[Around school I noticed that there’s a “wall of debt” where students post their debt. I thought this was a neat feature and today I’m going to share a story from Michael from the Dough Roller.]
Student loans are usually a very important part of college. Unless you are lucky enough to be able to pay for college without having to sign on the bottom line, there’s a great chance you are going to graduate with a good amount of debt to you or your parents name. With that said, I should have never let this happen.
Coming out of high school with a 4.0 and a solid SAT score of 1300 something, I wanted to jump ship from my current family and friends and really go out on my own. After shopping around for schools, my heart was set on the University of Miami. To be very honest with you, I have absolutely no idea why I chose this school as my major of choice was Mathematics (Go figure) and Miami’s Math program was average at best.
Anyway, my parents, God bless ‘em, didn’t have nearly enough money to pay for a $40,000 a year education at a private institution. After sending in my application, I was accepted with a 1/3 scholarship that paid for about 11K of the yearly tuition. As long as I kept my grades up, I could count on this scholarship every year. That left close to 30K a year that I would need to pay for on my own in order to attend the university.
With between 5-10K coming from my parents, I was around $22,500 short each year, which for me included food, housing, books and the rest of my tuition and expenditures. Planning a 4-year college degree, I would need close to 100K in order to attend the university. So now it was decision time. Do I go to a NJ state school pretty much for free, or do I suck up the six-figure debt for an undergraduate mathematics degree in Florida? Well, I was 17 and stupid and the money I would have to pay back was of no consequence to me at the time. Miami here I come!
After a couple of years of college life, and getting A’s through C’s consistently, I made another ingenious decision. Why not extend this party another year, and really take advantage of college life? So instead of a 4-year degree that ran me $95K, I took out another $35K in loans (My parents were certainly not paying for a 5th year) and ran the total to a cool $120K. PLUS, for the last couple of years, I only took 3 or 4 classes a semester so I was spending a little more pocket money here and there. All in all, with a degree in probability and statistics in hand, I was $120,000 in debt with no job and nowhere to live in Florida. I think it was the day after graduation where it hit me. “I have to move out in 4 days, and I have nothing.” Ohh what a foolish decision I made.
Well, after some scrambling, I found a nice apartment in Miami (I love my family and I love them even more 1,200 miles away, so going home wasn’t really an option). A month later, I landed a job with a restaurant as a GM so I thought I had done pretty well in such a short period of time. Then, six months after I graduated, the inevitable happened. I started to get 10-12 pieces of mail a month saying I owed money!
I knew the day was coming that my loans would be in repayment mode but I was hoping all 17 loans (That’s right, 17) would simply forget about me. As luck would have it, they didn’t forget and when you added up all 17 payments, I owed close to $1,600 a month. Could I afford half that amount, no, so I scrambled again to figure out my options. I first calculated what I could afford, which was around $600 a month then looked into forbearance and deferment options, also looking into consolidations. My credit was in the tank because of my debt ratio, so I quickly learned that consolidation was not an option, even with a worthy cosigner. After getting all of the forbearances and deferments I could for now, I was able to meet my minimum payments for now. Unfortunately, I knew that this wouldn’t last because when all of the loans were once again in repayment, I was a dead duck.
Not being able to save or really spend on anything isn’t fun at all. The best part of each month was getting the loan and rent payments out because I knew I had another month to figure things out. Bankruptcy was out, because new laws were passed because of people just like me saying my debts would not magically be forgiven anymore, and I wasn’t making enough money to gain any traction. What was I to do?
I spoke to as many people as I could about this extremely stressful situation and found I was in good company. My only way out of this mess was to simply make more money, or ask the folks in New Jersey for help. I was not about to admit defeat, so I began the hunt for a better job. I was able to find something just a tick more than what I was currently making so I took it. Not making much of a difference, I decided I would have to make a drastic decision.
Thinking it over, I wasn’t going to pay two of the loans. After 270 days, they would go into default at which point my credit score is officially 300. I had three quarters of a year to make things work, otherwise I may have to pack my bags with my head held low, heading for the New Jersey shoreline. So for the next six months, I sucked it up and did everything I could do to make and save more money. The plan was to call these loans back up and make arrangements once I had enough money to do so. The biggest advantage I had was knowing this was an unsecured debt, so I did have room to negotiate payments.
I took two extra part-time jobs and never left the apartment otherwise. If I wasn’t working, I was sleeping or eating and if something I needed wasn’t on sale, I learned to do without. While it wasn’t pretty, it was effective. After six months, I had enough to get my un-current loans up to speed and after re-negotiating all of my loans, my monthly payment was down to an affordable $1,100 a month.
Now, I still make close to $1,100 in monthly loan payments but I have a little extra on the side to spend on frivolous things like clothes and car insurance! I spent five years in paradise, then three years in hell. Now, I live in purgatory where things are just ok but picking up ever so slightly. If I had it to do all over again, I would never have been as foolish to think the money didn’t matter. I probably could have received a better education at a state school and saved up enough money to think about buying my very first house. Instead, I’m skating by wondering what could have been.