Break the Chains of Student Debt!

July 11, 2010 in Capitalism, Class, Education, Philly, Resistance

A short article I wrote for local Philly paper The Defenestrator, with a few tips on how to avoid paying back student loans. Student debt functions as an enclosure on youth – it keeps post-college youth from pursuing their dreams or working with others for a better world, because they feel pressured to pay their debt back. This affects students even before they graduate – rather than study what they care about, students feel immense pressure to study a subject that will land them a good job.

A few statistics:

By 2008 average college tuition had increased by 439% since the 1980s, meaning it’s over 5 times as expensive as a generation ago. This doesn’t include books, housing, meal plans, etc.
Graduating college seniors in 2008 had an average debt of $23,200. 67% of seniors graduated with student debt. (Project on Student Debt)
As recently as 1993, less than half of seniors graduated with debt.
Prior to 1980, 80% of government financial aid was given in the form of grants and scholarships that did not have to be repaid. Today, 80% of gov’t financial aid comes in the form of loans.
78% of undergraduates worked full or part-time jobs while taking classes in 2003-04. In 1984, it was 49%.
In 1970, 40% of new college students considered “being very well-off financially” to be very important, and about 70% considered “developing a meaningful philosophy of life” to be very important. In 2005, 70% considered “being very well-off financially” to be very important, and about 40% considered “developing a meaningful philosophy of life” very important.

Please comment if you have other suggestions on how to break free of student debt! [alex]

Break the Chains of Student Debt!

Alex Knight, June 3, 2010

Paying back student loans can be a real downer. Loans can make organizing after college virtually impossible as they force debtors to work a full-time corporate or nonprofit job, or join the military just to pay them off. When I graduated from college, I had $50,000 worth of student loan debt. I felt I was forced to get a full-time job, and pay them off as quickly as possible so in the future I could finally dedicate myself to social change work. Luckily I didn’t have to make this choice, as there are other options available! Here are a few worth knowing about.

First, you can defer or get a forbearance, to delay payments. Often with these you can delay paying your loans for years, although interest may accrue during that time, and you may be forced to make special payments. For example Sallie Mae used to require you to pay $100 for a 6-month forbearance on private loans, but now they’ve chopped this to $200 for only a 3-month forbearance, which often makes it almost pointless. Nevertheless, you can often easily qualify for an “unemployment” deferment, even if you are working part-time.

Second, you can try to run from your loans altogether and go into default. The only problem with this, besides destroying your credit rating, is if you have co-signers on your loans, such as parents. If you go into default, you’d also be screwing them over.

A third option has recently emerged, which should be taken advantage of as much as possible. It’s called Income-Based Repayment, and it can be used to reduce or eliminate your monthly payments for most Federal loans (not those pesky private ones, unfortunately). Through the federal government’s Direct Loan program, which was recently enlarged by Obama’s Health Care reform, you can consolidate your federal loans into an IBR (or Income-Contigent Repayment – ICR) plan. Payments then become “based” or “contingent” on your income, so if you work part-time and don’t make a lot of money, you won’t have to pay a lot, and you could even eliminate your monthly payments entirely if you earn less than 150% of the poverty line. If you’re a full-time activist like me, you almost certainly qualify. And after 25 years, your debt will be forgiven.

So check out IBR, and don’t let student loans stop you from dedicating your life to building the social movements our communities and world so desperately need!

Income-Based Repayment
Income-Based Repayment (IBR) is a new payment option for federal student loans. It can help borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, IBR loan payments will be less than 10 percent of their income – and even smaller for borrowers with low earnings. IBR will also forgive remaining debt, if any, after 25 years of qualifying payments.

Who can use IBR? IBR is available to federal student loan borrowers in both the Direct and Guaranteed (or FFEL) loan programs, and covers most types of federal loans made to students, but not those made to parents. To enter IBR, you have to have enough debt relative to your income to qualify for a reduced payment. That means it would take more than 15 percent of whatever you earn above 150% of poverty level to pay off your loans on a standard 10-year payment plan. Use our calculator to see if you’re likely to be eligible.

How does IBR make payments more affordable? IBR uses a kind of sliding scale to determine how much you can afford to pay on your federal loans. If you earn below 150% of the poverty level for your family size, your required loan payment will be $0. If you earn more, your loan payment will be capped at 15 percent of whatever you earn above that amount.

