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| I beat Sallie Mae at the student loan game – but nobody should face financial ruin for an education | I beat Sallie Mae at the student loan game – but nobody should face financial ruin for an education |
| (about 4 hours later) | |
| Beginning when I was an 18-year-old university student, I took out four Sallie Mae “Tuition Answer” loans worth about $36,000 between 2006 and 2008 – which was more than twice as much as I earned working my way through college – so that I could attend the City University of New York’s Hunter College. It’s a relatively affordable school, but due to the deaths of both of my parents when I was younger and the fact that my job at a local clothing store paid only $7 per hour, I still needed money to make ends meet. | Beginning when I was an 18-year-old university student, I took out four Sallie Mae “Tuition Answer” loans worth about $36,000 between 2006 and 2008 – which was more than twice as much as I earned working my way through college – so that I could attend the City University of New York’s Hunter College. It’s a relatively affordable school, but due to the deaths of both of my parents when I was younger and the fact that my job at a local clothing store paid only $7 per hour, I still needed money to make ends meet. |
| I felt uneasy signing the paperwork, but my school’s financial aid office was plastered with posters and pamphlets depicting smiling students whom Sallie Mae had allowed to follow their dreams and I was under the impression that they were benevolent. I had no idea that, without a cosigner, I’d end up with credit card-like interest rates, amongst a multitude of other problems. | I felt uneasy signing the paperwork, but my school’s financial aid office was plastered with posters and pamphlets depicting smiling students whom Sallie Mae had allowed to follow their dreams and I was under the impression that they were benevolent. I had no idea that, without a cosigner, I’d end up with credit card-like interest rates, amongst a multitude of other problems. |
| Most people think of Sallie Mae as a purveyor of federally-backed student loans with low, government-mandated interest rates, regulated deferred payments and hardship waivers. And, looking back, the differences between the federal student loans and private, bank-backed student loans that Sallie Mae servies were definitely blurry – listed in the same pamphlets, referred to as “Sallie Mae” loans, marketed in the same way. You could even say that Sallie Mae bases the reputation of its other, more predatory student loan products on the strength of the reputation of the federal loans everyone knows them for. (Perhaps that’s why reports surfaced in mid-November that the Obama administration may remove Sallie Mae from federal loan-servicing.) | Most people think of Sallie Mae as a purveyor of federally-backed student loans with low, government-mandated interest rates, regulated deferred payments and hardship waivers. And, looking back, the differences between the federal student loans and private, bank-backed student loans that Sallie Mae servies were definitely blurry – listed in the same pamphlets, referred to as “Sallie Mae” loans, marketed in the same way. You could even say that Sallie Mae bases the reputation of its other, more predatory student loan products on the strength of the reputation of the federal loans everyone knows them for. (Perhaps that’s why reports surfaced in mid-November that the Obama administration may remove Sallie Mae from federal loan-servicing.) |
| But after I finished my undergraduate degree in 2009 and earned a Masters degree in geography in 2011, I wasn’t able to find work. The field of computerized mapping had previously been booming, but entry-level tech jobs had dried up. I couldn’t even get a job housekeeping at a local motel. And unlike federally-backed student loans – which give borrowers the option of income-based repayment plans or deferring payments altogether in cases of financial hardship – private lenders, like the ones behind the loans Sallie Mae gave me, are under no such obligation and have no incentives to offer any repayment flexibility. | But after I finished my undergraduate degree in 2009 and earned a Masters degree in geography in 2011, I wasn’t able to find work. The field of computerized mapping had previously been booming, but entry-level tech jobs had dried up. I couldn’t even get a job housekeeping at a local motel. And unlike federally-backed student loans – which give borrowers the option of income-based repayment plans or deferring payments altogether in cases of financial hardship – private lenders, like the ones behind the loans Sallie Mae gave me, are under no such obligation and have no incentives to offer any repayment flexibility. |
| So, with no income and my private student loan payments, interest and fees, I was headed for default. | So, with no income and my private student loan payments, interest and fees, I was headed for default. |
| Sallie Mae’s collectors called me up to 10 times per day, even on weekends and holidays. I begged their representatives (and recorded the conversation on camera, as shown in the CNN documentary Ivory Tower) to make my payments affordable so that I could begin to pay them back rather than default. They refused. | Sallie Mae’s collectors called me up to 10 times per day, even on weekends and holidays. I begged their representatives (and recorded the conversation on camera, as shown in the CNN documentary Ivory Tower) to make my payments affordable so that I could begin to pay them back rather than default. They refused. |
| The only option Sallie Mae offered me to avoid default and subsequent financial ruin was to pay a $150 fee every three months to put my loans in “forbearance”. But interest – more than $1,100 per month on my $36,000 in loans – would still have continued to accrue and that $150 wouldn’t be applied to either the interest or the growing balance. It was mind-boggling. | The only option Sallie Mae offered me to avoid default and subsequent financial ruin was to pay a $150 fee every three months to put my loans in “forbearance”. But interest – more than $1,100 per month on my $36,000 in loans – would still have continued to accrue and that $150 wouldn’t be applied to either the interest or the growing balance. It was mind-boggling. |
