What happens if I do not re-pay my student loan?

student-loan-debtStudent Loans for college can be one of the most significant debts one may ever incur, both in a good way, and potentially bad.  They are necessary for many to attain their educational goals and aspirations, but on the back end, once done with school, they are waiting and, if not managed properly, can haunt people for life.

By some estimates, nearly one in three student loan borrowers in the US that are in repayment are actually behind on their payments.  Six months after graduation student loans come due and the first payment request will come to the door.  Many students I’ve worked with in the past were not even aware that, if graduating in a traditional form, in May, November meant loan payments were to be waiting and the lender expecting a nice response! 

While some take it on as a responsibility and manage their debt accordingly, others tend to put a blind-eye to the subject and that is a dangerous approach especially when dealing with the federally funded loans.  Let me explain.  Any loan is an agreement, a contract, that gives one money now, in the present, with agreed terms that you repay it back over time with interest.  The interest (and penalties) being where the loan providers make their monies so when repayment doesn’t happen according to the terms signed on for, the lenders tend to take it seriously.

Ignoring your debt only makes it worse in a general sense.  While some loans can be ‘negotiated’ away or walked away from with minimal (relatively) negative effect, when it comes to student loans in particular, there is truth in the adage that if ignored it will only get worse. Student loans don’t just go away, and the consequences of making no attempt to pay or resolve them can be severe.

Sometimes one even ‘ignores’ their loan by accident.  For example, many students I’ve worked with have been under the misconception that by deferring loans, say attending grad school for example, that the loans just sit there doing nothing.  While partially true, ‘doing nothing’ in that there is no immediate expected re-payment, when they come due after the deferral time frame, what’s now waiting in addition to the loan, is all the new accrued interest that HAS been racking up on the meter while the deferral time has ticked away.  The loan doesn’t just sit there inert, interest is adding up and added on to the original tally, so while your payments may have been deferred for a year or two, the interest has grown and is tacked on and your debt has ballooned more.

So, what DOES happen if student loans are ignored and/or mismanaged?

1) the debt will simply grow.  Predictably, account-ably, the maths increase and one gets deeper in debt.  Interest will continue to accrue and be added on as payment balances, that seem so daunting now, will only get even larger.  Additionally, loans that go into collection will incur additional penalties that can increase costs up to a significant percentage (State law, depending on where, may limit collection costs).

2) Credit scores will suffer and especially bad at a time when trying to build this number.  Late payments will appear on your credit reports and your credit scores will go down.  Negative information may be reported for up to seven years, and for many graduates their credit scores are more important than their college GPA’s when it comes to real life.  Need an apartment?  Many landlords are checking credit scores to measure potential tenants.  Need a car?  Credit scores are used to determine your risk and loan interest rate.  Want a job?  Many employers, more as time goes on, are checking credit scores as a way to determine how well one manages responsibility.

3) You will eventually go into default.  Federal loans generally can be considered to be in default when a payment has not been made for a period of 270 days.  Once in default, the government has “extraordinary powers” to collect (see below).

4) Private student loans are a bit different, though. The definition of “default” depends on the contract, and may include simply missing one payment or the death of a co-borrower. Private loan lenders don’t have the same collection powers as the federal government but they can sue the borrower, and if they are successful, then use whatever means available under state law to collect the judgment.

5) Expecting a tax refund?  If you’re lucky enough to have a job, you may have to kiss your tax refund goodbye.  If a federal student loan and in default, the federal government can intercept part or all of you tax refund.  Married filing jointly?  Yep, good guess!  A spouse’s portion of the refund may be at risk too, and they may have to file an injured spouse claim to recover it after the fact (although private student loan lenders cannot claim tax refunds).

6) Wages may, and most likely will, be garnished.  Normally, a creditor must successfully sue you in court in order to garnish your wages, and even if they are successful, there may be state limits on whether and how much income can be taken.  But if you are in default with a federal student loan, the government may garnish up to 15% of one’s paycheck.  While you may be able to challenge the garnishment under certain circumstances, but in the meantime, do you really want your employer to know you are in serious trouble with your loans and financial management?

7) Any co-borrowers/signers are in trouble too.  Anyone who co-signed a student loan is on the hook for 100% for the balance.  It doesn’t matter if it is a relative, friend, stranger; anyone that puts their name on the loan contract is then liable for whatever is left/accrued on the loan.  Simple.

8) One can be sued.  Lawsuits are less common with federal loans than with private ones. (After all, why would the government sue when it has so many other ways to collect?) But a lawsuit is always a possibility especially if you ignore your student loans.  If/when sued, it is advised to seek the help of an attorney experienced in student loan law to raise a defense against the lawsuit and come to some agreed resolution.

