Money U: Student Loans in Deferment or Forbearance

Monday, March 12, 2012

Anya Kamenetz, senior writer for Fast Company, discusses a recent report from the NY Fed on student loans that found nearly half of loans in deferment or forbearance, and gives advice on paying off those kinds of loans. Kamenetz is the author of DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education and Generation Debt: How Our Future Was Sold Out for Student Loans, Bad Jobs, No Benefits, and Tax Cuts for Rich Geezers--And How to Fight Back.

Comments [34]

boballende from Victorville, CA

The 104th Republican-controlled congress purposely gave lenders expansive collection powers. This was not an oversight.

Republicans took a good idea - low interest student loans, and intentionally altered it into a money-making venture for their corporate friends. The 104th United States Congress privatized Sallie Mae. Sallie Mae became a corporation, "went rogue," and started getting into the business of making unfair and deceptive loans to kids and their parents. Banks and loan companies also saw opportunities to easily double and triple their investments so they deviously started marketing student loans as something a "real American" did along with buying a house and leasing a car and apple pie.

Notwithstanding the money we lost because of wars and fraud, had Republicans never privatized Sallie Mae and ensured that people had the same bankruptcy protection as other unsecured debt, banks would have considered the risk, tuition would not be as high, and our kids would not be worried about a trillion dollar student loan debt.

Look up S.1198 -- Student Loan Privatization Act of 1995 & H.R.1501 -- Student Loan Privatization Act of 1995.

Mar. 12 2012 08:24 PM
Lawrence from New York

Need to know more about how student loans impact your ability to get a job. Prospective employers can reject you based on your loan repayment problems. And that includes being ineligible for some government jobs and civil service employment.

Mar. 12 2012 11:34 AM

Hazel - here's that website:

Mar. 12 2012 11:33 AM

How about the clear conflict of interest of Lee Bollinger, the president of Columbia University? Mr.Bollinger takes a nearly $2M (!) annual salary from Columbia and, also sits on the board of the NY Fed, the institution charged with overseeing the banks that issue these enormous student loans.

Mar. 12 2012 11:31 AM

Between my husband and I, over the course of 5 degrees (a BS, MS, and PhD for me and a BS and JD for him) we have accumulated almost $250k in loans. We took this gamble based on our ability to get an average paying job in our fields (lawyer and professor). Now that we are both at the end of our terminal degrees, let's hope it pays off! Literally!

Mar. 12 2012 11:30 AM
wb from nyc

It took many, many years to pay off my loans because the Dept of Ed refused to correct their figures to include the loan forgiveness I had earned for teaching over several years (50% per year).
I stopped paying and asked them to sue me and after about 5 years of seizing large tax refunds, they did. So I took all the documentation to the Federal Atty and she finally forced the Dept of Ed to correct the amounts -- reducing it drastically. The interest and penalties had made it more than twice what was borrowed. And despite that the Dept of ED took MORE than was owedfrom the tax refunds and even the Fed Atty could not get them back. A nightmare!!!!

Mar. 12 2012 11:28 AM
Chris Boese from Brooklyn, NY

URGENT QUESTION about Income Sensitive Loan payment. As many in NYC experience with high living expenses, esp. rent, I've been pushing to increase my income in order to live in a safe place bigger than a 250 sq ft studio.

I'm capped at 15% income sensitive payment, but if I were in full payment, it would be higher than my rent, almost one entire paycheck a month.

But in trying to raise my income, in order to live more comfortably, what happens if my income rises too much to still qualify for the Income Sensitive Repayment? Is this a double edged sword?

What I mean is, I can comfortably afford my smaller payment size, but it doesn't begin to cover the interest (interest alone would be higher than my rent).

NYC is the only place where I can make enough $$$ to even make my income sensitive payments. But will I be dumped out of the program and back to impossible payments if my income rises? So that I will become MORE POOR with a higher income than I am with a lower income?

None of the documentation answers the question of this possibility.

Mar. 12 2012 11:27 AM

I called Sallie Mae a couple of years ago about a forebearance and they told me they didn't do that. It was a private loan and I had to pay. Went into default (just stopped sending money I didn't have) and guess what? Just last week they sent me a forebearance form to fill out.

