Saturday, November 27, 2010

What'd you get for Thanksgiving?

I got seven (nearly identical) letters from the Department of Education right before Turkey Day. Like hundreds of thousands of others, I am a victim of predatory student loans.

Here's a little FAQ.

1. Why did I take out student loans? Because I had been going to college part-time for years, taking 100-level classes at community colleges, etc. I was 25 and working unbelievably low-paying jobs. I naively believed the myth you can't earn a decent living without a four-year degree.

2. Why did you take out loans for every school year? Every time I tried to get a SEOG, BEOG or an addition PELL, I was told I didn't qualify and/or there were no funds left. The UNR Financial Aid office kept stacks of private loan applications at their front counter and they would shove the stack toward me. Also, I tried for several scholarships but the person primarily responsible for deciding who got which scholarship in my department was a mean shriveled dick who hated me. He got a thrill out of causing kids to drop out of the Reynolds School of Journalism.

3. Why major in print journalism? Naively, I had no idea how desperately underpaid 90% of people working in journalism are or that the entire newspaper industry was a house of cards that would collapse when the World Wide Web reached critical mass. Today, print journalism is ranked No. 1 in lowest pay per education followed by public school teacher and nurse. To quote P.J. O'Rourke: "Thanks to the internet, I'm no longer a (magazine) staff writer. I'm a 'content provider' and I'm supposed to work for free."

4. When you realized that journalism was a lose/lose situation, why didn't you change your major?
I tried to twice and was told I could not by the academics counselors.

5. Why didn't you work your way through school? Are you kidding?! On five bucks an hour? I could barely make my rent working 50 hours a week at Kinko's, let alone magically produce a couple grand every semester for tuition + books. The three years I went to college full-time I worked part-time jobs, one of them was as an unpaid 'intern' at a local paper. I also worked for the college newspaper, which was virtually unpaid, but necessary as without 'clippings' I couldn't build a portfolio and without a portfolio I couldn't get a job as a reporter.

6. Why didn't your family help you out? Good question. My mother was retired and living on a microscopic pension from her government file clerk job. She was poorer than I was and died while I was in the middle of going to college. My father and stepmother had all kinds of money but, as my friend Louis Hornstein once said: "You know how rich people get rich? They don't like to share."

7. Didn't you realize you'd have to pay the loans back some day?
Yes, I did. I imagined myself the variety editor of a mid-sized paper in a second-string market making $40,000/year while writing movie reviews and somehow making monthly payments of $300-$500/month probably for the rest of my life. Reality sunk in when my first newspaper job paid just $8.50/hr, I averaged 100 miles per week on my disintegrating truck and I got my first real bill from Sallie Mae for over $1,600 per month ... on the interest.

8. Are we (American taxpayers) paying for your defaulted loans?
Yes and no. Supposedly, the Dept of Ed guaranteed half of my loans. So when the loans defaulted, theoretically the Dept of Ed paid my original loan writer, CitiBank Student Loans. (CitiBank was a recipient of the Wall Street bailout orchestrated by the Bush Administration and the Federal Reserve.)

9. Why are you reluctant to make payments right now?
Because of the above reason. My original loan amounts HAVE BEEN PAID by the Dept of Ed to CitiBank. Any money I send to Sallie Mae is basically gravy, it's strictly a for-profit collection agency, any money they collect goes toward the operation of their 1,000+ collection agencies which engage in horrendous, illegal collection practices because the Truth in Lending Act, the Fair Credit Reporting Act and a dozen other federal laws do NOT apply to Sallie Mae.

10. What's the big deal, why not declare bankruptcy?
I can't. Basically the year I left college, 1995, was the year Sallie Mae had the bankruptcy laws re-written. Student loans are the only debt that cannot legally be discharged through bankruptcy court.

11. So you don't pay your loans, so what? What's happened is Sallie Mae has reported my bad credit to every one. I literally cannot get a monthly cell phone plan because my credit rating is so bad. I can't get a lease on a decent apartment because of my credit. Even potential employers run credit checks on job applicants. I was told by a headhunter that I was "barred" from ever applying for a job with again. Ditto for T-Mobile. All of these companies deny they are doing this but if you've ever applied for a job, you know they often ask for your social security number. My ss# is tied to my loans for all eternity. Even government contract jobs are off-limits to me. If I was fortunate to land a gig with the USFS, BLM or even the military, Sallie Mae would be garnishing up to 60% of my pay within three month's time. I have a friend who is in the Army. He took out a tiny student loan years ago when he was only six months into his military career. The lenders sold his loan to Sallie Mae and a few years later they seized his entire Army pay for several months. He nearly lost his home and car.

12. What are you going to do? I don't know. But in the mean time, along with Alan Collinge, Robert Applebaum and the folks over at DEFAULT, I'm going to tell everybody I can about this crime and warn every college freshman and every parent of college-age kids NOT to fall into this trap because financially you will never escape.

