This woman is 41 years old. She is single. Anyone who marries her gets $555,000 in debt. No man wants to say, “I do.” She is trapped until age 70, unless hyperinflation delivers her.
No one warned her. Her father even co-signed for part of this debt.
The world is full of economically illiterate people. They are fair game for bankers.
She is a physician. She took on $250,000 in student loans: undergraduate and medical school. The interest charges and the collection agency charge ($58,000) took this to $555,000 in nine years.
She made it into the Wall Street Journal as a poster child of student debt run wild.
She admits that she failed to read the fine print. She did, indeed. She says maybe half of the problem is her fault. No, 100% of the problem is her fault. She signed the papers. She made a contract. Now she is paying the price. It is a terrible price — lifetime debt.
She says she knew when she started medical school in 1999 that she would have to borrow heavily. But she reasoned that her future income as a doctor would make paying off the loans easy. While in school, her loans racked up interest with variable rates ranging from 3% to 11%.She maxed out on federal loans, borrowing $152,000 over four years, and sought private loans from Sallie Mae to help make up the difference. She also took out two loans from Wells Fargo for $20,000 each. Each had a $2,000 origination fee. The total amount she borrowed at the time: $250,000.
This was self-conscious. At any time she could have stopped. Instead, she plunged forward.
Her father co-signed for some of these loans. Now he is on the hook.
This is self-conscious self-destructive behavior. No one counts the cost.
These stories on student debt reveal an ignorance that goes beyond mere stupidity. They reflect a systematic unwillingness to consider the economics of compound interest. They reveal a near addiction-like refusal to face reality early in life.
What is most appalling is that no parent intervened. No parent said, “Don’t do this. It will destroy your life.” Parents encourage it.
No banker said, “Not a brass farthing” at some point — no more loans to the clearly debt-addicted woman who could never pay back the loans.
Why not? Why wouldn’t anyone intervene?
She deferred loan repayment to complete her residency (low pay). Interest built up.
Every physician must complete residency. She failed to factor this into her repayment schedule.
She now has worked out a deal. She pays $1,000 a month. Only $100 goes for payment of principal. She is 41. She will be out of debt at ago 70.
At 41, she cannot get married. She cannot buy a home — bad credit.
This is becoming universal.
Unlike other kinds of debt, student loans can be particularly hard to wriggle out of. Homeowners who can’t make their mortgage payments can hand over the keys to their house to their lender. Credit-card and even gambling debts can be discharged in bankruptcy. But ditching a student loan is virtually impossible, especially once a collection agency gets involved. Although lenders may trim payments, getting fees or principals waived seldom happens.
Today, there is $750 billion in student debt, and only 40% is being repaid.
There is going to be a great default on these loans. At some point, the debtors will have such political clout that Congress will repeal its law that made student debt immune from bankruptcy.
Then watch the bankers howl.
Continue reading here.
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Published on August 1, 2012. The original is here.
Student debt is now up to $1.5 trillion.
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