The Student Loan Trap

When I first started attending college I wanted to attend a university that was small where I could interact with professors, and be more than just a number. I found just that at a small Catholic University. The tuition was twice the amount of a normal public university, but I though it would be worth it. I filled out my free FASFA form and got nothing! My parents are upper middle class so the Government did not consider me “needy enough” to obtain free grants. Instead I got approved for an Education One Loan, a Texas CAL loan, and a Sallie Mae loan. I didn’t think much of it in 1999 the rates were 4.65%. They were very low, and yearly it was costing me roughly $16,000 to attend college. The loans covered my room and board, books, and living expenses. I had a job and bought my own car, I also had a few credit cards that I used to charge airline tickets to visit my family over the breaks. Life was normal.

When I graduated, I decided that I needed a Masters since the job market was horrible in 2003. I went back to school and I did the same thing attended the same university and in two years I had my masters. Then thank God I got a good job. Now it was time to pay back my student loans. By this time I was married, I was renting an apartment, and I was paying for two car notes. My wife was still in school so she was not able to work, since becoming a teacher in Texas required 40 hours a week of practicum. In other works working for free, to gain experience.

By this time five years later the interest rates went from 4.65% to 10.95% on my private loans the Education one loans, which made up 90% of my education funding. Wow talk about racking up credit. My debt to income ratio sky rocketed! I went from only owning $100,000 total in all student loans to owing $130,000 just in the private loans bringing my monthly payment to $1,500 on private loans a month alone.

I wish someone had told me early on to apply for more of the Sallie Mae or State funded loans with fixed interest rates. It’s crazy how the interest rates not only affect one sector of the economy but all of them. The same thing is happing to home owners how purchased homes at variable interest rates, now they cant afford their homes, and I can’t afford my student loans. I hope the Government steps in and controls these student loan interest rates because in five more years my debt will double. It is impossible for me to buy a home now with the debt to income ratio, and I’m now stuck with a very uncomfortable monthly payment for the next 20 years. Who knows if I’ll ever be able to buy a house, at least for another 20 years, but all I do is pray to the Lord every night that things will change.

No one also told me that Student Loan Consolidation companies would not touch signature loans or private loans. They only want to consolidate student loans that are backed by the Government. This is the real shocker, when your getting ready to attend college it’s a life changing experience the last thing I did was check into student loan consolidation down the road. A hard Lesson learned.

My advice for people who are getting ready to attend college is to make sure your student loans are not private loans but rather government back loans. Also attending a small school was a real good educational experience but if you can live with going to a public school please choose that route. Also make sure you pick student loans that will be fixed interest rates and not variable.  I hope this helps someone out. Most importantly make sure that Student Loan Consolidation Companies will be able to consolidate your loans!

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