When The Bubble Bursts

26 Mar

Here we are at the end of March.  Everything seems a little brighter lately, doesn’t it?  The weather is warmer, the birds are chirpier, and everything is covered in a soft yellow blanket of cheerfulness.  Wait, scratch that last part.  It finally rained last week.  (If you’re not from the South of the US, that was supposed to be a pollen joke.)

When art imitates life...

I was feeling pretty despondent over my loans this past week.  A quarter of the year is gone, which means just 9 months left to pay off $10,382 + interest (because I’m not good enough at math to calculate that out. My loans have two different interest rates.)  As I said in my post two weeks ago, that means a monthly payment of $1334.  That’s a $373 increase from my original ideal monthly payment.  It went up because a) I failed at math and forgot to factor in interest each month, and b) I didn’t even hit the $961 ideal payment for January and February.  Thus the despondency.

However, I’ve found support in some unlikely places.  Those of you who are new to this blog likely found it because of Facebook.  A friend of mine posted a link to my blog, which then got reposted by someone else, and reposted again by a third person.  After that I lost track of the link, but 276 of you viewed my blog in two days (as compared to 250 views in all of February), so I figured I’d struck a nerve.  If you’re reading this now, thanks for sticking around.

I also found support from the Huffington Post.  In the last week, they’ve posted at least three articles on student loans.  One article stated that the average 20-something carries $42,000 in debt, and 50% of us so-called Gen Yers have educational loans.  Another said that the federal student loan debt is over $1,000,000,000,000.  Yes, that’s 12 zeros.  There is over 1 TRILLION DOLLARS in student loan debt in the US.  A third article discussed how a large percentage of student loan borrowers don’t fully understand their loans or repayment schedules.

Those articles astounded me.  If you didn’t just click on the links above, you should.  Go read those articles and tell me how you feel about this issue.  To me, it’s all saying the same thing- Gen Yers got duped.  We were told to go to college to improve our career prospects, but by the time we go out of school, the job market had bottomed out.  Now we’re stuck living at home again, working part-time or minimum wage jobs, and running on the never-ending treadmill of loan repayment.  It’s like the home ownership crisis all over again, except instead of 60-year-olds being forced out of their homes, it’s 20-somethings being forced out of their first apartments.

I’m going to level with you.  I didn’t get angry over the foreclosure crisis.  I felt like, at some base level, those people who bought too much house should have known better.  I know, I know- it was a terrible thing to think, and that actually very few people who lost their homes were being extravagent, but there it is.  I did feel sympathetic for those who lost their homes, and I even watched my neighbors get foreclosed on. (Note- I lost all sympathy for the neighbors after they threw a wild party and trashed their house on the eve of their foreclosure.  After that, I was glad to see them go.)  But the entire thing didn’t touch me personally, so I didn’t get angry.

I am angry now.

The student loan bubble is about to burst, and you’d better believe that I’m standing right in the splash zone, along with a few million others.  The federal interest rate program is about to expire, and the rates on our loans are going to skyrocket.  People are going to be defaulting and declaring bankruptency right and left, and setting the tone for their entire financial future based on one decision they made when they were 18 years old.  I don’t know about you, but that seems really, really unfair.

So yes, I am angry now.  But probably not for the reasons you think.  I’m not angry that I got tricked into taking student loans, because I don’t think that I did.  I read all the information, I understood that I would be paying interest on the loans, and that interest would accrue even while I was in school, and I understood that the only way my loans would be forgiven would be if I a) paid them all back, or b) died.  (No joke- I have a promissory note that says it just like that. “Full repayment or death.”) 

No, I am angry because other people got tricked into taking loans that they didn’t understand.  Student loan providers preyed on my classmates like credit card companies used to before colleges got wise and started banning representatives from their campuses.  But more than that, I am angry that even though we all endured four years of hard work, we can’t even earn enough to repay the chances we were given to succeed.  A college degree doesn’t mean as much as it used to, but  it sure costs a heck of a lot more than it used to.  That’s some twisted financial logic right there.

So here’s what we do.

1) Write to your congressperson.  Tell them to not let the federal student interest rate program expire.  Bust out some fancy mathematical skills and show them how much extra we will have to pay (hint- look at the articles linked above.  $5,000 over a 20-year repayment plan for a student who borrowed $23,000.  That’s almost 20% extra in interest alone.)  Casually remind them that college students are allowed to vote, and perhaps thrown in that said students know that congressional members are up for election every four years.

2)  … I don’t actually have a number 2 yet.  I mean, the obvious thing is that we all get really angry, pool our resources, take over the job market, and pay our loans back early in protest.  Rob the lenders of their cushy interest rates.  But since most of us are struggling to find a job that will cover the rent, let alone minimum payments, this might be a crazy plan.

Or is it?  Think about it and let me know.

Until then: I present End of March figures.

End of March

$10,980.16 (end of February balance)

– $658 (initial March payment)

+ $42.83 (March interest)

– $290 (Secondary March payment)

———————–

$10,074.99 (End of March balance)

My goal for April is a balance under $9,000.  And to beat Amanda.  This month I paid $948.  I’m still waiting to hear her final payment.  I bet I won, though.

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4 Responses to “When The Bubble Bursts”

  1. thefamilyfinances March 26, 2012 at 3:13 pm #

    As a Gen-Y graduate myself, I know that many of my classmates are in your same situation. You mentioned bankruptcy in your post, but student loan balances cannot even be wiped out through bankruptcy court, so the issue continues beyond that. In one of life’s ironic twists, I was lucky enough to grow up in borderline poverty and received a ton of state grants to help pay for college. I think the politicians know that young people are notorious no-shows at the polls, so I don’t know what help they’ll be. But at least the interest is tax-deductible. (that was my attempt at finding a bright side)

    • Losing My Cents March 26, 2012 at 3:23 pm #

      You are correct that student loans cannot be wiped out by bankruptency (except for when a person can prove that repaying the loans would constitute an “undue hardship,” now and in the future, but I’d like to see a 20-year-old convince a court of that.) It is, however, an option for those who have other debts. By discharging the credit cards debt, the student loans become the priority. In any case, it’s a drastic decision to make when you’re under 30.

      And yes, the tax-deductible interest is indeed a bright side. In fact, it was a very bright side on my recent tax filing- to the tune of a $300 deduction. More than I got for my books, actually.

  2. Becky March 27, 2012 at 12:38 pm #

    I absolutely agree that too many people took/take out loans without understanding what they are. I haven’t had to deal with student loans in about 18 years. I was lucky enough to get my undergrad loans paid off and super lucky to have had a scholarship for grad school. But… there wasn’t a scholarship for my mortgage or my car. 🙂
    Good stuff Katie.

    • Losing My Cents March 27, 2012 at 12:46 pm #

      First off, I love that I was commenting on your blog at the exact moment that you were commenting on mine. Haha.

      Second, now I’m wondering why there isn’t a scholarship program for cars or houses? Haha. It could be brilliant- make people prove that they are safe drivers or conscientious homeowners in order to qualify for a free car or house. If you do something stupid, like blow up your house via meth lab or wrap your car around a telephone pole, you lose your scholarship and have to take out a loan. If I ever win the lottery, I’m totally revisiting this idea…

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