I call my loan service provider first thing in the morning. Smooth jazz plays while I wait on hold, probably designed to lower the temperature of any student calling to vent or complain about their debt. Finally, the phone rings a few times and a monotone voice says,
“Hello, thank you for calling Forest Hills Educational Loan Services. This is Tanya. Who do I have the pleasure of speaking with?”
“Hi Tanya. My name is Henry Parsons. I think my loans are serviced through you guys.”
Tanya takes down my information and finds my account. After a brief discussion about my debt and unemployment, she quickly recommends one option: suspending payments through deferment.
“Before I initiate deferment, Mr. Parsons, I want to remind you that while you are not required to make payments during this time, you are responsible for any interest that accrues on all loan types except your subsidized Stafford loans. When your deferment ends, any unpaid interest will be added to the amount you borrowed. From that point on, interest will accrue on the higher balance.”
“So, I will be paying interest on interest?”
“Yes, that’s correct. Do you understand how this will work, Mr. Parsons?”
“How long can my loans remain in deferment?” My upper brow begins to perspire and I feel my body temperature rise.
“Your hardship reason for deferment is unemployment, which is approved in six-month intervals. You will need to prove that you have made six diligent attempts to obtain full employment in the past six months. This deferment cannot be granted for a total of more than three years.”
“Let’s hope I have a full-time job by then.” I say this mainly to myself. Tanya is silent on the other end.
“You can always apply for economic hardship after that if needed, Mr. Parsons. Do you understand all of the implications for deferment?”
“I think so. Any interest I accrue during this period will be capitalized, which means my principal balance will increase?”
“That’s right. Do I have your permission to move your loans into deferment?”
We end the call and I receive a confirmation e-mail a few minutes later. My soul is crushed. I feel compelled to call my mom and tell her, but I need to wait a few minutes for my pulse to slow down. She is probably in the middle of teaching her high school calculus class anyways.
To understand my perilous situation better, I search for my loan documents on the Forest Hills website. For each loan type, subsidized and unsubsidized, there are hundreds of pages filled with incomprehensible legalese. Even for an amateur lawyer, the documents appear daunting.
After a few minutes of reading, it is still unclear how much interest I owe, and will stand to owe moving forward on these loans, regardless of whether they’re in deferment or not. It’s as if they purposely hide the monthly calculation of interest costs for each loan type. Only by looking at my past monthly statements can I deduce what my future loan costs might look like.
I retreat to the internet. Google knows all. Numerous websites and blogs appear, some with strategies on paying off student loans quickly, others with warnings that address everything from refinancing to defaulting. The bottom line is that the loans will never disappear. There is no statute of limitations, aside from death, and according to self-proclaimed online “experts”, they are rarely discharged even in bankruptcy. With few exceptions, student loans follow the borrower throughout life until they are paid off.
Then comes the right hook, tossing me against the ropes. Had I not entered deferment and failed to make a payment within 90 days of my first payment date, I would be considered delinquent. Default arrives if that period extends to 270 days, or nine months from the first due date. At that point, Uncle Sam has the right to garnish up to 15% of my wages and Social Security benefits, and to offset any income tax refunds. In addition, that greedy bastard could even deduct 25% of each payment for collection fees, making the loan cost significantly more. And of course, late or missed payments would affect my credit report and score.
The horror of Emily and I both facing this financial fate simultaneously hits me like a category five hurricane. Our long-term prospects are already bleak given the distance between us. Now the possibility of maintaining a financially healthy and stable household is highly questionable. Unless one of us were to get a job that qualified for a loan forgiveness program, such as a position at the district attorney’s or public defender’s office, we are guaranteed to live with these loans for 25 years until they are forgiven by the government.
Based on my research, however, even if we wait the 25 years and the loans are forgiven, we will still be responsible for income taxes on the remaining principle balance. At that point, we will have paid a king’s ransom in interest. What will have started at about $250,000 in principle will have ballooned to some $500,000 for each of us, and over$1,000,000 collectively. How do we raise a family with that amount of debt?
