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What Real People Are Doing to Pay Off Their Student Loans

one hundred dollar bill with a graduation cap
It is easy to forget that the Student Debt Crisis is about real people in the real world.

So often — perhaps too often — student loan borrowers are overshadowed by depressing statistics and the latest weekly quote from some politician or bureaucrat in an alphabet soup organization. However, some of these statistics do raise the question: Just how are student loan borrowers paying back their debt?

According to recalculations by the New York Federal Reserve, the student loan delinquency rate is 21 percent. Understandably, this high number is a result of the lack of jobs for the many millions of young adults across the country that chose to borrow student loans.

Jobs and underemployment aside, any and all student loans must be repaid. It’s nearly impossible to discharge student loans in bankruptcy proceedings thanks to past legislation.

Casting aside statistics, political grandstanding, and bureaucratic reports, it is time to talk to student loan borrowers to see just how real people in the real world are paying off their student loan debt—or not paying it off.

The Default Pain of Niki Payne

Niki Payne, a 28 year-old writer, graduated from California State University of Long Beach in 2008 with a degree in Journalism. Two years later, she obtained a professional Consumer Psychology certificate degree online through the Chicago School of Professional Psychology. However, her problems began long before that.

“Halfway through college, my live-in boyfriend and I broke up so I had to pay full rent and groceries whereas before we were splitting everything so that was a huge adjustment for me, financially,” said Payne. “I also fell into depression because of the break up (it was traumatic and a whole other story in itself) and found myself engaging in retail therapy and making foolish choices with my private loans.”

Payne’s loans eventually compounded to a point where she now owes almost $100,000. Only now does she understand that a college degree does not guarantee a job or success in life—despite the promises of academic advisors and college recruiters.

She says that roughly half of her student loan debt is in federal student loans while the other half is private student loans. While she did consolidate her federal student loans, she has opted to postpone payments until July.

“I think I was making payments for about a year until I lost my job and became an independent contractor,” said Payne. “My private loans however, I made the decision to stop paying them since Jan. 2012 until I make enough money to actually afford the hefty payments.”

The debt collectors from Citibank, her private student loan lender, finally stopped calling Payne three times a day, however Wells Fargo — another of her lenders — remains relentless.

“Neither will offer me any options such as income reduced payments until I pay up, but I just can’t afford the payments without losing my car which gets me to work every day or starving to death which gives me the fuel I need to work my ass off trying to raise my income so I can gladly payback my student loans,” she said. “So far my education and two degrees has proven to be virtually worthless.”

When Obama instituted the direct loan consolidation program, Payne immediately sent in an application to consolidate all of her federal student loans. However, that does little for her private student loan debt.

With stacking bills, her repayment responsibilities have shifted part of their focus from her to her father.

“The only person that has ever helped me make my payments is my father because he is my co-signer,” she said. “I just found out that he has been making the monthly payments since February when my in-school deferment was officially over. The monthly payments are $265 which I definitely cannot afford.”

Payne has to make the difficult decision of making her car payments or making her student loan bills. The necessity and convenience of a car won out in the end. Sadly, that decision has caused a rift in her relationship with her father.

“He keeps asking me to make the payments, threatening me with the idea of him losing his house if he doesn’t,” she said.

Unfortunately, Payne’s father is now being overburdened with payments as a student loan cosigner, and his prospects for keeping his head above water may be grim.

Fortunately, not all student loan borrowing and repayment experiences reach such a negative state.  

Goldberg’s Goldmine for Repayment

John Goldberg, a 63 year-old corporate trainer, borrowed a student loan when he was an undergraduate student in order to participate in an overseas study in 1970 when he was 20. However, he refused to repay the loan when he discovered that the program director stole program funds. Fortunately, he only borrowed $2,000 and the overseas program did not attempt to collect once the director was fired.

Goldberg went on to get an MBA in 1996 at the age of 45, which was partly paid for by his $20,000 in student loans.

“I started at a school that was not ranked and worked on campus so I didn't have to pay any tuition,” said Goldberg. “Since I got a high score on the GMAT the dean of the top ranked school nearby invited me to transfer. This meant taking out another loan. I researched the average salaries of MBA grads of the two schools and it looked like the difference would pay off my loan in two years so I took it, got a good job and paid it off as soon as possible.”

After getting his MBA, Goldberg became a Manager of Organization Development for Chiquita Brands International — a dream job for many graduates.

While Goldberg’s experience may be far from the norm for most present day student loan borrowers, it does highlight just how important a welcoming job market and a suitably desired degree can be when it comes to student loan repayment.

Slayter Slays Her Debt           

Mary Ellen Slayter, a 35 year-old Founder and Managing Director of Reputation Capital Media Services, borrowed $14,000 worth of student loans. However, she was able to eliminate her debt and even save enough for the down payment on a house. Slayter was only able to do this by spending wisely and cutting expenses.

“I paid off my undergrad student loans by giving up my D.C. apartment and house and pet sitting full time for 6 months,” she said. “I realize that might not be feasible for everyone, but it's important to question your assumptions about what you "must" spend money on. In my case, it turned out I didn't really need to pay crazy D.C. rent to live and work in the city. For others, it may require rethinking your transportation. Cars are a huge money drain.”

In order to drastically cut down on her expenses, Slayter essentially became homeless.

She became a paid house sitter and simply moved from home to home as her employers went on vacation. However, she did keep her day job as a newspaper editor — successfully working two jobs at once.

Her federal student loans were paid off in 2001 — just two years after graduating in 1999 thanks to her aggressive thriftiness and work ethic.

Words of Wisdom from Experienced Borrowers

These borrowers have more to share than just their past experiences. They have wisdom and advice for the new generation of borrowers.

“The best advice I have for federal loans is to consolidate immediately because it will prevent a whole lot of headaches when you have to make your payments, get a forbearance or apply for an unemployment, in-school or economic hardship deferment,” said Payne. “I also advise to never default on your federal loans because you will automatically be disqualified for any type of financial aid from the government in the future, at least from what I understand.”

Payne also advises high school students to avoid private student loans “like the plague,” but if they must be borrowed then they should try not to exceed $10,000.

“I really hope that my experiences will help others not make the same financial mistakes I have made in my life concerning my student loans,” said Payne. “If knew then what I knew now, I would have definitely taken my own advice.”

Payne’s sentiments were echoed by the words of Goldberg.

“Student loan borrowers need to think about return on investment just like any borrower, but not only financial return,” he said.

He cautioned that students should think about how much they are borrowing, how long they are borrowing for, and what the interest rate of their financing is—which may be fixed or variable.

Goldberg also advises students to pay close attention to the income loss of time spent going to school as well as the potential means of repaying the loan if they are not able to get a job, or a job that pays as well as expected.

Borrowers should also look at the social-emotional value of their education and career, in addition to the potential financial return their student loans will yield.

Payne and Goldberg’s words speak the truth — student loan borrowers must be completely prepared for facing difficulties. Unemployment remains high for Millenials while job growth remains slow. Regardless, borrowers must repay their student loan debt whether they want to or not. It’s the real people in the real world who have to find ways to make these payments — something all too quickly forgotten as statistics and political quotes continue to be lobbed around in the mainstream media about the ongoing Student Debt Crisis.