While student loans cannot be forgiven through bankruptcy, loans from the Small Business Administration are. Why? How is this different? Maybe the idea is to come up with an idea for a small business, get a loan from SBA, use it to pay off student loans, and then declare bankruptcy. Yeah, I know - it's fraud. So's a lot of what goes on on Wall Street.

Mar. 12 2012 11:26 AM
Daniel from Westchester

Could we get the website for forgiveness for student loans? Starts with "student"-- Thanks.

Mar. 12 2012 11:26 AM
Alissa from Queens

I was wondering why my loan payments (especially the Federal loans) are not tax deductible. I know that there is some amount of the interest that is deductible (I think it maxes out at $2500), but I pay almost $12,000 a year on my graduate school loans.

Mar. 12 2012 11:25 AM
Che from brooklyn

Is there any way to lower the interest rate on your private loan? I consolidated my loans and locked in an interest rate of 8% before I knew the interest rates would drop later on.

Mar. 12 2012 11:24 AM
Mark from Brooklyn

What are the rules governing re-consolidation. I have private loans at a relatively high interest rate compared with current rates but my understanding is I can't take advantage of the current lower rates because I reconsolidated once already when I got out of grad school.

Mar. 12 2012 11:24 AM
Sheldon from Brooklyn

Higher education is no different from health care - prices go up because they both know the govt will back most of their financing.

I would recommend that the federal govt stop offering or backing student loans for private colleges, except for math, science, engineering etc. I bet you the rising rate of tuition will flatten like a pancake.

Mar. 12 2012 11:23 AM
Mike Finegan from Clifton, NJ 07011

Has it occurred to anybody that this not sustainable? the high cost of education is pricing the population into indebted servitude. At some point in time, only the rich will be able to afford an education; It will become a class society.

Mar. 12 2012 11:23 AM
MichaelB from Morningside Heights

It just goes to show that our entire higher education system is sick. And our ability to compete with other nations will suffer accordingly, more and more.

At the very least, until our society realizes that as a community, we collectively NEED citizens with advanced learning -- for ALL our benefits, and it doesn't make sense for our citizens to be putting themselves into such financial holes for decades, then if private banks continue to make student loans, then the banks should do due diligence on the schools, to make sure they are not lending money to students attending bogus diploma mills. This is the same type of due diligence that banks used to do on mortgage lending (before the recent sub-prime meltdown.)

After all, the banks DO have the data -- they could easily tell which schools are cranking out students who have little chance of landing jobs within the field of study.

Mar. 12 2012 11:22 AM

I agree the government is working for the banks, I am not even asking for loan forgiveness, I just want my interest rate in my student private loan to go down and there is no avenue for me to do that and my federal student loan does not qualify for a lower interest rate. so i don't really have a lot of options here.

Mar. 12 2012 11:21 AM
John A.

Best philosophy is to hit a loan with everything you can, to eliminate it from your life, because Infinite (your entire life) loan payments are indeed possible.

Mar. 12 2012 11:19 AM
jgarbuz from Queens

If High Schools worked the same way they worked in the 1950s, more kids would be coming out of high school ready to work and/or to learn. The Liberals destroyed the Dewey Comprehensive High School system in the mid-1960s, which is why we have all these educational and pedagogical problems today. The Liberals then expanded "higher education" to create fluff teaching and pedagogical nonsense jobs for themselves.

Mar. 12 2012 11:19 AM
Alex from Brooklyn

My husband consolidated his student loans through Sallie Mae at a 5% interest rate. My student loans have a 1.75% and 2.5% interest rate. We can't seem to refinance his loans to a lower interest rate unless we take out more student loans. If we had a private loan, or a mortgage, we could refinance with another company, but this doesn't seem to be an option for student loans. Is there any way to refinance his student loans without taking on more debt?

Mar. 12 2012 11:19 AM
walker from brooklyn

what does it mean for your credit to have student debt or go into deferment/forbearance? i always heard student debt was not considered as bad as regular, will the scale shift if this many people have student debt?

