Libby Lewis, NPR
In his cramped pastor's office in Sioux City, Iowa, Dan Lozer flips through two decades' worth of student loan paperwork.
Libby Lewis, NPR
Caveat emptor! That's the message for students shopping for student loans. One of the reasons there have been abuses of the laws and rules governing student loans is that they are so complicated, few people actually understand them.
A few tips for would-be student borrowers:
- Don't consider private loans (that is, loans that are not backed by the government) before you have maxed out on borrowing government-backed loans under the FFEL program or the government's own Direct Loan program. Private loans have higher interest rates and few consumer protections for students. For instance, missing one payment on private loans can put you into default. And private loans aren't forgiven or discharged — even if you die.
- If your school recommends a lender, ask why they are recommending that lender. Is it because it's the best deal for you, or better for the school? By law, you can borrow from any lender you want to, and your school must accommodate you.
- You can also use the online calculator from FinAid to figure out how much in loans you can afford.
- The National Consumer Law Center also offers advice for those having trouble repaying their student loans or who need other guidance.
- Other smart tips can be found at the Project Student Debt Web site.
— Libby Lewis
The vast majority of students pay back their student loans on time. But one of every eight falls into debtor's hell — or default.
They're branded as deadbeats. It's no surprise that many of them have low incomes.
This week, lawmakers in the House will vote on legislation to overhaul the student-loan program.
One change would make sure students can manageably repay their loans — no matter how paltry their paychecks.
The bill is aimed at helping borrowers like Dan Lozer. Twenty-five years ago, Lozer borrowed $15,000 in student loans to attend divinity school. He has paid back much more than that, yet he still owes nearly twice as much.
Lozer has never been paid more than $25,000 a year.
In his job, he counsels cash-strapped parishioners. He works at a soup kitchen, and he buries the souls of those who died with nothing in the pauper's cemetery by the river.
Lozer, too, knows he will die in debt.
By the time Lozer was supposed to begin repaying his student loans, he was only earning minimum wage. His student-loan bills were nearly half his income. He couldn't pay them, so he fell into default.
He has been there ever since. Because he was in default, the government could garnishee his wages, seize his tax refunds, even take his Social Security checks. It means he can't borrow money for a house or a car.
Lozer says that all he wanted was a way to repay his debt in a way he could afford on his tiny paycheck. But he says the private collectors the government uses to pursue students in default weren't interested in helping him figure out how to do it. They wanted full payment — immediately.
Lozer eventually persuaded the Education Department to let him pay $215 a month — without dealing with the collectors.
He'll still be paying by the time he turns 73 — 20 years from now.
The bill under consideration in the House would overhaul the student loan program to allow future borrowers to repay their loans at a rate they can afford — no matter how low their income.