The social contract is up-ended, but fortunately, I’m out!

Statistics on student loan debt, the debacle of debt on both recipients and society, and how a few people have dealt with this burden.

Readership: All; especially those with student loan debt

I did it! At the age of 47, I finally paid off my student loans!

I took the first one in 1990 when I started college, and I signed a promissory note for the last one in 1997 when I started graduate school.

It’s been a monkey on my back ever since. I’m not alone.

Statistics on Student Loan Debt

The Chamber of Commerce has reported some very depressing statistics on student loans [1].

  • 60% of all students have some form of debt by graduation.
  • There is more than $1.5 trillion of student debt owed in the United States.
  • This debt is owed by 44.5 million people across all demographics.
  • 2 million of those people owe more than $100,000 and 0.5 million of them have a loan for more than $200,000.
  • In 2017, $106.5 billion was borrowed. That is down, however, from the peak of $125.6 billion in 2010.
  • Tuitions costs have continued to rise; the decline is due to fewer people enrolling in college each year.
  • 40% of the total federal student debt is from graduate programs.
  • Master’s students borrowed $18,210 per year on average during 2015 compared to an undergrad’s $5,460.
  • The average debt of a master’s graduate is $51,000.
  • The cheapest master’s degrees are an MBA. Those with an MBA averaged $42,000 in debt. Those that graduated with a master’s degree in medicine and health science averaged $162,722 in loans.
  • Of people with student debt, only 37.5% are below the age of 30. The other 62.5% are older than 30.
  • 3 million borrowers are currently deferring their federal student loans. In this instance, deferment means that interest doesn’t accrue.
  • 6 million borrowers currently have federal student loans in forbearance. Interest is still piling up for them.
  • An astounding 4.7 million borrowers have their federal student loans in default. That means that 10% of all people with student loans haven’t made payments on their debt in more than 9 months.
  • Students that left college before completing their degree are more than twice as likely to eventually default on their loans compared to students that graduated.
  • More than half of all defaulted debts are on loans that amount to less than $10,000.
  • 45% of students that graduated in 2018 have student debt.
  • Their projected retirement age is a creaking 72 years old (compared to the average retirement age of 66 in 2018).
  • 11% of graduates don’t believe they’ll ever have the opportunity to retire.

For those interested, there are two primary federal student loan forgiveness programs.

  1. Public Service Loan Forgiveness – Is intended to be for eligible federal, state, and local government employees as well as employees at 501 (c) (3) non-profits. After exactly 10 years of on-time payments, the remainder of the debt is to be forgiven. However, as of September 2018, only 96 out of the 30,000 applicants have been accepted to the program and forgiven. Don’t count on this one.
  2. Teacher Loan Forgiveness Program – Teachers that teach 5 consecutive years in a qualified low-income school can be forgiven between $5,000 and $17,500 of their debt. About 40,000 teachers received aid from this program in 2017.

Although the Chamber of Commerce reports that 10% of student loans are in default, the Wall Street Journal claims that More Than 40% of Student Borrowers Aren’t Making Payments (2016 April 7). A third source [2] says only half of student loan recipients were in active repayment status, as of the fourth quarter of 2018. Image from [2].

student loan debt

Whichever statistic you choose, the situation looks grim.

Some are taking the easy way to get out of debt – by moving abroad

I’ve read several stories about how some Americans have been so overwhelmed by student loan debt that they fled the country.

CNBC (feat. Annie Nova): These Americans fled the country to escape their giant student debt (2019 May 25)

The article from CNBC takes note of the life improvement experienced by one debt ridden American expat in India, Chad Haag,

“Milestones that seemed like pipe dreams back home, like starting a family, and owning a house, are now on his horizon in India. Last year, he married an Indian citizen, a professor at a local college. He has a five-year spousal visa.”

Some of my cousins believe the reason I have lived abroad since 2004 was to escape my student loan. But it’s not true. I understand that feeling of being overwhelmed by debt, and not being able to make payments on time, but that’s not the reason why I moved to Asia.

I continued to make payments after moving here and it was a pain in the @$$. In order to send money to my student loan guarantor, I’ve had to make half-day trips to an international bank located downtown and ask them to issue a bank check. This always took a couple days to process, so then I had to make another half-day trip later in the week to pick up the check. On top of making the payments on the principal and the 4.5% interest, I had to pay additional banking fees, currency exchange fees, and checking fees for each check, which added about 9% to the total.

Busting A$$ (No Kidding) Is No Good!

moneyblackhole-1024x440

The Violated Social Contract

I took out those loans in good faith in my future earning potential, and I had every intention of repaying every penny. But for all my effort over the years, I could never pull ahead and get on top of it.

My father urged me to stop making payments altogether. His suggestion surprised me because he may be the most honest man I know, and he is a deacon and the treasurer of a Southern Baptist Church! I could not imagine such a statement coming from him. So I had to ask him to explain his reasoning behind his advice. He said that whenever banks loan out money, they have to assume the risk that some of the debtors will never be able to repay the loan. They have to figure this into their calculations as a potential loss. To minimize these losses, banks need to scrutinize every potential loan beneficiary before doling out the cash, to make sure each one is able to repay. Obviously, banks haven’t gone to enough trouble to protect themselves against making bad investments, so they should accept these losses. This was made abundantly clear during the subprime mortgage crisis in 2008.

During the subprime mortgage crisis in 2008, it was mobviously clear that banks and government insurance agencies made poor investments, with a back-up plan up their sleeves to foreclose on owners who defaulted. This brilliantly contrived scheme forced competing and relatively more honest banks out of business, and it stole repossessed properties from thousands of hard-working Americans, as well as ruining their hopes and dreams in the process. These banks and their supporting agencies were never held accountable for their irresponsible and unprofessional business practices. Instead, the common man had to take up the $lack.

