Dear Sallie MaeJust when you thought Sallie Mae was tough, some universities are now showing who’s tougher. Bloomberg and other news sources are reporting that George Washington University, Temple University, Yale University and the University of Pennsylvania have all filed lawsuits against students who defaulted on their Perkins loan repayments.

Unlike its loan counterparts, Stafford or direct federal student loans, which are distributed by the government, Perkins loans are administered by the colleges themselves. According to the Bloomberg report, during the 2011 fiscal year the Perkins defaults have skyrocketed to $964 million.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” said Deanne Loonin, an attorney with the National Consumer Law Center, a nonprofit advocacy group in Boston. “We offer credit very easily.” If the student doesn’t benefit financially from the education, “the government or the school comes after them very aggressively.”

Although President Barack Obama has proposed to remake the Perkins loan program by rewarding institutions that rein in tuition and produce good student outcomes, this is not doing much for students currently stuck in Perkins Loan hell. Under  Obama’s proposal not only would the loans be serviced through the Department of Education, instead of individual colleges, the pot for Perkins loans would increase to $8.5 billion from about $1 billion.

When you’re only given a 9 month grace period to pay back a loan, it doesn’t make it easy on students. In this economy trying to find a job isn’t the easiest thing to do.  Aaron Graff is one student Bloomberg cites as an example:

Aaron Graff, a farmer’s son from Denver, graduated from George Washington in 2010 with the help of $62,500 in scholarships over two years, according to his financial-aid award letters. He defaulted on $4,000 in Perkins loans. Graff, 30, said he hasn’t been able to find a full-time job. He earns $800 a month from teaching high-school equivalency courses and restores basements for extra money. He said he is trying to pay off other student loans first because they were co-signed by his parents.

“I live on the bare minimum,” he said. “It’s not like I’m defaulting on my student loans to live the lavish life. I’m defaulting on my loans because I really don’t have it.”

Maybe there should be a student-loan bailout soon?

 

  • MarloweOverShakespearw

    Wow. I’m certainly grateful for Stafford’s grace period.

  • Eyes Wide Shut

    As one who has borrowed a tsunami load for a graduate degree in medicine, I will tell anyone that students are the victims in this big business called “academia”. Over the last few decades, much of the population has been silently brainwashed into going to college as it’s a requirement to live a better life.

    A clerical job I had worked years ago NOW requires at LEAST a bachelors. 10-15 ago that same job did not require any degree just completion of high school. Credential creep is a very serious problem as now jobs are requiring more and more and more degrees to get a job that never required a college degree not that long ago.

    Another factor in the “College Industrial Complex” scheme is that the economy is still bad and getting much worse. The jobs are getting slimmer and slimmer. Many college students simply cannot find jobs that match their level of knowledge that was stated on the degree that they planked down thousands of dollars for. You have students with bachelors working at McDonalds. Students who have masters making ends meet by being stock clerks at retail stores. Get my point?

    Now I think parents have gotten wise to the scheme. Many parents (at least the ones I have spoken to) are telling their kids in high school to major in something that will generate the income that will pay back loans. Being a “liberal artist” will not cut it…….Some immigrant parents are preparing to send their kids to other countries where the education is top notch AND free (United States fell behind 20 years ago, sorry but true) Some parents are refusing to cosign loans (VERY SMART). Many are aiming to get their kids to go to community college and then transfer to state schools (VERY GOOD! State school tuition is notoriously CHEAP))

    Colleges have raised their fees to crazy ridiculous amounts($700 for textbooks used for one semester?! REALLY???!!!) that are not sustainable bc they get essentially easy money from student loans. The student loan debt in the US has reached astronomical proportions that exceeds credit debt. Once the student loan bubble pops, the SHTF scenario will be very very real in the U.S.

    Eyes Wide Shut

  • Ask_ME

    This is pure innocence. Perkins Loans are the MOST lenient loans of them all. If he defaulted on it he is just not responsible.

    President Obama changed the game when he introduced Income Based Repayment plans. There is no excuse to default on a FEDERAL student loan. You have options.

    Now private loans are a completely different story.

  • Eyes Wide Shut

    Student loan bubble is about to pop in 5,4,3,2………

    When that bubble pops the world economy is DONE!

  • Kacey

    I agree with much of what you say.

    I have to add that the “credentials creep” you spoke of is due partly to the fact that the American education system is failing. There are many who are graduating high school with reading and math levels far below what they were 10-15 years ago. Employers believe that to get some of the basic skills needed for administrative positions they have to raise the education level to college grad because the average high schooler just isn’t prepared to do basic office work.

