I Said No to My Student Loan: One Borrower's Decision to Stop Paying

 I’ve been in a panic these last few months. Making minimum payments on my student loans serviced by Sallie Mae Inc. was no longer merely a challenge – it was getting impossible. After making some awful sacrifices to refrain from defaulting (see more on that below), I’m in a corner.

I am aware of the total lack of consumer protection associated with student debt. I knew that if I was unable to make my minimum payments, they would hit me with late fees, penalties, etc. They would harass me. In ruining my credit history, they would make it impossible for me to get access to basic services. Forget about taking out another loan – I’m talking about not being able to rent an apartment. And defaulting would not only mean a ruined credit history, it would mean that my debt would double, triple, quadruple, etc…I would be a slave forever.

But I took a long, hard look at the numbers, and I realized that I am already a slave.

Here is a screenshot of the current status of my Sallie Mae loans as of November 27, 2011 (click to enlarge):

Notice anything?

Original balance: $37,099.00

Current balance: $35, 908. 41

I’ve been in repayment since 2006. I had to do one deferral – as to not default. I signed up for a program to minimize my payments that, I was told, was beneficial to someone who is going through financial difficulties – yet I regularly made payments over the minimum payment.

Because Sallie Mae helpfully provides a payment history, I was able to whip out a calculator and count up the exact amount I have paid over these last few years.

That amount is $23, 449.65

I was done before I even knew it. And applying for more deferrals will send me deeper and deeper into debt. Decades and decades of payments – as I grow old. There’s no end in sight. The system counts on this. The people setting it up knew that most of us would not be able to sustain payments over time.

Of course, the lending industry has its own arguments. 

But you knew you’d have to pay out more under your current payment plan!

Like many recent graduates, I had the following two options: default or allow myself to get even more screwed over wrt interest rates. I thought that I was picking the lesser of the two evils. I regularly paid more than I owed in a current month. You can see how well that has worked out.

The whole point of the student loan industry has to do with applying interest rates to loans! Otherwise, it just wouldn’t be profitable! Nobody would lend students the money to go to college!

These interest rates are not just predatory – in this economy, they are unsustainable. This system is broken. I was helping sustain it with my payments – now even that option is gone.

You really should have thought about that before going to Duke!

Seems to me that circa junior year or so, I had to have a Duke dean call Sallie Mae on my behalf – because they were refusing me a loan at the time with no justification (actually, their actions were directly tied to my parents’ financial troubles at the time – that much was obvious). It was only because I was at Duke that I had that kind of assistance, based on the stories other people across the U.S. have told me.

Like most U.S. institutions of higher learning, Duke costs too much. The astronomical cost of tuition is an exact reflection of our values – not just as members of the Duke community, but as Americans. We Americans pride ourselves on the lack of a safety for people like me. We’re rugged individualists, dammit! But entrapment of students does not help our society in the long run – it defies financial logic.

Oh, so first you were begging us for loans – now you won’t pay them back! Hypocrite!