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http://online.wsj.com/article/SB10001424052702304818404577350030559887086.html
To Pay Off Loans, Grads Put Off Marriage, Children
Student-loan debt is having a sharp effect on
people's lifestyles. Four-figure monthly loan payments are handcuffing
grads at all levels of the work force. Sue Shellenbarger has details on
Lunch Break. Photo: Jon Lowenstein for The Wall Street Journal
Ms. Romine's $900-a-month loan payments eat up 60% of the paycheck she earns as a bank teller in Beaufort, S.C., the best job she could get after graduating in 2008. Her fiancé Dean Hawkins, 31, spends 40% of his paycheck on student loans. They each work more than 60 hours a week. He teaches as well as coaches high-school baseball and football teams, studies in a full-time master's degree program, and moonlights weekends as a server at a restaurant. Ms. Romine, now 26, also works a second job, as a waitress. She is making all her loan payments on time.
They can't buy a house, visit their families in Ohio as often as they would like or spend money on dates. Plans to marry or have children are on hold, says Ms. Romine. "I'm just looking for some way to manage my finances."
Total U.S. student-loan debt outstanding topped $1 trillion last year, according to the federal Consumer Financial Protection Bureau, and it continues to rise as current students borrow more and past students fall behind on payments. Moody's Investors Service says borrowers with private student loans are defaulting or falling behind on payments at twice prerecession rates.
Most students get little help from colleges in choosing loans or calculating payments. Most pre-loan counseling for government loans is done online, and many students pay only fleeting attention to documents from private lenders. Many borrowers "are very confused, and don't have a good sense of what they've taken on," says Deanne Loonin, an attorney for the National Consumer Law Center in Boston and head of its Student Loan Borrower Assistance Project.
Jon Lowenstein/NOOR for The Wall Street Journal
Danielle Jokela will have paid $211,000 for $79,000 in student loans by the time the debt is paid off in 25 years.
The implications last a lifetime. A recent survey by the National Association of Consumer Bankruptcy Attorneys says members are seeing a big increase in people whose student loans are forcing them to delay major purchases or starting families.
Looking back, Ms. Romine wishes she had taken only "a bare minimum" of student loans. She paid some of her costs during college by working part time as a waitress. Now, she wishes she had worked even more. Given a second chance, "I would never have touched a private loan—ever," she says.
Ms. Romine hopes to solve the problem by advancing her career. At the bank where she works, a former supervisor says she is a hard working, highly capable employee. "Jodi is doing the best she can," says Michael Matthews, a Beaufort, S.C., bankruptcy attorney who is familiar with Ms. Romine's situation. "But she will be behind the eight-ball for years."
Private student loans often carry uncapped, variable interest rates and aren't required to include flexible repayment options. In contrast, government loans offer fixed interest rates and flexible options, such as income-based repayment and deferral for hardship or public service.
Steep increases in college costs are to blame for the student-loan debt burden, and most student loans are now made by the government, says Richard Hunt, president of the Consumer Bankers Association, a private lenders' industry group.
Many private lenders encourage students to plan ahead on how to finance college, so "your eyes are open on what it's going to cost you and how you will manage that," says a spokeswoman for Sallie Mae, a Reston, Va., student-loan concern. Federal rules implemented in 2009 require lenders to make a series of disclosures to borrowers, so that "you are made aware multiple times before the loan is disbursed" of various lending options, the spokeswoman says.
Both private and government loans, however, lack "the most fundamental protections we take for granted with every other type of loan," says Alan Collinge, founder of StudentLoanJustice.org, an advocacy group. When borrowers default, collection agencies can hound them for life, because unlike other kinds of debt, there is no statute of limitations on collections. And while other kinds of debt can be discharged in bankruptcy, student loans must still be paid barring "undue hardship," a legal test that most courts have interpreted very narrowly.
Work & Family Mailbox
She couldn't find a job as an interior designer and twice had to ask lenders to defer payments for a few months. After interest plus forbearance fees that were added to the loans, she still owes $98,000, even after making payments for most of five years, says Ms. Jokela, 32, who is working as an independent contractor doing administrative tasks for a construction company.
By the time she pays off the loans 25 years from now, she will have paid $211,000. In an attempt to build savings, she and her husband, Mike, 32, a customer-service specialist, are selling their condo. Renting an apartment will save $600 a month. Ms. Jokela has given up on her hopes of getting an M.B.A., starting her own interior-design firm or having children. "How could I consider having children if I can barely support myself?" she says.
When Debt Takes Over
Potential consequences of taking out too many student loans--Delays in buying a car or purchasing a home
--Postponement of marriage and childbirth for financial reasons
--Parents feel pressure to take out loans or otherwise help with payments
--Risk for parents who co-sign loans of losing homes, cars and other assets
--Little ability to discharge student loans in bankruptcy
--Inability to get credit cards or home or car loans
--Inability to rent a home because of high debt-to-income ratio
--Being forced to deal with private collection agencies in the event of default
--Having liens placed on bank accounts or property in a default*
--Facing collection fees of 25% of amount owed in a default
--No statute of limitations on collection efforts
--Having wages garnisheed
--Possible loss of state-issued professional licenses
--Reduction of Social Security payments**
--Seizure of tax refund**
*Used primarily by private lenders
**Government loans only
Source: WSJ reporting
Write to Sue Shellenbarger at sue.shellenbarger@wsj.com
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Even in the 1990s I had difficulty paying off my student loans because of a pending divorce. So, I know how difficult it is to pay off student loans under unfavorable circumstances. If you get behind on payments because of not having a job, divorce or other reasons the only way to stop what seems at the time infinite increases in penalty interest is to file for bankruptcy to stop the interest from accruing under unfavorable circumstances like that. However, you cannot get out of paying off the principal of the loan even through bankruptcy if that becomes necessary. So, be sure to realize that if you get these loans and then can't get a good job for ANY reason it might temporarily or permanently destroy your life ongoing. If you file for bankruptcy try to file a Chapter 13 if you have enough money coming in to feed and clothe and house yourself. It is best not to file a Chapter 7 unless you are going to be jobless, homeless and out on the street in most situations. Part of the reason for this is that a Chapter 7 may interfere with people hiring you because now most jobs require a credit check and a Chapter 13 is considered a more responsible thing to do by most potential employers.
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