Essentially, one in default will be haunted by this debt for life.  It may sound blunt, but it’s the reality and better the devil you know.  There is no statute of limitations on federal loans, which means there is no limit on how long you can be sued and it simply does not go away.  State statute of limitations do apply to private student loans, however, limiting the amount of time they have to sue to collect.  But it doesn’t stop them from trying to collect — and if one doesn’t know their rights it may go on indefinitely.

But What if You Can’t Afford to Pay?

For starters, get your free annual credit reports to see where things stand.  Personally, I like and use CreditKarma.com.  It’s free, secure and easy and will give constant monitoring and one will have a clear understanding of how debt is affecting credit.  There’s also the National Student Loan Database to track down your loans.

For federal loans, you can get back on track with a reasonable and affordable payment plan.  Programs available for federal loans such as Income-based Repayment (IBR) that allow some borrowers to qualify for a lower monthly payment based on income, and then discharge the remaining balance after a certain number of years of repayment may be an option.

For private loans, talk with an attorney who understands how to discharge certain private student loans in bankruptcy.  It can be tough to qualify and it’s getting more difficult, but not impossible. If that’s not an option, you may be able to try to negotiate a settlement?

While it’s never a good idea to ignore loans, there are times when a borrower simply cannot afford his or her loan payments. Fact of life but if ever in said situation, remember to prioritize.  Federal loans are more important than private ones.  Ignoring any debt/loans can be painful and have negative consequences to your lively-hood, but doing so at the federal level is life-long.

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What’s Missing in the College Experience? Part 2 of 4

Writing well is work.

Writing well is a process learned and re-learned.

Part 2 of “What’s Missing in the College Experience” – Writing competently and of quality is not scrutinized

Outside of academia, you aren’t guaranteed an audience.  Writing is a crucial communication skill whether you are drafting a book or simply sending emails to anyone in a professional setting. College writing has a tendency to trick students into complacency when writing, because it is someone’s job to read their writing. A salaried college professor is tasked with reading your essay on common pool resources, but would your writing attract any attention without the financial incentive? I have found that writing for college and writing for work are two very different ideas because your writing is not guaranteed an audience in the real world, and piquing the interest of others with your passion for a subject is a skill that requires extensive practice.”  (Eli Lisseck ’13)

In my experience, this is an area where many of the institutions of higher-ed are falling short, but in saying so, many – if not all, will disagree. Much of this disagreement is based on the philosophy or expectation that when students arrive out of high school, their writing skills and basic understanding of grammar are to be in place and of a second nature AND at this stage, it is no longer the job of the curriculum to be teaching the basics.  With that being the case, when entering college, the foundation is, or should be, in place and the expectations that the students can engage and embrace the more advanced, esoteric and abstract requirements of the college-level academics.

While it sounds good in theory, in practice, this is not the reality. Many students coming into college are relatively unprepared for the expectations and demands of what college level output requires of them, or at least used to.  Sadly, the solution seems to be, instead of monitoring, policing and fulfilling the expectations of higher-ed, is to simply lower them. Writing, especially in the abstract, tends to be of less than quality and with that, basic rules of grammar, spelling and structure, all get lost in the process as there is no system in place that reinforces or critiques in a consistent and/or permeating way.

Having worked with many, many students over the years, I have seen the writing skills in decline and there are many factors to this I imagine. But there are two that stand out to me in significance over the years as I have been witness to this decline. The first being the most obvious; technology and its contribution to linguistic regression, as we now speak in fractured spits and spurts as opposed to complete sentences attached to complete thoughts behind such. The second, which has crept in at a slower pace but over a longer period of time is that the schools seem to not want to hold people accountable for the lack of quality or proper writing. I have heard many college faculty and administrators lament the writing skills of their very students, yet said students seem to fly through the ranks ultimately receiving their diploma for their ‘exemplary academic four-year toil…’

I’ve called out people on many occasions for the lack of quality in their writing.  The usual response(s) seem to be something akin to, “well it doesn’t really matter,” or “no one really looks for that.” I’ve even spoken with and questioned faculty about such, and while many have agreed that the writing is less than stellar, they will then go on to say, “I am grading for the message and content, not their grammar.” More than one has said, “It’s not my job to correct their grammar at this stage.” I get what they’re saying but I disagree with it. The common theme is that anyone who IS the audience for such output should be critiquing, as if it is not done so, is ultimately a disservice to the student and will only end up being magnified later in time.