| Bankruptcy wasn’t even an option, thanks to the government’s 2005 “reforms”: you can now only use bankruptcy to discharge student debt in cases of extreme hardship, such as total and permanent disability. It would’ve been easier to get out from under my debt if I’d amassed it through using credit cards irresponsibly or even gambling, rather than taking out student loans to finance my education. | Bankruptcy wasn’t even an option, thanks to the government’s 2005 “reforms”: you can now only use bankruptcy to discharge student debt in cases of extreme hardship, such as total and permanent disability. It would’ve been easier to get out from under my debt if I’d amassed it through using credit cards irresponsibly or even gambling, rather than taking out student loans to finance my education. |
| So in early 2012, I started a Change.org petition to demand that Sallie Mae reverse its “unemployment penalty fee” policy. After 170,000 signatures and a press conference, Sallie Mae agreed to start applying the fee to students’ balances. I beat Sallie Mae at its own bureaucratic game, but even that wasn’t enough. | So in early 2012, I started a Change.org petition to demand that Sallie Mae reverse its “unemployment penalty fee” policy. After 170,000 signatures and a press conference, Sallie Mae agreed to start applying the fee to students’ balances. I beat Sallie Mae at its own bureaucratic game, but even that wasn’t enough. |
| I’m proud that my campaign had helped a lot of people, but I was still screwed: I was still unemployed, Sallie Mae still wouldn’t work with me on a payment plan, and my interest rates were still incredibly high. My “tuition answer” turned out to be a bill that grew to a monstrous $77,000, just three years after graduation. | I’m proud that my campaign had helped a lot of people, but I was still screwed: I was still unemployed, Sallie Mae still wouldn’t work with me on a payment plan, and my interest rates were still incredibly high. My “tuition answer” turned out to be a bill that grew to a monstrous $77,000, just three years after graduation. |
| I defaulted, and Sallie Mae brought four lawsuits against me to try to recoup all that money and more. If the lender had won, I would’ve had a judgment against me for the next 20 years; they would’ve been able to to garnish my wages and tax refunds; and, on the rare occasion that I had more than $2,000 in my bank accounts, they could’ve taken all but $1,920 of it. My credit would’ve been wrecked for at least seven years, preventing me from renting an apartment, leasing a car or getting a job – at least, with one of the 60% of employers who check your credit before they hire you. | I defaulted, and Sallie Mae brought four lawsuits against me to try to recoup all that money and more. If the lender had won, I would’ve had a judgment against me for the next 20 years; they would’ve been able to to garnish my wages and tax refunds; and, on the rare occasion that I had more than $2,000 in my bank accounts, they could’ve taken all but $1,920 of it. My credit would’ve been wrecked for at least seven years, preventing me from renting an apartment, leasing a car or getting a job – at least, with one of the 60% of employers who check your credit before they hire you. |
| Sallie Mae’s lawyers verbally suggested working out a settlement, but it felt like a trap: the judge said that, if I missed a single payment, my balance would revert back to $77,000 and none of the payments I would’ve made in the interim would be counted against that balance. | Sallie Mae’s lawyers verbally suggested working out a settlement, but it felt like a trap: the judge said that, if I missed a single payment, my balance would revert back to $77,000 and none of the payments I would’ve made in the interim would be counted against that balance. |
| Instead, I spent a year representing myself in county civil court, because the majority of lawyers I’d spoken to were ignorant of – or outright refused – to get involved in student debt cases. But the New York Legal Assistance Group set me up with a lawyer named Kevin Thomas who, when he heard my story, said, “You’re going to be OK. Trust me.” I was reluctant, but I figured I had nothing left to lose. | Instead, I spent a year representing myself in county civil court, because the majority of lawyers I’d spoken to were ignorant of – or outright refused – to get involved in student debt cases. But the New York Legal Assistance Group set me up with a lawyer named Kevin Thomas who, when he heard my story, said, “You’re going to be OK. Trust me.” I was reluctant, but I figured I had nothing left to lose. |
| It turned out that Sallie Mae had more to lose than me: Kevin discovered, and brought to the attention of the court, that in three of the four suits, I was being sued by an entity – “SLM Education Credit Finance Corp” – that wasn’t even registered to do business in New York State, and the plaintiffs couldn’t produce any evidence that the entity in the fourth suit – “SLM Private Credit Student Loan Trust VL Funding LLC” – even exists. | It turned out that Sallie Mae had more to lose than me: Kevin discovered, and brought to the attention of the court, that in three of the four suits, I was being sued by an entity – “SLM Education Credit Finance Corp” – that wasn’t even registered to do business in New York State, and the plaintiffs couldn’t produce any evidence that the entity in the fourth suit – “SLM Private Credit Student Loan Trust VL Funding LLC” – even exists. |
| Sallie Mae’s own lawyer was dumbfounded. The judge threatened them with a $10,000 sanction for their “nonsense”, then dismissed their case against me because they lacked standing. Their attempt to overturn the judge’s decision was denied, and they were told that, if they want to sue me again, they’d have to register to do business in New York (and pay millions, if not billions, of dollars in taxes) first. | |
| I had won. | I had won. |
| There is no single way to describe the enormous relief I feel about the opportunity to actually have a financial future. But there is one way to describe knowing that the company that sold me predatory loans – and tried to ruin my entire future in the process of collecting them – not only lost in court, but may have to leave multitudes of victims alone. It’s called schadenfreude. | There is no single way to describe the enormous relief I feel about the opportunity to actually have a financial future. But there is one way to describe knowing that the company that sold me predatory loans – and tried to ruin my entire future in the process of collecting them – not only lost in court, but may have to leave multitudes of victims alone. It’s called schadenfreude. |
| • This article was amended on 24 November 2014 to reflect that Sallie Mae attempted to vacate the judge’s order and lost, rather than initiated an appeal. |
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