
In this next case, we see the way in which the burden of student loan debt strains family relationships.
The following excerpt is from a woman who is married with a young son. Based upon our correspondence, she did not indicate that she was having marital problems due to the financial difficulties that she and her spouse were dealing with. However, in several cases I’m aware of, a divorce is imminent as a result of one of the spouses owing money on student loans. In this situation, on the other hand, the debtor’s young son is preoccupied with the family’s finances because of his mother’s student loan debt.
Mrs. A from the Midwest explains:
My husband has owned and operated a small business for nearly 25 years. As he was beginning to come out of debt, the economy crashed. He has been able to survive by clinging to the life of the business by the tips of his nails. I decided to get my master’s degree with the hope of getting a higher paying job that would allow us to make it through the final push of his plan.
I graduated in December of ’09 with my master’s degree and have yet to find a job in my field. I’ve spent the equivalent of a full-time job searching, sending resumes, and engaging in follow-up[s], only to make it several times to the last round and lose out to someone else. We have been living sparsely, borrowing money from each other when we get it to make ends meet. Our son turned 11 on May 12[th] and asked me what he should do with his birthday money. I told him he should save it but instead, he asked how he could be contribute to the family budget—he feels compelled to 'put it to the best possible use [my emphasis].'
My student loans are out of control. Between undergrad and grad school, the loans have amassed exponentially. I did pay on them regularly in between undergrad and grad, but with the state of the economy . . . I am terrified to assess and evaluate [the] payment[s] of my new loan situation. If I end up getting a job starting at $30,000 a year, that would be the answer to our financial prayers. However, at this point, how much of that is going to go toward student loans now? We are barely hanging on as it is. . . . We pay cash for our medical care and medication, have pared our budget to the core, and weigh every penny we spend against the need for the product/service.
I fear, however, that adding student loan payments into an already frayed budget will push us over the edge. And this is if I can find a job! If not, I can defer payment a while, but that is just delaying the inevitable.
In even the most personal of issues lenders act – I’d argue – without mercy. In situations of undue hardship, the arguments used to demean the borrower are excessive. As Brett Weiss and Deanne Loonin point out, “in one case, creditors aggressively questioned a woman about why she had children after she took out student loans if she was not going to be able to afford both children and loans. . . . [T]he creditor’s counsel got the borrower to acknowledge that she had borne all her children after she took out the loans. He then asked her if her children had been ‘planned’ to which she responded that she was Catholic.” In the closing argument counsel returned to her answer, and stated, “you have to make the decision to have a family in light of what you can afford.”
In the next example, this co-borrower had difficulty solving the debt she owed all because of an untimely death:
I co-signed for my boyfriend’s loans so that he could go to school to become a pilot. When he signed up with the school, they only had 2 banks they wanted us to get loans through Wachovia or Sallie Mae and only one was that accessible from their website (Wachovia) where he was supposed to sign up for the loan. So we ended up getting a private loan from Wachovia . . . instead of a federal loan.
One of the questions that this testimony raises is why the boyfriend’s financial aid office at his school failed to provide him with detailed information about the differences between federal loans versus private loans.
Unfortunately, he passed away a couple of weeks before his training was complete. Now the loan deferment period is coming to and [sic] end and they obviously want their money. . . They also sent a letter, addressed to him, stating that the loans don’t offer a death discharge. . . I understand that I’m responsible for paying these loans since I did co-sign for them, it just doesn’t make sense for me to pay the entire loan amount when I got nothing from them, didn’t even get to go for a ride!
So, even when a person dies, they cannot escape their student loan debt. To add insult to injury, this woman had to receive a bill that was callously sent to her deceased boyfriend’s lender.
Older Debtors: Health Problems and the Poor Prospects of finding Employment
Much like younger graduates, older debtors’ job prospects are grim. Many of the older debtors with whom I have been in contact are either unemployed or underemployed. Moreover, they have to contend with the possibility of perhaps never finding employment again. To make matters worse, many of them have health problems. These two factors - the cost of health care, compounded with their student loan debt – is making it nearly impossible to cover monthly expenses (food, transportation, rent/mortgage, etc.). Oftentimes, these debtors are forced to make difficult decisions like paying for necessities such as medicine and groceries. In so doing, they have no other choice but to stop making payments on their student loans, or juggle these bills in a precarious way.
Once a debtor, regardless of age, stops making payments on their student loans, they enter the vicious realm of default. For older debtors with health issues and poor prospects for future employment, their lives, and the lives around them, are devastated.
Ms. W poignantly describes her difficulties in paying her loans as a result of severe health problems. In this case, however, her loans were mistakenly put into the category of default rather than deferment by her lender (a common occurrence that leads to penalties that the debtor must pay, despite the fact that resulted in a clerical error).
Mrs. W writes [truncated version]:
Today I am 46 years old. I was 22 when my father died suddenly in 1985. I had no idea what I was getting myself into when I took out student loans to finish my BA at a college in Michigan. Let me preface this by saying I have never been in default and I have always believed in paying back what I borrowed.
I was majoring in theater and wanted to teach, but I was advised by the college to get a "real career," so I took out more loans and added a BA in Psychology. They told me not to worry, I could pay these back. I worked three part time jobs, and moved off campus.