Case in point being a student that I had the pleasure of working with during her undergraduate years and she was, in her mind, a competent and aspiring writer/communicator. Everything she had produced in college had been given praise and her writing was celebrated in her grades by faculty. However, upon graduation, her cover letters, the writings I saw, the very documents that were supposed to ‘brand’ her in the job market, that were supposed to tell her story and convey a positive impression on prospective employers, were woefully inadequate, both in foundation and style. Her writing, while ‘fine’ for the classroom, failed to make an impression on the audience she was hoping for outside of college. Actually, let me restate that; her writing DID make an impression on that audience. It happened to be a poor one in that her ‘new’ readers were indeed scrutinizing her materials and critiquing for grammatical mistakes and structure. They were looking at content and context with the evaluative eye of the red-pen and her materials were being lambasted for their poor quality, such that could never represent an organization she were to be interested in working for.

Our office of Career Services would get frequent calls from alumnae stating, “What is going on? The applicant’s writing is horrible? What can we do about it?” Frankly, at that point, the horse is already out of the barn, as it were. Being more an issue of image management and needing a reaction, we implemented a plan that every resume and cover letter forth that came through our office for recruiting opportunities was to be pre-screened and then ‘approved’ by our staff before being submitted to prospective employers. While this was done mainly as a service to appease the employer’s want of not being ‘embarrassed’ by the applicants of their own Alma Mater.  With the intent of heading off poorly written or ill-conceived letters and resumes, this became a pretty effective, for the most part, method in elevating applicant’s presentations. The fact that for many students, this, to use an over-used term, ‘teachable moment,’ the heightened lens of scrutiny, even labeled “harsh” by many students, was really met in our office for the first time on-campus, is part & parcel to one of the issues void in the academic mission – a willing, permeating, consistent and strong scrutiny for the students at every stage of their academic career.

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Millenials on the March….

Millenial’s on the march….Millenials

Lately, I have been reading a lot of articles, many actually, on the “Millenials” through the various news outlets.  There seems to be a new cadre of pundits espousing their research on the generation ‘gone wrong.’  The majority of the writings seem to be laden with facts, figures and statistics with anecdotes thrown in for marketing buzz that is a less than flattering theme in their portrayal of the Millenials, also known as ‘Generation Y,’ those born between 1980 and the early 2000’s. 

The various adjectives that are used to describe the Millenials often relate to them as being “lazy” or “slackers,” “lacking in ambition and drive.”  “Not being able to leave the nest.”  What’s perhaps most interesting to myself, and I’ll get to the realities of the Millenial generation, in terms of employment later in this writing, is that few observing, and now obliged to comment on, seemed to have seen or recognized what was to come? 

Granted, things certainly changed in 2008, for everyone.  Economically, the nation, the world really, has taken such a hit that unless you’ve been living under a rock, or are SO well financially insulated, you can afford to have the blinders on, you’ve been affected in ways not anticipated.  For that, you can thank Hank Greenberg, then CEO of AIG!  You can thank Bank of America and Lehman Brothers, Goldman Sachs, JPMorganChase, Bear Stearns!  You can thank Freddie Mae/Fannie Mac!  You can thank Bernie Madoff, Hank Paulson & Richard Wagoner!  Ahh, Richard Wagoner.  Remember him flying to Washington, D.C. on the corporate jet to beg congress for bailout monies for GM?  Poor soul.  It was the packaging and re-packaging of risky mortgages being sold to a euphoric public willing to spend much more than they could afford on the McMansion because they were guaranteed equity growth to spend.  It was the ‘creative’ financing of Derivatives that are so complicated that many of the very banks executing such didn’t understand how they worked?  I’m mentioning only a few as the list is very long and they are by no means alone nor is any one of them singularly the cause of what started to unravel economically in 2008.  As Alan Greenspan said, “an irrational exuberance…”

It was a systemic failing, and what I was witness to before 2008, before Millenials were even dubbed or recognized as such, was an increasing trajectory that, unless oblivious or a fool, could in no way think it would keep its upward, double-digit climb and the various expectations and entitlements that come with that? 

I have been working with the Millenials since the day I finished graduate school in the early/mid 90’s.  I didn’t know, at the time, they were called Millenials and it was early enough then that they had not yet earned any labeling of such.  With or without the corresponding labeling, what WAS obvious, was that in the 1990’s into 2008, except for a few minor ‘corrections,’ economic prosperity was simply going upwards.  Every generation throughout the 20th century and into the 21st had the good fortune to be riding a given expectation that theirs would be better than their parents!  Marginally or dramatically, it was given, a mere fact, that ‘each generation would have it better than their predecessors!’ 