    The unemployment rate of some college and advanced-degree recipients can also be partly blamed on the type of degrees they are obtaining, in conjunction with a lack of sufficient career planning and advice. A general liberal arts degree will get you almost no where. Too many believe that just any college degree will open doors, and that is simply not true, especially in such a competitive job market. I know so many people who obtained liberal arts degrees and had absolutely no clue (or some far-fetched, unrealistic notion of) what they were going to do with it, and it wasn’t until they experienced the hard knocks of searching for a job that pays a living wage that they got serious and went back for advanced degrees in more targeted, lucrative fields.

    Honestly, I believe trade schools and junior colleges would be a better option for a large segment of the American population. We also need more of us to enter STEM fields, because that’s where the jobs are but also where blacks are least represented.

  • Eyes Wide Shut

    For some reason, I really though my first post got erased…….
    Hence a two sentence repeat. Sometimes, my posts take awhile to be shown and many times it’s instant…….

  • http://www.myblackfriendsays.com myblackfriendsays

    I just paid off my Perkins loan last year…phew.

  • apple

    i went to the school that gave me the money so debt for me, the degree still amounted to nothing but oh well.. i did want to school after college but i got by the last time scott free, i don’t want to risk it again and have another waste of a degree but this time with debt

  • SpkKay13

    I have to disagree with having all of these options to circumvent default on Federal Loans. Although I have never defaulted, I will say that I have personally contacted US DEPT OF EDUCATION several times to lower loan payments, extend the amount of time, etc and have always been hit with, based on your gross, this is as low as it gets. They do not take into account private loans, cost of living, healthcare, etc. They look at the gross pay and conclude that you can afford to pay them over your rent, food, transportation, etc. It is amazing how willing the government is to provide relief for individuals with multiple children, little to no education, and low wage paying jobs. Because I am without depedents, it is presumed that I am financially capable of juggling all of my essentials and a student loan payment that is a few dollars less than my rent, because after all, I only have me to take care of. I live a rather modest lifestyle and am very serious about fiscal responsibility, saving, planning ahead, etc so me living above my means is far from the issue. In spite of my attempts to make arrangements to lower loan rates, I have to file forebarence each year, pay what I can afford, while the amount owed increases because I cannot afford to put a dent in the loan payment. I have come to the conclusion that I will probably leave this earth owing the federal government for student loans.

  • anon

    I currently owe 4K.

    I flunked out of the first 4 year college I attended…using federal grants loans.

    Went back and took out a Sallie Mae loan to get a certification – almost defaulted, but paid them off. Fuck Sallie Mae. And I mean that from my heart.

    The one certification got me work for many years.

    A few years later, I tried going back to finish the bachelors on federal monies. They took care of me one year, but did not fund me enough the next. so, I couldn’t finish.

    The market has changed, and the bachelor degree is more required. I decided to pursue an associates degree at a CC, to save money, then transfer to a 4 year and finish using all of my credits, all while continuing to work full-time.

    For me, the difference in income should be more than 60K after I get the BA – I SHOULD be making 6 digits when I’m done. I’ll live like a pauper until I’ve paid off the loans (I could probably do it within a year) but I will have to take out about 40K more to finish. However, having an associates degree should make enough difference in my income where I can start paying the loans off before I finish the bachelors degree.

  • http://gravatar.com/hsm36 Whatever

    @Eyes Wide Shut

    I agree with your entire post. This is getting so ridiculous. It is a terrible feeling for young adults to complete their degrees only to graduate without a job. So many people in their twenties are moving home with their parents and having a difficult time finding a job that matches their level of education. Honestly, now is not the time for liberal arts degrees… or art degrees. Majoring in English or Design is not going to pay the bills and in the end it is a huge waste of money. (I’m in the creative field, I know :)) There are many unemployed people holding law and business degrees as well. If you aren’t majoring in science, technology, engineering or math, pick a state university. Find a mentor and network and intern your life away to make those connections.

    Forget what they told you about the American dream being home ownership! Your first major investment starts at 18 years old with your degree. If you can’t get a decent return on that investment, find a plan b.

    Now the credit bureaus would like you to believe that student loan debt is “good debt”… no debt is good debt.

  • http://gravatar.com/hsm36 Whatever

    @spyk13

    This is why so many Americans believe the middle class is shrinking. Graduating and entering a diminishing workforce, while trying to pay back those loans is swallowing up the exact demographic that has the ability to make a difference.

  • anon

    *correction, I currently owe 40K not 4K.

  • anon

    It’s scary.

    I’ve been hoping to find me a rich man that will be my boyfriend/husband (who does not live beyond his means), and let me live with him, so that I can use my entire 1 years worth of income to pay off my student loans.