I went on to get my Master’s in Counseling Psychology, which was paid for by my employer, Thank God. I found to my dismay that I just couldn't make enough money on a salary of $25,000 as a counselor to make the loan payments and take care of everyday life. My cancer in 1986 left me thousands in debt. In 1991, I ended up filing a chapter 13 for my medical bills. Subsequently, a woman at Wachovia Bank noted this, and accidentally put my loans in default instead of deferment.
My life became a nightmare for the next seven years. This was before the regular use of computers. I was on the phone for hours on hold, but I couldn't get anyone to talk to me. Creditors treated me like a leper. I was actually told by a well meaning person that "your loans have been bought and sold so many times, they are probably in a shoe box in someone’s closet."
Finally in 1995, after getting nowhere, I contacted the US Dept. of Education. I literally sent them a shoebox full of notes about my conversations and letters I wrote trying to ask for help. They eventually tracked them down and subtracted the penalties, but not the interest, so my $25,000 turned into $45,000.
I tried to make the payments on a counselor's salary, even on an income contingent plan or any plan I could find, but it was too much money on $28,500 per year. I made payments whenever I could afford to but they never seemed to count because they were never enough to cover even the interest. My payments were more than my rent! I have deferred and been in forbearance so many times it's not even funny.
I had to declare bankruptcy again in 2000 due to lack of finances and everyday living, and ongoing medical issues with my cancerous nodules on my thyroid which prevented me from working for 7 months in 1999 – (once) again, deferment, hardship forbearance, more compiling of interest.
I wanted to go into the NHSC (National Health Service Corps) which is a program for health professionals to go into public service into rural, urban (low income areas), or prisons to work for a period of time in exchange for loan forgiveness. I had a license in Michigan, but they changed their policy and you had to already have your national independent license.
I couldn't afford to stop working to get my PhD, so after 10 years of getting nowhere and the threat of default, I went back to school at age 41 in 2004 and got my MSW so I could be in the NHSC. This was not something I wanted to do, but I wanted to get my loans repayment [sic] and I already had devoted my life to public service, it seemed the logical thing to do. Another Masters would increase my loans, but I could pay it back through this program.
I have new student loans and consolidated them. Now, my loans have ballooned to $160,000. I can't afford even to make the smallest payment because I wasn't making enough on a social worker’s salary. The whole thing is insane.
I put off and sacrificed most things people my age have; a family, vacations, stocks, savings, investments, retirement and most of all children; because I had to pay my loans. My friends have watched me save and scrimp and never get anywhere.
There were times I had to decide whether or not to buy food or pay my loans. Pay the heat or pay the loans. Get my medication or pay my loans. Eat rice and live in the dark . . . I can never get good credit rates because this $160,000 shows up on my credit.
I just got married and have Lyme’s disease that damaged my neurological system and I have not been able to work full time. [In addition,] my medications are really expensive.
I have been made to feel like dead beat. I have felt very ashamed. I feel as though I can never get ahead. It would be nice once in my life to have some nice things, or not always having to worry about defaulting and having my social work license taken away, and then I can't work. I still have nightmares about this.
This July 2009 they finally passed legislation for income based payments instead of income contingent. I want nothing more than to pay my loans off, I am grateful I was able to get an education, but I cannot afford almost $1000.00 per month, and the penalties that accrue if you don't pay the full amount to even cover the interest. Even if I get a great paying job, most of the money will be go to student loans. This is a very complicated situation.
I am working part-time now and am on the Income Based Program [IBR] where as of now I pay $50 per month. I wish I could do more.
In closing, it is my hope that when people read this, they understand I am not asking for a free ride-only a just one. I am requesting that with the new public service forgiveness legislation, that my 23 years of public service be taken into account and allow for my forgiveness to be retroactive.
Ms. W hopes to solve her financial issues at home. In contrast to Ms. W, Mr. A, a contract laborer, is thinking about fleeing the country, and returning to China again, where he previously worked.
China is nice and I was treated with great respect and offered a superior job while there. Returning to live out my life there in usefulness and without the hounding of collectors is an attractive option. I know nothing about loans being discharged other than extreme disability that must be well verified. I heard poverty counts, but I do not know what the collectors mean by that. My wages are currently garnished . . . Garnishment will be a fixture the rest of my life under current law; next year they will start on my Social Security, taking 25%. If I have my father’s genetics in aging, I have at least 26 years of Social Security garnishment, living on $750 a month, and poverty staring me down.
We all went to school to better ourselves. We did not sign up for this when we signed an agreement to pay back our student loans.
We are consumers and no one is protecting our rights. Student loan borrowers, past and present, have fewer rights than prisoners, gamblers, or non-citizens. Gamblers, for example, can deduct losses from their taxes and file for bankruptcy; student loan debtors cannot. We pray for anti-predatory lending legislation that will protect consumers from abusive practices. Welcome to our world.
No one wishes to be invited into this world. Based upon these testimonials it is more than just an unpleasant realm. It is clear that indentured educated citizens feel they are (a) useless to society; (b) believe and have been made to feel that they are second class citizens (“dead beat[s]” as Ms. W mentioned), and, worst of all; (c) hopeless.