Incomes were steadily rising, luxury goods were becoming more and more prevalent, houses were not just getting bigger, but more grandiose and feature laden.  Acquisition & consumption was growing at such a pace that it made the 1987 movie, “Wall Street,” almost quaint by comparison.  Computing, electronics, cars, television, communication; things were just getting ‘better,’ day by day, year by year.  And along with this came a new child rearing.  Kids were being raised, granted with the best of intentions, with the ever growing expectations that each was the next prodigal child in every one of the nation’s homes.  The platitudes have been many and the constant patting on the backs of the growing youth over the last 20 years have been so systemically ingrained that they’ve become the norm.  Every little Johnny & Jenny is to be ‘appreciated’ and the ‘best!’  Every child is a ‘star’ or at a minimum, budding ‘expert.’  Everyone deserves an ‘A,’ and everyone will do great things and discover new antidotes for all of the societal ills!  ‘Competitive’ day-care.  Private schools and nannies.  Designer diapers, Themed birthday parties, extravagant gifts and toys, electronics and connections abound.  Photographs and videos documenting every, singular, mundane moment in every new life!

Now, not only are all these superlatives and actions unrealistic but they are also statistically impossible.  Not everyone can be an ‘A’ student.  Not everyone gets to be a Valedictorian.  Not everyone can be a star quarterback for the team, especially if, given the fact, that every player is given a ball so that it’s ‘fair…’  Generationally, we’ve, systemically, raised a group of people that have difficulty in that they’ve only received positive praise.  They’ve not been ‘allowed’ to fall, or fail, as there’s been a safety net so well built-in that learning to face real adversity, learning to think around a situation, learning to adapt and be resourceful, has been somewhat filtered out of the upbringing. 

Academically, the MIllenials have been duped.  Every college/university has been involved in the ‘arms race’ in trying to make themselves more marketable.  Every institution has spent inordinate monies on waving more glitter, making things shiny, new and large.  Science centers, student centers, suites to live-in, on-campus entertainment and events.  Athletic centers that rival any New York City fitness club!  Selective showcasing of their alumni/ae that have made successes of themselves in popular culture or business, all peripheral branding tools THAT highlight a school’s ‘educational value.’  Academic institutions of learning have become residential communities and country clubs, playgrounds for those entering adulthood, not too unlike a cruise-ship package, oh, but with some coursework and a $200,000 price tag! 

Each institution has been guilty of the ‘come here and your degree with OUR name on it will be the ticket to get you that job or career you not only want, but deserve!’  Along then comes 2008.  Bam!  Nothing seen like it since the Great Depression!  Markets had been climbing, spending growing, no ‘forewarning’ of any doom except from a very bright financial guy from Boston, Harry Markopolos, saying unchecked growth cannot continue and who pointed a finger at Bernie Madoff’s Ponzi-Scheme and said, “there it was, looming in front of us,” to paraphrase, identifying a crash to come.  Prophetic, but had fallen on deaf ears.

In working with the Millenials as stated before, what I’ve witnessed is not that they’re lazy.  They are also not unmotivated, not by any means.  What they are is of such a different time and upbringing that while they are facing some of the very same challenges & similarities that every generation has faced, it is now packaged in different ways and needing to be confronted in new and adaptive ways than in times before. 

Every generation has dealt with economic fluctuations, but this is the first generation that’s had to deal with it while also combined with other ‘new’ factors; many jobs now being outsourced and going overseas, technology eliminating various roles, if not industries, through new understanding and automation.  Every generation has dealt with increasing avenues of communication, but it has been exponential for the Millenials.  Everything now being a simple keystroke or post away, so for them they really do communicate and access information in a way that had been foreign to previous generations.  Every group has had the support of the previous, as alluded to above, but the Millenials have had the ‘good’ fortune of being raised by a community that wants them to succeed!  So much so, think ‘helicopter parenting,’ we’ve in a way forgotten, if you’ll excuse the metaphor, ‘to teach them how to fish, as opposed to just handing them a bountiful catch.’ 

How all of this has evolved along with the associated labels; ‘entitled’ and ‘narcissistic,’ among many others, and yet not having foreseen such, remains an enigma to me.  In using the term ‘slackers,’ I’d like to just draw a few analogies to their previous cohorts, sort of a “then and now.” 

Think Mark Zuckerberg (Facebook)?  How about Steve Jobs (Apple)? 
Think Chad Hurley (YouTube).  How about Bill Gates (Microsoft). 
Think Evan Speigel (SnapChat).  How about Michael Dell (Dell Computers). 

“Slackers?”  No.  Different in how they communicate, think, process information, form expectations and view the world and quality of life?  Yes.  Are they to be held accountable for their actions?  Yes.  Are we (previous generations) partly to blame for their new/different world-view?  Absolutely.

Much more to come as this is a new blog and I’ll be reflecting on the employment markets, the entry to such by the Millenials and what it is all to mean…  Stay tuned!      

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