Are you still paying off student loans, or do you have a close family member who is? Then like me, for you, student loans are personal. I have a son who graduated five years ago from William & Mary Law School in VA, with $85,000 in student loan debt that grew to $88,000 before he could start paying on it. You can imagine why I feel personally invested in all of the collection industry news about student loans—how much student loan debt is “out there,” how many students are faced with the dilemma of not being able to repay their loans and what their options are.
Job hunting and couponing
When he graduated, my son was fortunate to get a job as a judicial law clerk in state court, but he still hasn’t been able to find a more lucrative job in law. The judges love him and have agreed to let him stay as long as he needs to. Last November, they even changed his title to “Attorney/Law Clerk” to reflect his more permanent status, his eligibility for raises “if the legislature ever decides to give them,” and vacation time that carries over year-to-year. But for now, his duties and pay are still about the same. He, his wife and 2-year-old daughter are still living in the same two-bedroom apartment they moved into 5 years ago. She works as a pharmacy technician when he’s home, so they don’t see much of each other. He spends his spare time applying for jobs and couponing to buy the groceries. I recently asked him what his status is with his loans. Here’s his report.
“My four loans are with ACS (servicing for Access Group), AES, My Campus Loan, and Direct Loans (Federal Govt). The minimum payment on each of them is more than the interest. The interest rate on the first two is about 3.6% (variable), the third is 5%, and the Federal loan is 5.25%. I pay my student loan bills on time, every month. I set up my bank’s online Bill Pay to pay them automatically. That way, I don’t forget, and I’m not ever tempted to not pay them. My loans total about $660 a month, and I just don’t count that as my money. Also, for a little over a year, I’ve been paying an extra $300 a month on my largest loan (currently at $47,000 and in year-5 of a 25-year repayment plan) to help bring the principal down faster. If I can keep that up, I’ll pay that loan off in about 7 more years, instead of 21, which will end up saving me about $20,000 over that 21-year period.”
Suing and cutting
I’m very proud of my son and his wife for living so frugally and for being so conscientious about paying off his loans, but I worry about them, too. The probability of him getting a better job isn’t good. One recent ABAJournal.com article talks about law students who are suing their schools for falsely claiming high placement rates. A Wall Street Journal article posted this week, says that because of fewer applicants and a “dismal job market,” at least 10 law schools plan an unprecedented move to cut the size of incoming classes.
A huge percentage of students with a BS or even advanced degrees in other fields are in the same boat or worse. They have the education, but not the job, and their student loan debt is not going to go away, nor can it be included in bankruptcy, if that becomes necessary.
Postponing and slowing
My son is just one of the Americans who is postponing buying a home and slowing the housing recovery. He is also an example of why there is a lot of student loan dept out there to collect, but very little ability to pay. For many of the students who incurred the debt, their high hopes for their financial future have not been realized.
If you would like to share a personal student loan story or your thoughts on how stories like mine are affecting not only the debt collection industry, but the economy in general, we would love to pass them on to our readers.
by Nancy Lender, NL Marketing Assistant