    I guess, I need to pray on that shit.

  • Eyes Wide Shut

    I also want to add that I do believe there should be a student loan bailout. Why? If our banks can lose like a billion dollars with no consequences to them and still get bailed out by the government, then why not students????

    (Wasn’t it last year that the CEO of Chase said 1 billion – 3 billion dollars has just vaporized into thin air???? Really? Ok then, Mr. Obama I need my student loans to be bailed out!!!)

  • anon

    it sounds nice, but a student bailout would devastate the economy. I’d to see the government enforced a bank executive mandatory payout where they are heavily fined for their negligent actions from 10 years ago.

    If Warren Ballentine has to go down, they should.

  • bubbleyumgirl

    Yes! So true! Went to a liberal arts college. Got a useless degree. I couldn’t find a job that paid me enough to not live out of a cardboard box. Now I’m applying to pharmacy school. We need more black people in the science and math fields (other people of color like Indians and Chinese already know this!)

  • pe.riche.

    “Fuck Sallie Mae. And I mean that from my heart.”

    ^^^^^^^^^^YES!!!!^^^^^^^^^^^^^

  • politicallyincorrect

    that guy cant pay back a 4k loan? He can give them 50 bucks a month instead of defaulting and getting sued

  • http://gravatar.com/nolakiss16 binks

    This! It is not that people don’t want to pay them but they want you to pay them the amount they think you should pay with little regard to everything else.

  • EST. 1986

    Where is my comment?

  • Eyes Wide Shut

    @bubbleyum girl:

    I am currently enrolled in pharmacy school. BEWARE! The academic greed machine has opened over 30 schools in the last 10 years!!!! There are not enough hospitals to accomadate students for residencies and the land in the U.S. is finite…how many CVS, Walgreens, etc. can the earth sustain? Enter pharmacy school only if you have a reliable network system (ie family that are pharmacists already). The reason why my debt load is so high is bc I went to a private school as the public ones are fiercely competitive bc of the extremely cheap tuition. 15-20 years ago there was a genuine shortage of pharmacists in the U.S. (and the salary began to reflect that) but then the retail giants started to donate to schools like crazy to fund the building of more schools and satellite campuses!
    End result: super saturation of pharmacists and pharmacy students in most cities…..unless you are willing to relocate to the boonies………

    Love and peace,

    Eyes Wide Shut

  • lauryn

    I have a B.A. and an M.A. and I work three jobs to make ends meet. And trust me, ends are NOT meeting. I’m currently enrolled in a certificate program at a local community college so I can acquire some skills that will help me land a job (my degrees are in English Lit.– I know, I know). Shit is real and shit is tough.

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  • apple

    @anon
    lmfao lmfao hahaha

  • Rochelle

    I feel somewhat sorry for people in debt…..No actually I don’t. No, loans should not be forgiven. How bout, don’t major in something stupid. Especially in grad school. One should be more mature and know better. Also, I am tired of Americans getting into something and then wanting someone to “care.” Well most only care about themselves in this country and most americans, like myself, don’t care about a person being in debt because of their assinine decisions. I took out loans too, I dont ask for a bail out. Of course I did the smart thing, went to the cheapest STATE school on my state, borrowed books (didnt buy them), sent back every single one of my refund checks to the loan company within a week of getting them. No I did not spend it in Louis and Gucci. How many of you can say that? I completed the whole of undergrad with only a 10 k loan. It can be done. And if 10k is too much to pay back, you picked the wrong major my friend, that should be nothing. Add people who have kids while in school and fail classes when they should have been getting help, therefore prolongng their time in school………….sheitttttt. I reaaly have no care in the world for people who put themselves in their own messes. F Sallie Mae. Well F you and your piss poor choices.

    And another thing. This reminds me of all those poor souls that needed that big house during the real estate boom. Then they cry when it gets taken. Boo hoo.I just bought another property and at closing the lady, with 2 kids and a husband said “Im going to miss my house…” I wanted to jump up and smack her in the mouth right there. I wanted to say “well 1st you should have taken care of your house and paid your bills. The upkeep on the house was underwhelming to say the least. obviously you don’t care about having a home for your family too much considering you stopped your mortgage payments, so cry a river somewhere else and take your poor excuse of a husband with you. No good man would not keep up with their bills and have their fam on the streets. B-tch.” But since ‘Im a lady, I didn’t say that:)

    Point is American needs to stop crying and make better decisions. You guys can thank me later for the advice.

  • Rochelle

    Lots of thumbs down for telling it like it is. Sad.