When we consider the current student loan debacle, with 10-40% of the beneficiaries in default, subject to wage garnishment, and being pulled into federal court, I have to ask, what is their back-up plan for recouping their investment? They can’t repossess an education, and they can’t recover their investments through wage garnishment if the benefactor cannot find a sufficiently high paying job.

Furthermore, why is it that student loan debt is the only debt that cannot be forgiven through a bankruptcy settlement?

I hate to think about this, but the only thing I can think of, is that the powers-that-be have engineered a massive plan to subject the American people to debt slavery and to impose all of the associated constraints that go with it.

This could be part of a plan to limit population growth by discouraging or postponing marriage and raising a family because of insufficient income – a move to completely obliterate the once majority middle class, which has been the time honored cornerstone of the American republic.

It could also be a carrot-and-stick approach to convince the masses that socialism has many benefits, leading to their agreement of a gradual takeover! Heh…

Any way you look at it, it’s one more Harbinger of the Impending Collapse of the U.S. Social Security System (2019 April 12)

asian beauty with magazine

How did I repay my student loan?

In 2009, I had my student loan paid down to $26,622.10. Then my first wife left me and cleaned out our savings without any notice. I was so broke that I had to borrow money from my parents so that I could hire a lawyer for the divorce proceedings.

Needless to say, I was unable to make payments for a few years until I got back on my feet. During this time, my loan went into default and was sold to a collection agency. Because of the interest and collection fees, the outstanding balance ballooned to an astronomical $58,619.37 within 5 years!

One day, after reading the amount I owed on a statement, which was 2.7 times the sum of the original loan figures, I was seriously considering taking my Dad’s advice.

But my conscience afflicted me, so I prayed about what to do…

“God! I always had the intention of repaying this loan, but I just don’t think I can do it. Should I take Dad’s advice, or are You going to make a way for me to repay this loan somehow?”

After a few months, I got an answer to my prayers.

My wife was always complaining about the place where we lived. Her parents finally got fed up with hearing her complaints, and urged us to buy our own house. I always thought this wasn’t an option, because we didn’t have enough money for the down payment. But her parents agreed to give us enough money for the down payment. I would still be responsible for the monthly mortgage payments, but that would not be a problem since I would no longer need to pay rent. The mortgage is only US$80/month more than what I was paying in rent.

We had to take out a loan to cover the balance, but I was able to get a 30-year home owners loan at an interest rate of 1.65%. So I just asked for $30,000 more than the remaining cost of the house, which did not raise any flags because it was less than the amount offset by the down payment. I put this extra amount aside to pay off my student loan.

After I was awarded the loan from the bank, I called the agency responsible for collecting my student loan and negotiated a lump sum settlement in cash. I sent them a copy of an old statement, proving that the original loan amount totaled $24,560, and that the balance stood just under $26,000 in 2011. I wrote a long-winded explanation for why I was so far behind on my payments, and I offered a cash settlement of $20,000. They made a non-negotiable counter-offer of $30,913.38, and I accepted it as an opportunity to escape the 4.5% interest rate, the guilt of debt, and all the hassle of making regular payments.

I made arrangements with my bank to pay the amount using a credit card, so that I could reduce some of the checking and handling fees. Unfortunately, the exchange rate was at a 5 month high, so that cost me an additional $1,518.

In summary, I consolidated my loan into a hotly appreciating real estate investment at a much lower interest rate. I thereby escaped the horrid student loan trap and became a homeowner at the same time.

God answered my prayers! Hallelujah! I’m totally out of the rat race!

References

  1. Chamber of Commerce: Student Loan Statistics
  2. Medium-Knoema (Feat. Ivan Lapickii): US Student Loan Debt Accumulation Showing No Signs of Slowing (2019 January 24)

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About Jack

Jack is a world traveling artist, skilled in trading ideas and information, none of which are considered too holy, too nerdy, nor too profane to hijack and twist into useful fashion. Sigma Frame Mindsets and methods for building and maintaining a masculine Frame
This entry was posted in Building Wealth, Culture Wars, Freedom, Personal Liberty, Models of Success, Perseverance, Prayer, Society, Stewardship, The Power of God and tagged , . Bookmark the permalink.

5 Responses to The social contract is up-ended, but fortunately, I’m out!

  1. Lexet Blog says:

    This is the one good argument leftists are making, and republicans are on the wrong side of this issue.

    Student loan debt is a government scam to begin with. To attend their institutions, you must pay them a ton of money, and to put them that money, you must take loans from them- at a high interest rates. Oh and you can’t discharge them in bankruptcy.

    PSLF is a scam that screws people over. The companies contracted to oversee the loans routinely F with those who have loans. They will routinely mess with your payment amounts, say your payments are not qualifying, and will disenroll you before the end of the year (you pretty much have to reapply every 7 months or they will screw with you).

    My income hasn’t changed, yet their calculations do- so my payment amount changes on a regular basis.

    Liked by 2 people

  2. h0neyc0mb says:

    “Good faith” is out the window.

    Nudging the wimminz hasn’t worked… so now they make “fake news” to steer the herd to the final solution…

    https://www.dailymail.co.uk/news/article-7125343/Majority-American-women-age-18-54-prefer-socialism-living-capitalist-country.html#article-7125343

    If you don’t want to give’em more free stuff (th wimminz)… they will turn to BIGGER GOVERNMENT to solve their problems… and right on cue, stories like the above appear.

    Giving th wimminz the right to vote was the second worst mistake we made as a country.

    Like

    • SFC Ton says:

      For The South the biggest mistake was entering into a poltical union with yankees.

      Why more folks don’t dip out overseas and leave their debt behind is beyond my understanding but one thing I have learned in life is people love being slaves.

      Like

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