I was touring apartments in the Chicago area earlier this year, and a lot of them were the same places I looked into back in 2010. In every case, the rents had at least doubled.
As an example, I lived in a one bedroom apartment with a $795 monthly rent in a nice suburb in 2010. Now, just 15 years later, the rent for the exact same apartment is almost $1,700.
Back in 2010, I was able to afford that price in spite of having car and school loans to pay and an entry-level salary in higher education. Could someone with an entry-level salary--which has not doubled--afford that rent now? Only if they didn't want to eat.
The path we are on as a nation is not sustainable. Cutting programs for the poor and giving tax cuts to the wealthy while boosting military spending will not make it easier to live in America. Conversely, tinkering with Obamacare and promoting the status quo will only allow pressing problems to fester.
Bold reform is needed to address the urgent problems our society faces if we want to stem the suffering and precarity people are facing daily.
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DISCLAIMER: while I have worked in private loans specifically for five+ years, this isn't âfinancialâ advice and is just a heavily summarized guide on how to navigate them. Yes, these loans suck, but complain to your legislators not me. Iâm just trying to help you know what youâre doing. Additional info for each section is under the cut!
1) Who are you and who are all the companies constantly running around with my money?
I work in loan SERVICING, which is basically the billing department. If youâve got a new company asking you for money, it's probably a new servicer and your debt is still owned by the bank. We enforce the terms in the promissory note, the document you sign telling the bank âyeah I'll play by your rules if you give me the money.â If your loan defaults, youâll get contacted by a third (fourth?) party, but how that works is beyond my wheelhouse. The bank or your servicer should be able to confirm what happens in case of default.
2) What am I looking for in a âgoodâ loan?
Generally, youâre going to want SIMPLE instead of compound interest, a FIXED RATE opposed to a variable one, and youâll want to go for FULL DEFERMENT while in school and make manual payments when you can. Also ask up front about stuff like if disability forgiveness or co-signer release (getting your parents off it) is offered.
3) This loan sucks! How do I make it better?
Student loans are NOTORIOUSLY hard to get out of, unfortunately. If the interest rate/payment relief options suck, you can try to REFINANCE where you take out a new loan to pay off the old one. This gives you a new promissory note, interest rate, and terms/conditions. If youâre trying to erase the debt entirely, ask for the promissory note (if they can't provide a copy, we have to forgive the debt. I've only seen this happen ONCE.) or try to go through social security disability.
DO NOT USE FREEDOM DEBT RELIEF OR OTHER SERVICES. DO NOT. THEY ARE SCAMS.
More in depth information for each point!
1) Lenders and Servicers
The lender is the person who provides the funds in the debt - the bank who pays the school or the hospital or the home contractor fixing your sink. The servicer is the company that is your point of contact when you need to make payments, ask for payment relief, or otherwise manage the loan that exists. Think of us as the mechanic (we keep the car running) where the bank is the manufacturer (they make the car). Some different servicers are SoFi, Zuntafi, Great Lakes, Nelnet and Firstmark Services; their names will be on the billing statements. Some different banks are Citizens, US Bank, NorthStar; their names will be on the promissory note and the disclosures.
Sometimes banks do sell the debt, however! A couple years ago Wells Fargo sold an enormous chunk of their loans off somewhere (an investment group, maybe?) but! The promissory note will still be the EXACT same if your debt gets sold. Youâll only get a new promissory note if you refinance the loan yourself.
2a) Interest Accrual and Rates
Interest is how banks profit off the loans they give out and/or âensure they don't end up with a loss if the loan defaultsâ. (It's profit.) Most, but not all, loans calculate interest with the simple daily interest formula, shown below:
[(Current loan balance) x (interest rate)] divided by 365
If your loanâs balance is $10,000 and your interest rate is 6% youâll be charged $1.64 each day. SIMPLE INTEREST means that this interest just kind of floats around on the account until a payment comes in and pays it off, where COMPOUND adds that interest to the balance at the end of the month/day/whatever. Compound charges you more over the life of the loan.
FIXED INTEREST is a set percent that doesn't change, where VARIABLE will change usually based on whatever the economy is doing. Thereâs a minimum and maximum value to the variable interest rates, so if youâre doing a variable ASK WHAT THE MINS AND MAXES ARE. A fixed rate might be 8% and a variable might be 3.25% the day you take it out, but that variable could have a maximum interest rate of 25% so be VERY, VERY CAREFUL. If you get stuck in a real bad variable interest rate, your best solution is probably a refinance.
2b) Deferment and Payment Allocation
So interest is gonna be accruing on your loan from the day the money leaves the bank. Sucks. And you may not be able to make payments while you're in school, so opting to DEFER your payments will stop them from billing you so you can skip a month or whatever without penalty. At the END of that deferment, though, whatever interest that accrued will be added to your current balance. If we use the example from above (10k loan with 1.64 daily interest) four years of school will add $2,400 to your balance and then your daily interest will jump up to $2.03 a day.
Solution? Make payments of what you can while youâre in school to chip away at that floating interest. Usually when you make a payment, itâs gonna go towards the interest first and then the rest drops the balance. (E.g. if you make a $20.00 payment ten days after your loan is disbursed, $16.40 will go towards interest and $3.60 towards your 10k balance). There is NO PENALTY for making extra payments or making early payments, but it might make your bills look a little weird if youâre being billed each month for just the interest.
3) Why are these loans so horrible? Canât I find anything to help me?
Blame Reagan and the republicans who enabled him.
No, but really. The problem with these loans is that those promissory notes are VERY legally binding and have lots of fine print in there designed to make it as hard as possible for someone to skimp out on their debt without having their credit score decimated. Some lenders might even dip into your paychecks if you're crazy behind or default; again, that's not my wheelhouse and I've only maybe seen that once. Your best bet is just to pay it off as fast as possible (again, no penalty for paying the loan off early) or refinance into better terms.
And I get it. I really do. I hate how weâve made so many incredibly important things in our society locked behind a paywall that charges poor people more to climb than the rich. But if youâve made it this far, please don't turn your anger at me for not giving you the answers you want. The best I can do is vote for people who are willing to crack down on predatory lending, keep fighting for student loan forgiveness⌠and at my own job, make sure that my coworkers aren't making mistakes.
If you have a more specific question, I can try to answer as best I can without breaking any information privacy laws. And take care, okay? You are never fighting alone.
"On Wednesday, President Biden announced a sweeping effort to forgive up to $20,000 of federal student loan debt for Pell Grant recipients, and up to $10,000 for other qualifying borrowers. Biden also extended the federal student loan payment pause through Dec. 31....
To qualify for the $10,000 forgiveness, individual borrowers must earn less than $125,000 a year, or less than $250,000 a year for couples. To qualify for the $20,000 forgiveness, borrowers must meet those income requirements and must have received a Pell Grant in college. Pell Grants are designed to help low-income students pay for higher education."
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