  • Kay

    First off, there are tons of people who went into “safe,” areas of study and STILL can’t find a job. The economy sucks. When economies suck, there are not enough jobs for the people who seek them, regardless of what kind of educational backgrounds they have. I know accountants, business people, doctors, lawyers, etc., who are ALL unemployed and trying to make it and worked their through school without loans and still have tons of debt because they AREN’T WORKING!!!

  • mEE

    you must be such a ray of sunshine and constant source of joy for everyone in your life -___-

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  • justanotheropinion

    Many companies require all new hires to have degrees because it looks good. Took me a few years to get my company to change the policy. After all, a degree to work in the mail room or an admn. position is so not necessary. Not to mention the fact that there were several ppl with advanced degrees that were struggling in lower end positions which contradicted their arguement. Unfortunately, this is the new normal. A bachelors degree is now what the HS diploma once was. Without it, basic employment will be a struggle for any of us.

    Having said that, I do believe that if you take out loans, you are responsible to pay them back. I do not believe that school loans should be forgiven (after all, you received the product – a degree). However, I do think that the rules should be more flexible in the repayment area. If your income is $1k/mo., just because the loan docs say your payment should be $700, I don’t think that’s reasonable. If I were the lender, I’d rather you pay something than nothing. That may mean you end up paying for the rest of your life, but you have to honor your obligations.

    Lastly, as a country, we need to stop pushing college as the end all be all for everyone. College isn’t for everyone. There is nothing wrong with going to a trade school. Don’t knock your kid if they have a passion for cars and wants to be a mechanic. Don’t knock your kid if they want to be a plumber, electrician, medical tech, vet tech or hair dresser. They are all necessary jobs in our society. There is NO SHAME in doing an honest days work, whatever that job may be. Also, employers should be encouraged to hire folks that have a desire to work (and have shown the willingness and responsibility to be a solid employee) and INVEST in them by providing on the job training as well as outside training thru a CC and/or tech school. 60mins. did a piece on just this last year. The participating employers said they were skeptical at first, but it has paid off. They have skilled employees who feel vested in the company because of the opportunity they were given.

    Lastly, some common sense and counseling needs to come into play. If you want to become an engineer and the avg. earning potential for that position is $80k/yr., then $100k of debt doesn’t seem too unrealistic. But if you have no idea what you really want to do or your desired field of employment has an avg. yearly salary of $40k, you have no business being $100+k in debt. That just makes no fiscal or common sense.

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  • Crystal

    I agree with some of what you said. I just tend to think that only a few wasted their loan money. There are those who were not able to pay for school without a loan, were responsible made good grades, and can’t find a job and are still struggling with student loans.

  • Magnolia

    LOL!!! It’s funny because it’s true… My friend’s and I joke about this all the time but we’re secretly serious…

  • naduck

    I am currently working to be a nurse. I have loans and will try my best to get into the program and get a job afterwards. That said, I am not feeling personally guilty about it if I don’t make it in this economy. Why should I feel ashamed or guilty?

    Think about it: if I invest in the stock of a company and that company becomes the next Coca Cola or Facebook then I will make big bucks on it. And that is all good. However, if that company goes under then I lose all that money. Even if I could call a collection agency, I have probably lost my money, haven’t I? But I made that deal of my own volition – I chose to invest that money. Investments are always a gamble – that is why long term savings involve blue chip stock options as it helps assuage the danger of the more volatile stocks.

    People are volatile stocks and banks, schools, and the federal government are playing in a stock market when they invest in us, the students, with loans. Now many of us will succeed and pay our loans back and everybody wins then. But sometimes, the investment falls through (bad economy, poor choice of investment, and so on) and when it does, the investor loses money. It is really that simple. So why should I feel guilty? Do business owners I invest into feel guilty when their stocks go down?

    So, to all the students, relax guys and gals. Collections can’t do anything to you except hit your credit score. During the depression people were starving to death so if that is the worst you deal with, you are lucky. These rich old dee bags inundated us for years about how important it was for us to go to college and then stole all the money and wrecked the economy and now blame us for taking out student loans. Gimme a break!

    As for those angry at the youth who hold my sentiment, grow up. That is capitalism, friends. What are you gonna do, throw me in jail? I will just cost you 45 to 60 grand a year more! Gonna cut off my hand? Enjoy paying me social security for my injury and thanks for the handicapped spot! Garnish my wages? Good luck getting blood out of that stone! You made a bad investment. I was promised a better job from going to school and, if I don’t get it, why should I feel bad about not being able to pay back my loan? Suck it up and move along.That’s what grown ups do.

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