Volunteering My Kidneys to Sallie Mae, and Other Student Loan Repayment Strategies

National student loan debt is currently over ONE TRILLION DOLLARS. That doesn't even sound like a real amount of money that is possible, does it? They could call it a STOMPTILLION or a FREAKAZILLION and it would carry just as much meaning.

Apr 25, 2012 at 1:00pm | Leave a comment

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A meticulously rendered dramatization.

I can’t actually say the number out loud. 

Amongst my friends with student loan debt -- which is to say pretty much all of them -- when conversation turns to student loans -- which it rarely does -- we discuss our responsibilities in vague greater-than/less-than terms, a lighthearted, LOLsobbing reckoning of who has it worse. 

“I owe more than 50K,” says one. “I owe more than 75K, and am on a repayment plan that will probably extend into retirement,” says another. “I have no idea what I owe because I’ve been on forbearance or deferment for 10 years and I refuse to look at my capitalized interest for fear of instantly committing suicide,” says a third. 

Few of us want to say our precise number out loud. Many of us, in fact, live on in a sort of extended college-student haze of denial when it comes to our student loans -- if we don’t think about them too much, we can forget they’re there.

The culture around student loans when I was an undergrad and a graduate student was one of quiet resignation: We have to take the loans. We can’t go to college without them. And while not going to college is always a possibility, it’s not really a choice if we’re deciding against college on a financial basis alone. 

More than that, forward-thinking prospective students must also consider the earning difference with a college degree versus without; while the exact numbers are often debated, a 2002 US census report found that college grads on average earned almost $20,000 more per year than those without college degrees. That is a lifetime benefit worth considering.

So for many of us, we take the loans because that’s just what you do when you’re a student; loans have become a rite of passage for many young adults, a financial burden they’re saddled with even before they get their first job. But the commonness of the experience doesn’t mean it’s not a problem.

Indeed, President Obama made a campaign stop at UNC Chapel Hill yesterday to speak about this issue. National student loan debt today exceeds one trillion dollars, far outweighing the national consumer debt that has played such a key role in the current state of the economy, and leading many economists to predict that student loans may well be a looming source of future financial problems for the nation. 

Obama was promoting his goal of getting Congress to freeze interest rates on student loans for another year, or else rates on new student loans will literally double come the summer. Given that loan repayment is already difficult enough, this could be devastating to college students graduating in the next four years. 

Opponents, however, argue that keeping interest rates low is too expensive -- one year of loans costs the government six billion dollars -- and may be creating a cheap-debt bubble not unlike the housing bubble that led into the recession the US is attempting to struggle out of even today. 

While this is no doubt a critical long-term concern, it’s a hard sell for students today. Amongst his other observations, Obama noted that he and wife Michelle faced student loan payments higher than their mortgage when they initially finished graduate school, and only paid off their loans in full about eight years ago.

Let me break that down for you: The President. Only paid off his student loans. Eight years ago. I heard this on NPR this morning and immediately suffered a powerful spasm of FEELINGS. 

On the one hand, I feel sheer trembling pants-wetting horror that I will never pay my loans off, never ever, because nothing I do will ever make me even slightly rich, and when I die Sallie Mae will likely turn up at the funeral to harvest my organs to finally settle our accounts. (Actually, I would do this, were it an option -- I would promise Sallie Mae my kidneys or whatever in exchange for loan forgiveness while I'm alive. THINK ABOUT IT, SALLIE MAE.)

On the other hand, I feel relieved that this is somewhat normal, that my being 35 and barely having made a dent in my own loans is not a unique source of shame. When I first saw my initial default 10-year flat repayment plan, the numbers elicited only deranged laughter and solicitations for student loan goons to just drive to my house and smash my kneecaps now to get it over with. Seriously, my reaction was all COME AT ME BRO because I don’t have that kind of money and I probably never will. (My husband has frequently suggested we fake our own deaths and move to a foreign country, something I hear many loan-fretting adults say in jest, but always with a glitter of possibility in their eyes, their laughter nervous, belying semi-serious contemplation.)

