Student Loans Love Me, They Love Me Not

For those who are home and out of work due to job closures and lay-offs, enrolling in a post-secondary educational program may not be such a bad idea right now. Program requirements are more relaxed, and student loan funding is readily available making it a prime opportunity. Many students, like I did, depend heavily on student loans, but I encourage everyone to accept student loan funding with caution. I feel a little hypocritical for even saying such a thing because more so than not, I accepted every penny that was offered, and I am paying for it now in more ways than one.

The majority of my undergraduate degree was paid for by grants and VA funding received from my dad’s GI Bill, so when I graduated, I had only accumulated right at $20,000 worth of student loan debt for a four-year degree. I remember my first loan payment being around $120 a month, doable. After I secured a job as a teacher, I purchased my first home at 24 years old. The student loan debt did not seem to be a problem at the time. I received all of the homebuyer’s perks available at the time- FHA financing, down-payment assistance, and the $8,000 home tax credit. The process was, as my son says, “easy peasy.” This process made me confident that when I decided to sell this starter home, it would be just as easy.

Fast forward ten years, I have a husband, son, dog, and I owe over $100,000 in student loans after completing my doctoral program. While my husband and son are content in our home, I need my own sink and counter space in the bathroom and an oversized closet. I am ready to make a move. So, I talked things over with my husband, and I applied for a home loan. Everything looked good on the front end, so I started collecting the requested documents, and to my surprise, I was not approved for the amount requested because of student loan debt.

Oh, I forgot to mention this was my third attempt. The first and second times, I was informed that the home loan was not approved because the loans were reported as deferred, and they need an actual payment amount. There was nothing I could do. I had recently graduated, so my student loan payment would have been suspended for at least four more months. The mortgage advisor nicely encouraged me to come back when my loans were in repayment status. I did just that.

I waited nearly a year to try again. During the time, I put my loans on the IBR plan, Income-Based Repayment Plan. The monthly payments were less than $200 a month. I had become addicted to Credit Karma, monitoring my credit night and day, making sure everything was up to par. I was breathing excitement and hope. This was the fourth attempt, but I felt optimistic. I knew what I would need to start the process-my documents were in order- I was ready. Strike four, another failed attempt, and a pain in my heart. I work hard, pay my bills on time, and try hard to follow biblical principles; what is the problem? The loan advisor said in the most solemn voice, “Jo, due to your student loan debt, you are ineligible for FHA or USDA financing.”

You see, I was banking on being approved for either an FHA or USDA loan because that meant a lower down payment or no down payment at all with USDA if I chose a home in a rural area. Neither FHA nor USDA allows an IBR plan. When processing a loan, they factor in 1% of your total loan balance as payment. For me, that was $1200 per month, which limited my loan approval amount.

Now, my only option was a conventional loan, and with household income limits, I could blow a kiss in the wind to any down payment assistance. Conventional loan products require buyers to have at least a 5% down payment. Five percent seems like a small amount until you calculate 5% of a house priced at $200,000, $10,000, which has to be paid either with cash or cashier’s check-no credit card or payment plan accepted.

It was hard to shake the feelings of shame and hurt, but I realized I am blessed with everything I need and more. Plus, I am not the only person in this situation. By no means, does this make me feel better but instead it raises consciousness about student loans, which cause disruption and detriments on people’s lives. Just the other day, I had a chance to catch up with a family member working on her Ph.D. We talked about love and marriage. She shared that she is open to marriage after being single for two decades but feels apprehensive when thinking about going into a marriage with over $300,000 in student loans. I was taken aback. This is predatory lending at its best. How can something awarded so freely limit you from making a family investment- the double-edged sword.

My advice to student loan borrowers in school and those currently under any repayment where your payment is $0 per month is to pay something towards your loan every month, even if it is $5 or $10. Whatever you pay will be applied towards the accruing interest while in deferment. Secondly, educate yourself, ask questions about student loan options, and stay away from private loans. Like Wells Fargo, many private loan institutions do not offer low-income repayment plans and will not work with you on your monthly payment if it is unaffordable. Lastly, make student loans your last resort. Colleges and universities tend to have academic scholarships and scholarships for diverse students (e.g., first-generation college students, students with a disability). I know being told to stay away from student loans as a college student with no money is easier said than done, but it is possible. As an undergraduate, I was able to find a job on campus as a resident assistant. The job paid minimum wage, and we were paid bi-weekly. As a graduate student, I worked as a graduate assistant for one year while working on my dissertation. The benefits were that I had time to work on my research and collaborate with faculty on various projects. I received a monthly stipend, health insurance, and tuition waiver for two semesters. It was a great experience.