Writing this post has been sad for me.
This is the first time in over 15 years that I’ve actually looked at and studied my original student loan documents. In doing so, I’ve had to face the reality of how stupid I’ve been. Really stupid. It’s one thing to see your current six figure balance. It’s a whole other thing to see that it started off as five.
I still have a hard copy of the letter that Sallie Mae sent to me 18 years ago, 2 months before my law school graduation. It gave me advance notice that I was scheduled to begin repaying my loans 6 months after my upcoming graduation. As of the day that I graduated from law school, my total loans for undergrad were $25,410. Ten months after that letter, the balance was up to $28,825.40 because two of my loans were unsubsidized. This was the total before my law school loans were tacked on to the balance.
Today, the total outstanding balance on my student loans is $152,011. This consists of two loans at 5.875%. One loan is subsidized, with a balance of $64,931. The other is unsubsidized, with a balance of $87,080.
Here’s the vomit-inducing part: the original loan total amount was $93,054.
A Word on Unsubsidized vs. Subsidized Student Loans
An unsubsidized loan is one on which the interest begins to accrue once the loan funds are disbursed. This accrual continues regardless of whether the borrower is still enrolled in school or is in an allowed grace or deferral period. With a subsidized loan, alternatively, the accrued interest is paid by the government or the bank while the student is enrolled on at least a half-time basis in school or are within a grace or deferment period. The fundamental difference between the two types of loans is who is paying the interest once the loan has been given to the student.
Why would anyone ever take out an unsubsidized loan? SallieMae.com provides an enlightening explanation:
Simply put, subsidized loan offers are based solely on need, when you apply for aid through the Free Application for Federal Student Aid (FAFSA) and they are only available to undergraduate students. Generally, you’ll find out how much you’re allowed to borrow on a subsidized loan, for a particular school, via your school’s financial aid offer. Colleges set those amounts individually. If you’re eligible for a subsidized loan, it will be part of your offer. On the “un” side, you do not have to demonstrate need for an unsubsidized loan, so you can borrow more money, and use the funds to pay for a graduate degree, for example.
So What Happened?
When I attended my undergraduate institution, the amount of tuition was approximately $24,000 per year. The law school I attended charged tuition of around $19,000 per year.
I don’t remember the total cost of my education (i.e., tuition, room and board). Through some online research, I was able to find tuition amounts mentioned above, but I do not recall (and haven’t found) information regarding the room and board costs. Based on the numbers that I found, the cost of my undergraduate education tuition totaled $96,000 and my law school tuition totaled $57,000. Again, this doesn’t even address the room and board piece.
I was diligent about getting scholarships for my first year of undergrad. Because my parents were divorced by that time and the FAFSA relied on my mother’s income at the time I applied to college, I was also able to get some financial aid. Some of my financial aid package included work-study.
I was a cheerleader in high school and decided to continue my cheerleading participation during my first semester of undegrad. I learned quickly, however, that I needed to have some money and cheerleading, as an extracurricular activity, didn’t pay. My parents weren’t sending me money in any substantial amount or on a consistent basis, so I set my sights on gainful employment.
To be fair, I may have been too independent for my own good. My father gave me an American Express card while I was in high school to have for emergencies. While in college, I very rarely used it. He didn’t encourage me to use it, but I also didn’t ask. My parents weren’t paying any tuition. In my mind, I was the one who was responsible for my education. Since I could work, I thought I should do my best to be self-sufficient and earn money to buy things like toiletries and to have pocket money. I’ve always been that way. Working for me meant doing a full 40 hours (between my paying job and an internship) per week. My younger brother and sister also received an American Express card to use while in college. From what I hear, my brother was way more diligent in using it. He also received a monthly allowance from my father while there. My sister was, apparently, the queen Amex user of us all.
For an Ivy League undergraduate education that retailed at over $100,000 (if I were to include room and board), coming out with $25,000 in loans wasn’t that bad. My law degree was a different story. Not only was I an out-of-state student, therefore, paying out-of-state tuition, but I also didn’t get any financial aid. So, I attended law school at full retail price, along with an out-of-state premium.
Scholarships are relatively rare in law school. Many professional graduate-level programs do not offer financial assistance – at least, not on the level at which such assistance is usually offered to undergraduates. If one is fortunate enough to get a scholarship, those scholarships generally cover only tuition at the graduate school level, leaving books, room and board, and all other expenses up to the student.