13. Surely they're not that bad, can't you reason with collection agents? I have a high school friend who took out a tiny student loan back in 1986 for about $1,200. She then had a baby, went through a bad divorce and stopped attending community college. Six years later, while she was on welfare and trying to raise her then 5-year-old daughter, the student loansharks tracked her down. She started making payments to them, fell behind a few times, but kept going all while working two full-time jobs and raising a child. One day the loansharks called her. They told her they were going to garnish her wages. She told them if they did, she would quit both her jobs and go back on welfare. They went back and forth, finally they said they would take her income tax return (again). Ultimately, she paid over $3,500 on a loan which originally was $1,200. Yes, they're that bad.

14. But if you contact the loan collection agencies things will improve, right? Let me tell you another story. While I was a temp employee for an airplane company in Seattle, one of the collection agents called my temp agency with 'urgent information concerning a sick relative' of mine. The collection agent persuaded a receptionist at my temp agency into giving out my business cell phone. This was a cell phone provided by the airplane company I worked for and was for business only. The collection agent called me under the guise of telling me my grandmother had died! I don't HAVE any living grandparents!!! When one of my on-site supervisors found out a collection agency had gotten access to my business cell number, she hit the roof. I was nearly fired and my temp agency nearly lost the contract.

Thanks to the economy, up until a few months ago I've been on unemployment for over a year and a half. Right now, I'm currently undergoing physical therapy for a back injury and I hopefully will be physically able to return to work again ... if I can find any.

None of the original loan amounts listed in the letter (transcribed below) matches my original loans. When I went to UNR, I could not take out more than $2,300 max from Citibank per loan per semester, and only two of these per semester. After "processing fees" I usually got a check of about $2,200. Toward the end, when UNR's tuition tripled in just two years, I was getting even less as the Financial Aid office deducted any tuition before I got a check for the remainder.

Apparently, Sallie Mae has some how managed to sell my loans back to the Dept of Ed with the interest rates attached as principal. So I'm guessing the Dept of Ed paid Sallie Mae for my original loan amounts (or whatever number they gave them). This is the ultimate shell game for a corporation. Or rather the ultimate Three-Card Monty.

November 18, 2010
The U.S. Department of Education now holds the defaulted student loan from Citibank NA SLC to attend University of Nevada, Reno for which you are responsible. The entire outstanding balance on this loan is now due. You will also be liable for the costs of collecting this loan. These charges can add substantially to the amount needed to satisfy your debt. (Actually, they've tripled it.)

The department wants you to know that paying your debt by a mutually agreeable installment plan may make your loan(s) eligible for loan rehabilitation or payoff through consolidation, which will remove your loan(s) from default status and may improve your credit rating, and will make you eligible for additional Title IV student financial assistance. (My loans were consolidated when Sallie Mae bought them from CitiBank Student Loans in July 2000).

To remedy your default status, you can pay the total amount due immediately (follow the instructions on the above coupon), or contact our customer service representative to enter into an acceptable repayment agreement or to find out additional information on the benefits of the department's loan "rehabilitation" programs. You may contact our customer service center at 1-800-***-****. (Where did I put that six-inch stack of 100-dollar bills?)

All of the department's repayment opportunities are designed to assist you in remedying your defaulted student loan status.

Failure on your part to repay your debt may result in the department moving against you with one or all of the following collection measures:
  • We will report your default status to national credit reporting agencies; this may hurt your ability to obtain further credit. (Too late, Sallie Mae already has.)
  • We can refer your debt to a collection agency, and charge you the costs incurred by the department in having that agency collect this debt. These costs are currently up to 25% of the principal and interest owed on your loan. The department applies any payments you make first to these costs, and then to your loan balance. This will increase the cost to you of paying off your loan by up to 25%.
  • We can notify your employer to initiate wage garnishment; (Again, too late. Sallie Mae did that while I was making monthly payments to them.)
  • We can refer your debt to the U.S. Attorney for litigation; (So they can ship me off to debtor's prison???)
  • We can perform computer matches with other federal agencies to determine if you are a government employee or recipient of other federal aid for purposes of offsetting all or a percentage of these funds; (See? If I manage to land a government job, they'll take every dime I make.)
  • We can refer your debt to the Department of Treasury for offset of federal funds due you (including your federal income tax refund). (Again, see what I mean? They have more power than the IRS.)
To avoid our reporting this loan to the credit bureaus as in default, you have 60 days from the date of this letter to repay this loan in full, make satisfactory arrangements to repay and actually make the first payment under this arrangement, or to request an administrative review.

To request review, an explanation of this debt, copies of documents, or an opportunity to dispute this debt, you must send a written request to the following address: (Note: the Dept may use a contractor to provide information, arrange repayment terms and process payments.)

U.S. Department of Education
PO Box ----
Greenville, TX 75403
Dwight Vigna


Feoshia said...

I'm sure you've already done/thought about this but is there ANY way you can negotiate less of a payback. Can they forgive some of this debt? Who have you talked to about this? You can send me a note if you want.

Mz M. said...

Nope, I can't negotiate less of a payback, esp in total amount.

The only way they 'forgive' student loans is if you die. Visit Alan's site ( or friend him on FBook. He's got stories about former student lenders who have died (cancer, car wrecks, occasionally suicide) and Sallie Mae came after their families or spouses afterward.