Reflection on Student Loan Default

June 11, 2015  •  Leave a Comment

I have been reading some things that have finally pushed hard enough to get me to write about it.  The one item that has really made me go over the edge is an article I read in the New York Times titled “Why I defaulted on my Student Loans.”  The writer of this article is irresponsible and immature.  He says he didn’t know what he was signing up for when he did the loan, nor can he do what his passion is because of the debt.  Well, guess what, you signed up for it.  Now you have to worry about garnished wages, which they can do.  If I remember correctly, wages can still be garnished even after declaring bankruptcy. 

In my opinion defaulting on a student loan is an ethical issue.  First, you took out student loans with a promise to pay.  You may not have understood exactly what you were signing up for.  I didn’t either when I signed up for it.  If I was a mortgage company, or other institution that provides loans or credit, you would be a high risk.  I would rather not lend you money.  How can I trust you in job responsibilities or paying your bills?  If you default on your student loan, what other promise are you going to break?

The author has a solution for this.  Before defaulting grab as many credit cards as you can and find a stable place to live.  So, if you are going to default on your student loans, you must go down in a blaze of glory!  Fill up the credit cards, stop paying your bills, and forget your rent!  You can always use that money for something else, and isn’t Comcast or ATT evil anyway?

So, I’m clearly established as anti-default on the student loans.  What’s my story?  Well, after I had done some missionary work with Youth with a Mission, I enrolled in Sterling College.  I was able to get a full tuition scholarship, but that did not pay for my room, board, or books.  So, thinking everyone took out student loans, and not knowing any better, I did.  I took out a total of $23,521.21 over the course of 4 years.

I loved the college, and if I did not go there I would not have met my wife.  However, I know believe I could have done other things to reduce or eliminate my student loans.  If I knew of a way to get rid of my student loans completely, I now would have chosen that.

During college and afterwards, I, and eventually my wife, got into much debt.  We had 2 cars with loans, 4 credit cards, 2 of which were maxed out.  Here’s a surprise, we had $15,000 on one credit card!  We also had a house with a mortgage of 150,000.  I did refinance it to under 4% and we had $145,000 left on it.  At the time we started tracking we had $54,000 in debt plus the house.  At that time the student loan was $19,000.

What did we do?  I knew I wanted to change, even before I got married.  I was encouraged to take Dave Ramsey’s Financial Peace University in the corporate class.  I did so.  We had already started figuring some things out about our finances before, I was a business major after all.  We put together a ledger to track our expenses and try to forecast cash.  The class solidified the budget, as well as ignite our passion to get out of debt.

We attacked the debt using the snowball method.  This is where you put extra money towards the lowest amount of debt first, say a credit card that has $100, and then move to the next.  If you don’t have extra money, check your budget to see if there is extra spending.  If not, I would suggest checking out Dave Ramsey’s website.

How much have we paid off, and are we debt free?  Well, we are not debt free yet.  We have $9,800 left on the student loan.  We have paid off everything else, and sold our house.  That’s $44,258.94 of debt, plus $145,000 for the house totaling $189,258.94 paid off!

Our plan is to get rid of the student loan this year, help us out if you wish!  We both have a strong desire to buy a house, and I am being told directly and indirectly to buy a house since interest rates are low.  However, living with no debt, or very little debt, makes me not want to go back.  I can only dream right now of things we should do, or will be able to do.

Am I against student loans?  I am torn with that since I met my wife at college.  However, I do believe school can be done without student loans if you work hard.  I’m not sure I could have handled a job during school, but that may have just kicked me hard enough to graduate debt free.

In my opinion, there is a better way to fund education.  I don’t believe everyone should go to college/university, as it’s not everybody’s strong suite.  However, I am not opposed to a publically funded program to provide education or workers training.  That’s only if my taxes don’t increase.  How about reducing the defense budget just a little?

The USA is a nation of abundance.  We have many struggles, but we live in an economy that we can make much more money.  I don’t believe in income equality, as there will always be different standards of living.  I do believe that no one needs to be poor.  I believe we can feed our citizens, provide them decent healthcare, and a good education.  I believe the USA can be the top in education and in health.

How do we solve the student loan crisis?  PAY THEM BACK AND STOP BORROWING!  If everyone would pay their student loans back, the interest would stop accumulating.  This would no longer be the cash cow it is today! 

How about this novel idea?  The population of the USA is $318 million, and the student loan debt is 1.2 trillion.  If everybody put $3.76 towards that debt, our country would stop the crisis.  Even if half the people wrote checks to the government for the student loans it would be $7.53 per person.  I’m not advocating a government program, since I don’t trust the government to handle money appropriately.  I’m advocating as a citizen of the USA to help other citizens get rid of their student loans.  Do we want more active citizens?  A happier lifestyle?  What about more money in the economy?  If you say yes, let’s tackle this student loan problem head on.  Pay your student loan, and let’s build a better life!

 

Blessings and prosperity,

Andrew Krob


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