Short-Term Thinking
It is ridiculous that I graduated from school 18 years ago and owe more money on student loans now than I did back then. In fact, I now owe more on my student loans than I do on my home. How does that happen? The simple answer: short-term thinking.
Immediately after I graduated from college, I went to law school. Since I was enrolled full-time in law school over the next three years, repayment of my undergraduate loans was deferred until after I graduated from law school.
And defer was what I did. Since then, and up until recently, I’ve always wanted to pay as little as possible on the loans. That, obviously, has huge long-term consequences. I took advantage of every minute of forbearance that was available to me. Then, when forbearance was no longer an option, I utilized whatever other program would make it possible for me to make a lower payment. There were so many possibilities – the graduated repayment, the extended repayment, the income-sensitive repayment. It was so easy to put the loans in forbearance, or to request some form of hardship deferral that allowed me to pay a reduced or non-existent payment. My lenders made that very easy. With the way that these major student loan lenders operate, you almost have to be egregiously irresponsible to ever land in default. Reducing or not making payments is as easy as making a phone call or filling out a form.
They were also extremely easy to get, unlike other forms of debt. When I was in undergrad, if I was short on money, do you know what I did? I went to the financial aid office and got more. It was as easy as that. All I had to do was sign a piece a paper. Then, suddenly, I had more money on my student card to use for food or other on-campus expenses. I see now that what I must have been doing was, unknowingly, getting a bunch of unsubsidized loans.
I think I always viewed the loans as “not that bad” of a debt because, after all, I got a great education out of them. I have an education of which some people dream. I never felt any shame or stigma attached to having student loans. Whenever I’d mention them, people would usually say something along the lines of, “Tell me about it. I totally understand.” When people learned of the schools that I attended, the student loans seemed justified.
I hadn’t been serious about paying these student loans for any extended period of time. I treated them as an obligation that could continuously be deferred. I don’t think I ever consistently made full, sensible payments (i.e., ones that actually reduced the balance) for more than 5 months or so in a row – in almost 2 decades!
The crazy part is that as I write and think back to what I was doing and thinking over the last 18 years, I’m not quite sure about why I didn’t treat my student loans like a real bill – like other bills that cannot be repeatedly deferred and that have to be paid. Were there times over the years at which I was seriously financially strapped and struggling? Absolutely. But for those bills that I knew I had to pay, I found a way to pay them. I never, ever viewed my student loans as one of those critical bills.
The reason I didn’t treat my student loans like other bills is because . . . I could.
~ Single Girl
The only reason I can think of is . . . because I could.
Where Were My Parents When All This Was Happening?
Where were my parents when I was making thoughtless student loan decisions? I’m not sure. I think that my parents just weren’t paying attention. I spoke with them regularly, but they weren’t intimately involved in the financial affairs related to my schooling. My mom made sure to complete the FAFSA every year, but that was about the extent of my parental involvement. We joke about how they, basically, dropped me off at school and didn’t come back until 4 years later to pick me up at graduation. It’s true. They never visited. (And my parents and I are cool – super cool – and haven’t had relational issues.) I met with my father once for lunch during my first or second year when he had a layover on an international flight. That was it.
They were living their lives, working on building their businesses. My father was fostering a new relationship with my sister’s mom. My mother moved from my home town and was focused on getting acclimated to her new city. She was also concentrating on my little brother, who had significant health challenges to overcome, and also had to adjust to his new environment.
Plus, they were immigrants who didn’t know much about the post-secondary education system in the United States. My mother attended college here, but at the time, her father was still alive and could cash flow the cost of her education. He’d send her tuition funds from overseas and, from what I understand, she didn’t worry much about money while in school. In his formal education, my father only got as far as a couple of community college courses.
The one thing I know is that they never said that the loans were a bad idea or discouraged me from getting them. First of all, you’re going to go to school, kiddo. That’s non-negotiable. Second of all, you don’t not go to a great undergraduate school if you are offered admission. Third, you don’t not go to a top 10 law school if they’ve agreed to let you in. I think we all thought that this was just how it was done. If you don’t have the money to pay for school, you borrow it. Period. How else was this fancy education going to be paid for?
What’s Done Is Done, But It’s Bad
As I sit here now, in the process of cleaning up my mess and facing all of the nasty, nasty facts, I’m pissed with myself for not being more diligent in my handling of these loans. I should never, never, never have treated them like they were some kind of “acceptable” debt. What was once a $93,000 problem has now become a $150,000 problem. That’s ridiculous! And embarrassing. And sad.