Except for the highest earners, that usually works out to less than 10 percent of your total income.

This chart shows examples of IBR payment caps as a percentage of the borrower’s family income, based on various incomes and family sizes.

What about interest? In some situations, your reduced payment under IBR may not cover the interest on your loans. If so, the government will pay that interest on your Subsidized Stafford Loans for your first three years in IBR. After three years and for other loan types, the interest will be added to the total amount you owe. While your debt may grow if your affordable payments are low enough, anything you still owe after 25 years of qualifying payments will be forgiven.

What are qualifying payments? The Department of Education has indicated that the following types of payments will count towards IBR’s 25-year forgiveness period, as long as you are in IBR at some point during those 25 years.

Payments made in the Income Contingent Repayment plan (ICR) before July 1, 2009. All payments made on or after July 1, 2009 in the IBR, Income Contingent Repayment (ICR), and Standard (10-year) Repayment plans.

Periods when the borrower has a calculated payment of zero in IBR or ICR (this occurs when your income is at or below 150% of the poverty level for your family size). Periods on or after July 1, 2009, when the borrower has been granted an economic hardship deferment.

For more information, visit http://www.ibrinfo.org/what.vp.html

12 comments

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July 19, 2010 at 12:26 am

Cap'n Rusty

To get the money, you signed a piece of paper saying that you would pay back all the money you borrowed. In old-fashioned parlance, you “gave your word.” Or, even more old-fashioned, you “promised.” You didn’t tell the people who loaned you the money that you would only pay it back as long as doing so didn’t interfere with your plans to save the world. Maybe if they had know that, they would not have loaned you the money. But now, you’re saying that your personal plans for yourself are more important than those pesky little promises.

Son, I truly hope that you get to live in the world you are creating, one in which nobody keeps their word, where it’s just everybody doing what they damn well please, regardless of what they promised.

July 19, 2010 at 10:35 am

alex

Are you saying that education should only be available to those who can afford it? Because at $40,000 a year, hardly anyone can afford college anymore. Like the article says, this phenomenon is NEW, it was manufactured in the last 20-30 years. There is no possible way that all the billions of dollars loaned out in student loans are going to be repaid, because there aren’t enough high-paying jobs for all of us. It’s literally inevitable that many former students are going to go into default. So you have to look at WHY this is happening.

This is not a friend I made a promise to, it’s what Wendell Berry called “a pile of money that only wants to become a larger pile of money,” a corporation. I have no allegiance to their private profits. I have allegiance to myself, my community, and humanity. Are you telling me corporate profits should be more important than everything else?

alex

July 20, 2010 at 6:26 pm

Cap'n Rusty

No Alex, I’m telling you that when you borrow money from someone — anyone — and sign a piece of paper that says you will pay back the money to them, you should do so. If you cannot keep your word, do not give, otherwise you are simply lowering yourself to the level of all those persons and entities that you despise. One good way of determining what is “moral” is to consider whether you would want to live in a world where everyone behaved like yourself.

July 20, 2010 at 10:27 am

Lars Sorensen

Cap’n Rusty is a student loan industry employee.

These spiteful, cowardly bottom feeders inevitably show up in the comments section of student loan-reformist articles. True to their cowardice, they never sign their real name.

A message to all of you student loan industry apologists, and the industries that pay you so handsomely to pervert true discourse: WE KNOW WHO YOU ARE. PISS OFF.

July 20, 2010 at 6:32 pm

Cap'n Rusty

Lars: You are quite wrong. You have no idea who I am. I will tell you that when I went to college and post-graduate schools, I took out student loans, and I paid them back. Unlike you and Alex, I did not think I was “entitled” to anything in this life. You will eventually discover that you aren’t, either.

I use a fake e-mail address to get past your comment filter, because I don’t want to be harassed by people like you. Surely a person with your moral principles doesn’t mind if someone else “cheats,” too.

July 24, 2010 at 4:21 pm

Lars

Post your real name, or shut the hell up. The adults on this site have better things to do with their time then coddle a narcissistic child with a grotesque Ayn Rand boner.