I have to step outside to escape the depressing confines of my shoebox studio. As I walk aimlessly up 25th street, my inner voice asks a barrage of questions: was law school worth $250,000? Did you really need to go to graduate school? Why did you not fully evaluate your economic prospects when you signed those loan documents at the age of 22?
As I think about my dire straits some more, my thoughts jump from those of personal accountability to the responsibility of the government and my school, Worthington Law. Why is the Department of Education permitted to give graduate students loans at more than double the rate of typical home and car loans? If it is due to higher default rates, then why does the government not enforce stricter standards on graduate schools and hold them more accountable for the often inflated employment data they advertise? If a school like mine advertises a median private sector starting salary of over $100,000 six months post-graduation, and I graduate with reasonably decent grades in the top fifty percent of the class, I should be able to expect to earn that salary. The government should expect as much too. Conversely, all parties should not be approving $200,000 principle loan amounts if student borrowers cannot reasonably expect to pay them off within 25 years. Otherwise, the government and the schools are nothing better than loan sharks.
I guess Emily and I could simply make minimum payments and hope, under the government’s program, that our loans are forgiven after 25years. Alternatively, one of us could try to get a government job that qualifies for the Public Service LoanForgiveness program. As I cross K Street amidst these troubling thoughts, however, I cannot help but notice the immense wealth all around me. Do I really want to live on some $40,000 or $50,000 per year after seven years of higher education? Could I even afford to live in a city like Washington DC without financial support from family or friends?
I am not even sure of my dreams anymore. My grand vision for life after law school was to work at a firm, get trained, and then figure out my career. Hiring partners will not even entertain a coffee meeting with me though, let alone an interview. Is the Public Service Loan Forgiveness program really intended to be the only option for loan repayment if I cannot obtain a high paying legal job?
Even if I went this route, I would still be obligated to make income-based repayments, including interest, for the ten years prior to forgiveness. Subtract those totals from any already meager starting salary. A salary, mind you, that has no hopes of significant wage growth or bonuses unless I escape the program for the private sector. And I would have to factor in the cost of living in an expensive metropolis like DC. A salary of even $60,000 would probably force me into a suburb like Arlington, Virginia or some outer part of the District. At least I would have decent healthcare and the warm feeling that I am supposedly doing good in the world as a public servant.
Although what is to say that the government will actually forgive all of that debt after 10 consecutive years of public service? As of now, in 2013, the program has not been around long enough to confirm it is legitimate. Even with the thousands, perhaps millions, of young workers relying on the program, the pessimist in me doubts the government will stick completely to its word. All it takes is for one lunatic to enter the White House and pull the plug.
I kick a small rock mindlessly up the sidewalk. The streets are fairly empty at this late evening hour. My thoughts race. Visions of Emily speed through my brain in one endless reel of memories.
Are we victims of our own creation? Do we deserve a life sentence of loan repayment, and a monstrous debt to the IRS for any remaining portion that becomes taxable? Everyone – from my parents and teachers, to my peers and mentors – told me to go to law school. The government and my school made it possible by giving me all of the loans I needed, and then some, all without my parents having to sign. Keep in mind, I had never had a real salary in my life. I guess everyone assumes all lawyers will make big money, regardless of the state of the economy.
Now that I am still unemployed some four and a half months after graduation, I feel like a sucker. Swindled by sophisticated loan sharks who spied the ignorant and innocent minnow swimming in the dark ocean for the first time. Eight percent interest rates? Deferment, forbearance, and loan capitalization? Even if I get a job tomorrow, it will take me years just to pay all of the interest I have accrued since starting law school. How is that fair and just? More importantly, how is the United States government permitted to engage in these types of financial services?
The Department of Education hides behind the promotion of higher education for all. We saw how well those same types of incentives worked in the housing market of 2007 and 2008. I feel like one of the subprime mortgage-backed securities from that period, at risk of falling deeper into arrears and eventually default. There is little use complaining or feeling sorry for myself though. A negative attitude will only cause further damage to my marketability.
I text my mom as I walk back to my apartment. The night sky is clear and the air is cool. The bench in front of my building beckons me to sit.