This summer, when I got my student loan balance below $30,000, I celebrated a little. But I have no idea why.
My steady $204 payments have been chipping away at that massive balance since 2009— I say “chipping away” because barely half of my payment affects the principle. According to Navient’s Accrued Interest Calculator, my loan balance goes up by more than $3 every day, about $100 per month. In mid-August, I made my regular payment, and it pushed my balance down to $29,883 . . . But when I printed a statement on August 30 to look into a few things about my loan, $47 in interest had already accrued, pushing the balance back up to $29,930. By the time I will make my next payment, in mid-September, my balance will almost be back to $30,000.
When my wife and I were newly married, with no children, I was offered a teaching job. That opportunity was a step up for me. The starting salary was about a $4,000 pay raise from the job I had then; the health insurance was very affordable, and that mattered because I didn’t have any health insurance at the time; and teaching would allow me summers off to write. This new job was a win-win-win. But there was a hitch. I had a bachelor’s degree in English, not in Education, so I had to go back to school to earn a teaching certificate and also take a few more classes to earn “highly qualified” status. I hope you’re smart enough to know that, if a first-year gig teaching high school meant a pay raise for me, and if I had no health insurance, then I didn’t have the dollars to drop on tuition for the coursework. I had to get student loans.
Taking this new job seemed smart, and then I made another choice that I believed to be a good one. After finishing my coursework in three part-time semesters, I went for a master’s degree to bolster my pay even more. (In Alabama, teachers are paid on a grid: years of experience by level of education.) Our first child had already come, and by the time I was finishing my master’s, we were expecting our second. By the end of 2008, I had tenure and a master’s degree . . . and two kids . . . and a pile of student loans. Taking a long-haul view of my career, finances and family life, the education that fortified my new career seemed wise: the pay raise from the master’s and the incremental cost-of-living raises each year would allow for the student loan payments and more. It’d all be OK . . . right?
I realized that Sallie Mae is the Devil in early 2009. I hadn’t noticed sooner, since I was trying to work, go to school, and help my wife (who also works) to raise two small kids. My worst err-in-judgment was disregarding the way these unsubsidized loans were stacking up. Other than that, my wife and I had not made any irresponsible decisions about our lifestyle; we were living within our means, we lived in an affordable house, etc.
Repayment on my student loans began at the same time the recession hit. I couldn’t have foreseen what would happen in 2009 and 2010. Due to the state budgeting crisis caused by the Great Recession, my salary dropped 10.2% from the 2007-2008 to 2008-2009 school year.
With my new master’s, I should have been making more money. Instead, my pay went down— significantly. I arranged with Sallie Mae to have my monthly payment at the bare minimum – $204.37 – since I had two kids in daycare and was taking a pay cut. The minimum was all we could do, and I take pride in being a person who pays my bills. I wasn’t going to default or defer.
By my calculations, I’ve been sending Sallie Mae/Navient about $200 a month for more than six years. Keeping the math simple, I’ve paid in approximately $2,400 per year . . . nearly $15,000 total. Want to know how much of that has gone on principle? Less than half.
Sallie Mae/Navient is screwing me. As a grown man who already had a bachelor’s degree, I was only eligible for unsubsidized loans. At this rate, sending $200 when $100 in interest accrues, it would take me 3,000 months to pay off $30,000. I would have to live 250 more years to pay them off! However, understanding that the accrued interest will reduce as the balance does, maybe I could have it paid off in less than 200 years.
I’m being snide and sarcastic, but the truth is, if I keep sending $204 each month for the rest of my natural life, that balance will never be paid off. Never. If I send $2,400 per year for the next thirty years – that’s $72,000 – mathematically, I still won’t get out from under those loans. I’ve looked into a consolidation, and the best option I’ve found is about $250 per month for 30 years— a payoff total of $90,000 . . . on a $30,000 loan balance.
That’s wrong. This situation is as unjustifiable as title loans, payday loans, and other types of predatory lending.
What has occurred to me recently is: it’s not just me. The student loan industry is doing this to lots of people. And I’m about to start digging, to see what a person like me can do about it.