Yes, You Really Do Have to Pay the Student Loan Back! - Nancy McKenna ––

Yes, You Really Do Have to Pay the Student Loan Back!

If you borrow money, you have to pay it back.  Right?    So why is it when some people borrow money in the form of student loans, they feel it should be negotiable whether to repay the debt?

Somehow the student loan that allowed them to go to school morphed into a fuzzy-ethical object.  You'll hear that "the college signed them up for the loan", or that "they didn't really understand" what was happening, therefore they feel indignant that the loan people actually want their money back.  They feel that Congress should wave its magic wand and erase the debt.   Because it was for school.   They had to borrow the money, you see.

People are borrowing money for college with little thought as to how it will affect their lives in the future. We've all seen the headlines: that millenials aren't buying houses, they are delaying having children, cannot have "normal" adult lives - all due to the crushing amounts of student debt they owe.

The other shocker is the level of Parent Plus loans - there is $77 million in outstanding Parent Plus loans at this time.  I couldn't believe it!  People in their 50s taking out student loans?  Who needs to retire?

A woman I work with asked for my advice recently.  She knows I help people learn how to avoid taking on debt in the first place, but asked if I had advice for her.   She owes about $35,000 for her student loans.   The thing is, she had a 4 year scholarship!  And she graduated in 2003!  But hasn't made any payments yet!  Yes, 2003.  She keeps asking for forebearance for the payments, and getting it.   Of course, kicking the can down the road makes the loan balance grow and grow with all of that interest that is tacked on.

My colleague did tell me that she knows no one made her take out the loans,  but she is hoping for some "real help".  "Real help" is code for someone saying she doesn't need to pay it back.  She asked if there was some point in time after which they'd forgive the debt.  We spoke about loan forgiveness plans, but she correctly said you have to have made 120 payments before you'll get the forgiveness.  It isn't an option for her because she hasn't made any payments.

I told her that she has to pay the money back. Simply put.  She responded that they want her to pay $400 a month!   Gasp!  I said, well then that's what you need to pay.  

She also knows the forebearance police will be knocking on her door at some point - and her payments will be higher/worse.  

Another woman I know said her sister similarly hasn't made any loan repayments, and graduated many years ago.  Not only hasn't she repaid any of the debt, but she now wants to got to graduate school - and add to the debt! 

Another co-worker also asked for advice.  His father co-signed for his student loans.  Dad now wants to retire, so he wants to know how they can they refinance the loans under junior's name?  The other wrinkle is that his income-based repayment plan is based upon his father's higher income. Like many people, Junior wants the monthly payments to be as low as possible each month, So, he'll be paying the loan off for many, many years to come.

Another colleague heard Junior talking about his student debt.  This other colleague went to a CUNY school, where he excelled.  He asked Junior how long it would take for Junior to repay his debt - Junior said "for fricking ever".  The other colleague mentioned he was even given a stipend for attending CUNY.    The punch line is that they have the same job.   And make the same salary.  Wow.  Guess who is better off?    Junior went to a state school in a state he didn't live in.  Ouch.

There was a story in the news recently.  A young woman wanted to become a nun, but the order wouldn't accept her due to her student debt.   The prevailing sentiment was that the big, bad loan companies should forgive the debt.  And let her nun it up.  So, her first nunly act is to try to stiff the loan company?  Hmmm.  

There was another story in the news of a young man who died.  His mother - who co-signed for the loan- was still on the hook for the debt.  More media brouhaha over this.  Of course, if Mom had co-signed for a car, house - or other loan,  no one would think it odd when she would still be on the hook for the debt.   

The truth with both of these last two scenarios is that they don't mention the type of student loan in question.  Whether it was a traditional government loan, or a private loan.   

Repaying debt sucks.  It really does.  There is absolutely no question about this.  And it makes it almost impossible to build real wealth.  So, if you have debt - the best strategy is to repay it as quickly as possible.  That's all there is to it.  Create a debt snowball, and have at it.  

Yes, there are loan repayment plans of different stripes for those working in certain public service jobs, or working for non-profits. If that is the work you planned to do anyway, it may be a decent option. One of my sisters used a repayment plan for her law school debt.  She was and still is a public defender. 

But, I certainly a) wouldn't advise taking a low-paying job so you can repay less money or b) go to an expensive school if you plan to take a low-paying job.   Match the school to the career.

Student loans are not discharged during a bankruptcy either, so don't go there.

So, now that we have all seen the devastation that student debt wreaks on people's lives - please don't let this happen to someone you love.

About the Author Nancy McKenna

I'm a personal finance geek. A real estate investor. An accountant, a single mother. And I'm going to get my kids through college without student debt! Will you?

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