I was SO overwhelmed that I then spent the next five years with my loans in either voluntary forbearance or economic hardship deferment -- during which time the interest kept accumulatin’ -- because I couldn’t even fathom a world in which making regular payments was a conceiveable possibility.

I’ll admit that my student loan debt is above average, mostly owing to my having gone to graduate school. Twice. 

I’m not saying this to be all POOR ME, I HAVE SMART-PROVING BITS OF PAPER THAT WERE VERY EXPENSIVE -- I chose to go to grad school knowing I needed loans to do it, and given the chance to do it over again I would not change that decision -- I’m just saying that this is a reality for those of us who pursue advanced degrees. 

In a curious way, I was lucky to go to grad school when I did, because today it’s far less easy to make ends meet, even with the full amount of student loan funding available.

When I was a graduate student in the late 90s and early aughts, I was able to pay my whole tuition via goverment-backed Stafford Loans, and have enough left over to help pay my rent and other bills incurred by living. Technically, I did not even need to accept the full amount offerred by the federal government; I did, because it enabled me to pay rent and buy food and only work part-time instead of killing myself with a 35-hour-a-week job on top of a full-time course load. 

It’s worth noting that students in the US need to be at least half-time (usually this means a minimum of 7-8 credits per semester, which usually equates to two classes) in order to qualify for federal student loan aid in the first place, which can make working and going to school at the same time kind of challenging.

Today’s students face a much tougher scenario. While some programs do offer full tuition remission and other sources of scholarship funding, these benefits are necessarily limited to a tiny percentage of the total student population. And while the per-semester maximum loan amount in government-backed loans has increased a bit over the years, it hasn’t kept pace with tuition inflation, which has well and truly skyrocketed (much faster than inflation, in fact) to the point that now many students at private universities must take the full Stafford loan amount plus additional private loans just to bridge the tuition gap. 

And this doesn’t even cover living expenses, which must be made up for in parental assistance and/or paid employment -- employment which can negatively impact a student’s ability to focus on and succeed in their classes.

According to nonprofit student loan information site FinAid:

A good rule of thumb is that tuition rates will increase at about twice the general inflation rate. During any 17-year period from 1958 to 2001, the average annual tuition inflation rate was between 6% and 9%, ranging from 1.2 times general inflation to 2.1 times general inflation. On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years. For a baby born today, this means that college costs will be more than three times current rates when the child matriculates in college.

This is just for undergraduate tuition; you can imagine the cost should a student want to go on to grad school, as I did. The killer student loan debt shouldered by the vast majority of graduating university seniors has been among the rallying cries of the Occupy movement, as for many young adults, even after consolidation, they are looking at a mortgage-rivaling payment they will be making for thirty years or more, just to pay back their education.

The average student today finishes their undergraduate degree with about $25,000 in student loan debt; obviously, there are many who face far higher numbers, and for those who pursue graduate school -- be it in a wealth-friendly field like medicine or a less-practical intellectual arena like English  -- the debt often outpaces even what an experienced adult worker can afford, much less a person new to the job market. 

And as people seek out new skills and careers in the changing economy, the burden of student loans may actually be hindering our recovery as the looming threat of increased debt prevents many adults from going back to school to get a degree with which they might improve their circumstances.

There is no easy solution to this problem. Controlling tuition rates might help, but at the expense of institutions that are tuition-dependent for operating costs; this would be any school without a huge endowment like Harvard, or any school that is not a public university -- mostly small private colleges of middling selectivity struggling to be affordable while still remaining solvent, and exactly where a large number of middle-class students with mediocre academic stats wind up.

Sure, we can argue that more kids should go to public universities, but the more students said public universities have applying, the more selective they become, which still leaves the medicore kids out in the cold and thereby further expands the ever-widening gap between the upper and lower socioeconomic classes.

Alternatively, loan forgiveness programs and the low interest rates described above are definitely beneficial, but may result in costs to the national budget that quickly spiral out of control, as well as potentially causing long-term economic issues.

So what’s a prospective student to do? Frankly, my kidney proposal is actually starting to look pretty feasible. Don’t say no right away, Sallie Mae. Just think about it.