Drowning In Debt: Student Loan Fine Print

It’s that time of year, where a number of undergraduates and graduates across the country preparing for graduation come to the horrible reality…they’re in debt for the rest of their lives!

Photo by @DonkeyHotey on Flickr. Great photo that sums up how we feel after graduating – OWNED by loans. See more of his work here – https://www.flickr.com/photos/donkeyhotey/6304808136/

OK, it’s not really for the rest of their lives. But it sure does feel that way after taking the exit loan online course. I remember taking it back in 2011 and thinking, “where was this when I applied for the loan?!?!” I’m having flashbacks to it now because my fiancé John, who graduates from law school this May, recently took it.

We’re about to get married and our biggest long term challenge will be paying off our student loans. The loans that were supposed to secure our future in a higher pay bracket, so we could make sure our future kids would have the childhood both our parents gave us. There’s no way we’re getting close to paying even half of our debt off by the next decade though.

No, it’s not because we’re worthless millennials looking for a handout in the form of student loan forgiveness by the government. The reality is that even if the government offered to forgive all federal student loans tomorrow — and keep in mind John and I both took out Federal funding for our education — only one of us would have our loans forgiven.

You see, there’s a fine print when you sign your federal loan that gives the Department of Education the right to sell…I apologize, the correct terminology they prefer is “transfer” your loans to a private not-for-profit loan servicer. Yep, and they can do this with any of your loans for any given reason. All of my loans (both for undergrad and grad school) were sold…gosh! Excuse me, I keep meaning to say “transferred.” Mine were transferred to a loan servicer called MOHELA and I was actually lucky it was just one. A friend of mine had her loans transferred to two different banks and her attempts to consolidate them was not only a nightmare, but she’d also have to pay higher interest rates if she consolidated. The last time I spoke with her (which, admittedly was a few years ago), she had just accepted her fate and made two separate payments to two separate servicers.

The New York Times published an article called “We’re Frighteningly in the Dark About Student Debt.” The article is definitely worth the read, however I was surprised it didn’t include anything about this aspect. It was more about how secretive the Department of Education is with their data, which it is when you consider the following revelation from the article: They will not even share data with the Federal Reserve, who relies on student loan data from Equifax.

I guess I shouldn’t be surprised about anything in the article though. The Department of Education’s right to “transfer” seems to be the biggest secret of them all. Especially given that I found out about it in an email two weeks AFTER it had happened, citing the fine print of my loan agreement. Trust me, if I knew my loans would be “transferred” to a servicer who didn’t know how to apply my payments correctly to the principal (true story), it would have been a red flag to stick with my gig at Starbucks a little longer. At least they offer tuition reimbursement and health benefits.

As for the Student Loan Forgiveness program? It’s joke. Mark my words, if it does happen in our lifetime. The Department of Education will be sure to sell…(Apologies again! Not sure why that word keeps popping out of my mouth! I MEAN transfer!) My guess is that they’ll “transfer” as many loans as possible because no one can afford to take a $1 Trillion hit.

In the meantime, my hands are full trying to pay off my student loans and making sure MOHELA applies the correct amount to the principal.

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3 thoughts on “Drowning In Debt: Student Loan Fine Print

  1. blonderbetterfasterstronger says:

    I’m confused by this. Your loans should still be federal loans, entitled to all of the benefits of federal loans, they are just services by different parties. You should still be able to consolidate on the same terms you would have if they were with a different servicer.

    • aclarkcorner says:

      First off, congrats on paying down your loans! Nice to meet another fellow graduate in the same boat – trying to pay down loans quickly. You’re also right that my loans are still considered Federal Loans and all the terms stay the same. However, the quality of service I get has significantly gone down (and it wasn’t that great to begin with). Have you ever tried contacting one of these service providers? Not only are they difficult to get a hold of, banging your head against a wall is usually a more pleasant experience with how little they know about handling your payments. I’m doing my best to pay them down ASAP and crossing my fingers my Fiance’s doesn’t get transferred to another servicer.

      • blonderbetterfasterstronger says:

        I remember being on Fed Loan Servicing and Great Lakes. I also had Granite State for my private loans from undergrad, but those eventually got transferred back to the original lender. I didn’t have too much trouble with my servicers–even though my payoff dates kept getting pushed back my extra online payments were going to principal. I’ve heard a lot of stories about people having issues with that. So far I’m not paying extra on my private refinance, but hopefully when that happens (probably at least a year away) they can figure out how to apply it.

        P.S. A Link to the Past is the best video game ever.

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