Life Options


Last November, I ran a marathon. Specifically, I ran the New York City Marathon.

For those of you thinking “she’s a lunatic,” I can only respond that running a marathon is much like paying off debt. Unless you’re trying to be Paula Radcliffe, there’s a lot to be said for the slow and steady approach. I reached the finish line in under five hours, but it took six months of training and some tedious long runs.

Unless you inherit a pile of cash, paying off a large pile of debt takes a lot longer than six month. This is why everyone should approach education loans with caution.

Because unlike a marathon, you can’t drop out. Student loans are almost never wiped away in bankruptcy filings. They must be paid before you put food in your mouth (or your child’s mouth) or shelter over your head. Sometimes you can take a vacation from paying your loans through forbearance, but guess what? That costs you too. Interest continues to accumulate on those loans until you decide to get serious about them.

If you’ve taken private loans to pay for college, you may forfeit the ability to take a vacation from paying them. If you do, you’re likely to end up paying a lot more than you originally signed up for.

So evaluate those private loans carefully, and make sure that the end result is worth taking the risk. If you’re going to come out of school making $40,000 a year in annual salary, you should not be taking on twice that amount in loans. Doing a little math can save you a lot of heartache down the road.

If you’ve already taken those loans, though, there’s no choice but to tough it out. Or leave the country. According to CNN.com,

To date, there is about $60 billion in defaulted student loan debt according to Chris Lang of the New York-based debt collection agency, ConServe. But while skipping town to avoid paying student loans isn’t very common – Lang estimates that only about 2% to 4% of delinquent student loan debt is owed from students abroad – for some, it seems like the only way out.

Honestly, for “Chris,” the guy interviewed for this article, staying abroad is probably the best option.

Chris (who doesn’t want his last name used) graduated with about $160,000 in student loan debt with a master’s degree in music.

“At the time I thought I could handle it. I thought the most I’d be paying was $600 a month,” he says.

But his payments were $2,400 a month. So Chris started looking for jobs overseas. He thought he’d be able to earn more and pay off his loans. But it didn’t turn out that way. His salary was even less than what he was making back home.”

Chris’s payments for his education are far beyond what most music grad students make in a single month, much less leaving anything for food or rent. Now, Chris doesn’t appear to have been particularly analytical about the amount of debt he was taking on or the returns he could expect on is education investment. This was not smart. But neither is a system that penalizes students for seeking degrees with no chance of escape the debt they incur along the way.

For many people, the amount of debt taken on during college or grad school determines their options for the rest of their lives.

For most of us, paying down student debt is going to be more time-consuming than running a marathon. Trust me – paying down $12,681 in student loan debt has taken a lot longer than it took me to train for and run a marathon. And I still have over $18,000 to go. But having done the marathon, I know I can pay this off.

Graduating from college into the real world with my shiny new English degree was tough. While I had been drinking and philosophizing and occasionally writing papers, the real world had been suffering through the Internet bubble bust. Although my school was quite forward-thinking in requiring its liberal arts grads to acquire some tech skills, my graduation could not have been more poorly timed.

In a market flooded with unemployed techies, there was no place for me to begin honing the few skills I’d picked up. In a peculiar reversal of fortune, my English degree actually proved nominally useful in obtaining a job – teaching English abroad.  I rode out the bear market in another country, which was fine for what it was, which is to say that it was essentially another year of college. I didn’t learn very much of anything except that teaching wasn’t really my calling.

Meanwhile, my student debt was climbing the Stairway to Perpetual Servitude.

I had taken out two loans, you see, to pay for that very expensive “experiential” undergraduate degree, but upon graduation received counseling for only one. Being a clueless student – my entire analysis of the cost of college had consisted signing on the dotted line – I figured that $17,000 in student loans was a pretty ordinary amount to have and, though twice my anticipated salary abroad, it would somehow disappear.

In other words, I followed the time-honored method of dealing with burdensome debt: stick my head in the sand and flee the country.

When I came back, my mother presented me a neat stack of envelopes printed with increasingly fluorescent and dire warnings. “Maybe you should consider consolidation,” my mother suggested, sticking another envelope on the top of the pile. “Are you sure you deferred those loans?”

You can probably guess my response: “Sure mom, stick them in that bag there and I’ll figure it out in New York.” Undaunted, I moved to the most expensive city in the country. Jobless. In the middle of a recession. Behind on my student loans (read: trashed credit). I opened the consolidation envelope, sent it in, and set about securing a job and a place to live.

Apart from my student loan follies, I was actually doing pretty well for a post-grad in a still-crappy job market. I had a low salary and a lot of roommates, but I also had a budget and stuck to it more or less faithfully.* I had a credit card that was pretty tough to get into trouble with at a $500 limit, and this went a long way toward repairing my credit as my consolidation application wound its painful way through to completion.**

Since I had no money, I continued to not make payments. Those fluorescent envelopes turned positively volcanic in tone and color. By the time the consolidation company tacked on the interest and penalties, I owed over $31k.

This is the story of what $31k and a generic degree*** do to your plans for the future. In my next post, I’ll start exploring some of the data on student loans.

*In fact, I managed to save a whole $3,000 on a $28k annual salary, but that’s another post.

**Seriously, students, if I have one piece of advice it is this: just say no to the credit card offers. I don’t care how they’re branded. Choose one, and don’t let them give you a large balance.

*** For the record, I love studying literature, it’s just almost impossible to find anyone willing to pay you for reading or writing it.