July 20, 2010 at 6:51 pm

alex

rusty,

thanks for the comments.

i surely do want to live in a world where people are honest with one another.

but i don’t think you’re listening to what i said. this is not an agreement between peers, or between two entities which should respect one another. we’re talking about a predatory industry, which sees people like me as a source of profit, period. it doesn’t matter to them what hardship they cause in the lives of students or youth. and they are causing serious hardship. starting with mental and emotional anguish, to the point where student loan borrowers are literally committing suicide.

please don’t justify this predatory industry. it is a disgrace and it needs to change.

did you know that not 10 years ago the student loan industry made Congress abolish bankruptcy protection for borrowers? unlike every other kind of debt, where you can declare bankruptcy if you’re bankrupt, you can NEVER get rid of student loan debt, no matter how poor or desperate you are.

if Sallie Mae went bankrupt, they would declare it and get bailed out by the government. if i’m bankrupt, i still have to pay student loans.

how is that fair?

we are not talking about fair contracts. we are talking about exploitation.

alex

July 24, 2010 at 4:16 pm

Lars

Cap n’ Rusty,

You paid off all your student loans? Good for you. I’m guessing that, like a number of other self-congratulatory “I-paid-my-own-way” braggarts, you took out loans at a time when a collegiate education was much less than it is today. That is, if you actually aren’t an anonymous corporate troll.

People like you, who make the sort of comments you do on topics like these, tend to fall into one of three categories:

1) Student loan industry employees who post condescending crap on sites like this, pretending to be someone they aren’t, in an effort to shame the destitute and further rub their nose in the dirt,

2) People who took out loans ten, twenty, or thirty years ago, when student loan debts were small enough to actually pay off,

3) People from upper-middle class or wealthy families who claim to have paid off their debts, when actually it was their mummy and daddy who did all the heavy lifting.

And lastly, your claim that you don’t want to be harassed by me is interesting not only because it suggests that you view people who tell the truth as a threat, but also because it exposes you as a classic, modern-day conservative: rude and disrespectful until confronted, at which point you cry “victim,” and act like you’re being threatened. For the record, you cowardly douchewad, I have more working-class morality–and sense of right and wrong–in my little finger than you have in your entire desiccated soul.

September 19, 2010 at 10:12 pm

criticaldispenser

This is an excellent article. I might add that the hyperinflation in college tuition costs has made the price of college almost “fictional”–that is, the costs are, if you think too hard about them, unreal sums of money. I am 24, in graduate school, and in all my years working I don’t believe I’ve ever had more than $1500 in my bank account. What does a number like $50,000 supposed to mean to me?

My grandfather recalls paying his Berkeley tuition bill–$35 per semester in the late 30s. He said students were pissed when it went up to $50. That’s some exponential growth in the mathematical sense of the word.

I am currently accruing student loans as a graduate student, and I must say I have no intention of ever paying them off simply because I do not feel beholden to the privatized loan corporations. (I probably will never have a real job, either, and thus never be able to pay them off, but hey, that’s secondary.) Education should not be a privilege of the rich, and it should not deter citizens from studying disciplines that are not “valued” by capitalism.

Recently I received an email from Sallie Mae about enrolling in a program that would give me coupons and discounts to local retailers. I read the fine print, and apparently Sallie Mae has a subsidiary that tries to understand market behavior in students and build “brand recognition” in college-age consumers–and make us consumers for life. I know exactly what I am to Sallie Mae–a walking wallet, a consumer waiting to enter the market where all there is to do is consume more. The worst part is that this abomination is in the hazy “semi-public” realm–a corporation on government welfare, as it were, much like Lockheed Martin or Halliburton or the private corporation that runs the public housing complex down the street from me in San Francisco. As another commenter said, I have no doubt Sallie Mae would be bailed out at the drop of a dime.

I want to suggest another path for people looking to rid themselves of student debt, and that is: stay in school forever, and you’ll always be entitled to loans. Or, never get a job. At least not one that appears on tax forms. Go underground, move to another country (bankruptcy extradition ranks as difficult to impossible on the scale of international bureaucracy) and wait for the banks to fail again, the middle class to erode more, and the country to descend into the next revolution. (We’re facing the highest levels of income inequality in history; I, nor the economists, have any fantasies that this will improve.)

Just make sure your parents or friends aren’t co-signers.

September 19, 2010 at 10:45 pm

alex

thanks for the awesome comments Keith! i agree completely. hope you’ll check back here in the future.

alex

October 23, 2010 at 2:45 am

bankruptcy