I’ve been doing student loan work for over 6 years now. Here is a chance for me to share some of my favorite comments I’ve heard over the years. Enjoy!
1) I co-signed a private student loan for my child. He/she isn’t paying the loan. I want to sue them to make them pay.
My Response: I suppose a parent could sue a child, but I wouldn’t take that case. I think such a lawsuit would be an admission of fraud by the parent. If you’re a parent scratching your head, ask a local attorney.
2) I want to transfer my Parent PLUS loan into my child’s name.
My Response: You can’t. A Parent PLUS loan belongs to the parent and can never be transferred to the student child.
3) I’m paying more interest with IBR than I would if I were on a balanced based plan.
My Response: Actually, no, you’re not. In fact, if you’re on IBR, you may not be covering all of the monthly interest. But that isn’t the point of IBR. IBR is about surviving, not paying off your loan.
4) I’ll never pay off my loan with this low IBR payment.
My Response: Correct, but again, IBR is not to pay off your loan. IBR is about surviving. If you want to pay off your loan, and you have the means (like you actually earn enough money to do this) IBR isn’t for you.
5) My Federal loan was sold 7 times. I know because I was contacted by all of the creditors.
My Response: Um….no. Federal loans are never sold (well, there is one exception, but that isn’t the issue here). Again, Federal loans are NEVER sold. If you took your loan out directly from ED (a Direct Loan), it never goes anywhere. Seriously, ED doesn’t sell its loans. If you took a loan from Sallie Mae or another bank, (FFEL) it transfers upon default to a guarantee agency (ECMC, VSAC, Great Lakes to name a few). The guarantee agencies do not sell loans, though they may transfer it to ED. Again, Federal loans are NOT sold. Instead, what likely happened is that the loan was assigned to several different servicers over its lifetime. Don’t ask me why, I have no idea why servicers are assigned and reassigned. Probably a contract issue with the note holder.
6) I have a Federal loan and my parent is a co-signer.
My Response: No, no, no. Federal loans are not based on credit which means there is no need for a co-signer. The only Federal loan that uses credit is a PLUS loan. Even then, there is no co-signer, rather there may be a need for an endorser. This is different than a co-signer when it comes to enforcement. Further, if we’re talking about a Parent PLUS loan, there is no way the student child would be the endorser. Consequently, when I hear “co-signer” between a child and parent for undergrad loans, I know it is a private loan.
7) All student loans are Federal loans. There is no such thing as a private student loan (NOTE: I heard this from an attorney!)
My Response (after shaking my head in disbelief): Back to basics. A Federal loan is one that is somehow guaranteed or funded by the government. A private loan is NOT guaranteed or funded by the government. Believe me, there are student loans that are purely private. The Federal government does not buy private loans. It’s Federal or private from the day the note is signed…period!
8) I paid my student loans. Why can’t people get a job and pay their loans?
My Response: Because not everyone is as lucky, gifted, financial savvy, and/or as lacking in empathy. We may be comparing apples and oranges. How much were your student loans that you paid off compared to other folks? Also, there is a poor assumption that those who need assistance are unemployed. In this economy, many folks are underemployed. Further, employment doesn’t mean life is affordable. There are so many other factors such as family size, geographic cost of living, medical issues, etc. Most of my clients can pay their loans and would if only the servicers and debt collectors would tell the truth and offer real options – like affordable payments. People don’t necessarily need help, they need truthful information.
9) You shouldn’t go to college if you can’t afford it.
My Response: (Ugh, where do I begin?) If that were really the case, this country would be in a heap of trouble. Many doctors wouldn’t be doctors, many lawyers wouldn’t be lawyers, and there would be a backlog of applicants for McDonald’s and other low wage jobs. Don’t get me wrong, not everyone should or needs to go to college. But to say higher education should be only for those who can afford it is one of the dumbest comments ever. Where would the middle class be if this were a true statement? Come to think of it, the middle class is disappearing precisely because of this statement. I’m all for those who found a way to pay for college out of pocket. It may have taken them a few extra years, but they came out debt free. Great. BUT, if this were the way to obtain higher education, it would take a lot longer to enter the workforce. Imagine going to undergrad and medical school part-time. How much longer would that take? Is that the model we want on a mass scale? And really, where would the American banking system be if American’s only bought what they could afford with cash. Imagine no more credit cards; smaller, affordable houses (or maybe a shift to a larger renter based society); and say bye-bye auto financing. Where would the banks make their money? On the plus side, this would get rid of for-profit schools.
10) College isn’t worth it.
I disagree. Private loans aren’t worth it, but college is, as long as you are smart about it. There was a time when people went to college not knowing what they would do with it. I can’t advocate for that anymore. I would say shop around for a college that gives 100% need based aid and one that has majors that interest you. And about majors; think of a major that you can get a job with, please. I’m not worried about income potential, there are affordable payment options for Federal student loans (not private loans, stay away from them!). But seriously, pick a major that can get you somewhere, please. Remember, it’s ok to shop around for colleges. If you need a private loan to afford the college, find another school. If a school really wants you as a student, they’ll find funding for you, without the need of a private loan. This is just like buying a car or a house, don’t be afraid to walk away from a bad deal!
Do you have a favorite comment you’ve heard? Or maybe you’d like to respond to some of these comments yourself. Please do! Student loans are a huge deal and needs more discussion. Lets have those discussions people!