Mar. 12 2012 11:16 AM

I'm working full time and still can't come close to paying the $1,000 the loan companies are asking for. Taking loans was the stupidest decision I ever made. I own up to the fact that it was all my doing, but I was a young college student, and I was naturally optimistic about the future. Turns out the future wasn't so bright, and now I'm stuck with this burden that has literally made me depressed (and I do mean literally--worry over my debt keeps me up at night, it is constantly on my mind, and I can't enjoy life because of it)

Mar. 12 2012 11:16 AM
cynthia from Queens

My problem with the student loans is that the amount that they deduct from the automatic payments is actually too low and causes you to pay alot in interest. It benefits the lender because they make alot of money off of interest. Also, they stopped sending paper statements even though I requested it, I think it's done in a effort so that you don't see that you are actually not paying down the principal. I think mailing paper statements should be a requirment so you can see what your account looks at on a monthly basis. They should create credit disclosure laws like credit card statements and show you what your payoff looks like.

Mar. 12 2012 11:15 AM
Laura from New York, NY

If you have a private loan you're pretty much screwed. For some reason there are no regulations on the private loans, and getting forebearance or lowing the minimum payment is EXTREMELY hard. (or will not happen)

Mar. 12 2012 11:14 AM
Michael from Staten Island

Are you eligible for the social services loan forgiveness program if you have consolidated your loans (Sallie Mae)?

Mar. 12 2012 11:14 AM
tom from astoria

How about the William B Ford program? I'm now taking my old student loans out of default with this program. But all the inflated charges and penalties can only be removed by paying it off in a lump sum. Where are we supposed to get a loan to cover the pay off? Is this a good program?

Mar. 12 2012 11:14 AM
Randi from Brooklyn

I graduated undergrad ten years ago, but I'll be paying student loans for another 10 years; my loan balance is $30K. I was able to consolidate all my loans and get really low interest rates (2.75%); thank goodness most of my payments are going toward principal.

Mar. 12 2012 11:13 AM
Sheldon from Brooklyn

Leo - The Govt does nothing because politicians don't work for you - they work for the banks.

Mar. 12 2012 11:13 AM

(This may be a dumb panglossian question, but I keep hearing that sweeping student loan forgiveness -- not just for the public employees mentioned -- will become a realistic policy proposal soon. Any news on that front? If so, what about those who've already recently paid them off?)

Mar. 12 2012 11:12 AM
Suzinne from Bronx

I just stopped paying my loan last month because I ran out of and and all money! Owe over $6,000 and went to a program for one year while collecting unemployment to enter the medical field. School promised placement, but failed to get one referral. Was a total con job.

As I have no job and zero assets, how can they make any claw back on me? Am very glad that I'm not alone in my financial agony.

Mar. 12 2012 11:11 AM

I am paying back my student loans, but I am paying 9% interest on a private loan. I do not understand why the government does nothing about this private loans.

Mar. 12 2012 11:11 AM
Sheldon from Brooklyn

Will we have entire generations - spending all their disposable income from their 20's, 30's, 40's and 50's, servicing debt?

Mar. 12 2012 11:11 AM
Alex from Brooklyn

My loans have been in forbearance since 2009 after I graduated from NYU because I wasn't able to find full-time employment. I just started working full-time on a 12-month contract, so they want their money now. I feel terrible for not paying anything, but I got a bill the other day and they want $1800 dollars a month from me. I don't know who could afford that. Plus, I am making less money than I was in 2007...I don't know what to do...

Mar. 12 2012 11:08 AM
Helen from manhattan

I don't have that much in student loans (under 20,000), but when I got my tax statement from last year I was shocked to discover that most of the money I paid on my student loans last year went to interest only. I am paying more than the minimum (almost twice more) every month so I was really surprised to see this. I don't make enough money to pay off the loan outright any time soon, is there anything else I can do to prevent paying so much in interest?

Mar. 12 2012 11:05 AM
pat kinney from wnyc

aired earlier this am..........(heard something but paid little attention at 8 AM)

my student loans are in SON has paid his off.....I graduated in barely employed......age 69...

-Pat Kinney

Mar. 12 2012 10:54 AM

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