Thoughts on Loan Consolidation

Recently I’ve been giving the idea of consolidating my student debt some serious thought.  My motivation for this line of thinking is that I have a rather large amount of debt that is spread out and controlled by several different sources.  My lender here in Vermont controls the lion’s share of what I owe due to the fact that most of my debt was accumulated when I went to culinary school (by the way, Vermont has great food, but not as many great restaurants as it should have), and the debt from my university days is dispersed between my bank, Sallie Mae and Great Lakes Educational services.  Among the problems that I’ve encountered while researching consolidation is that I have both federal and private loans, which can not be consolidated together.  I also have to make low monthly payments a priority for the time being and that probably means extending the term of my loans from there current term of ten years each to thirty.  And I’ll freely admit that the idea of living with these loans for the next thirty years is frightening and depressing.  I fully intend to have these loans paid off in the next ten years, though how I’m going to do that is something that I’ll have to learn as I go;  I really just need the burden of the monthly payments reduced as much as possible.

So what would it mean to consolidate my loans?  Well, it would mean different things for my federal and my private loans, and I’m hoping that I can find a lender that would be willing to take control of both and give me the favorable terms that I need.  For my federally backed loans the best options will probably be to obtain a direct consolidation loan from the U.S. Dept of Education.  Which would cover the majority of my debt and mean that I’m making one payment directly to the government (I’m not actually a huge fan of the idea of making the government my primary lender, but I’ve got to do what I’ve got to do in this instance).  What I like about this idea is that I would be borrowing directly from the government instead of from a middle man agency like Sallie Mae, I would have a single point of contact regarding the servicing of these loans, and I would retain a degree of the protection that comes from my loans being backed by the government, including some deferment options and subsidy benefits on the government subsidized loans that I have.

My private loans are a slightly different matter.  Since they aren’t backed by the government and are instead with private banking institutions, the single most important advantage would be that I would be replacing several loans with a single one.  The most important factor to consider here is my credit score, which is the primary determiner of what type of interest rate I might get on a consolidation loan.  Since I am currently unemployed, and my loans are all currently deferred anyway, I’m not moving on this for at least a couple of months, but I am going to use that time to research lenders for refinancing my private loans and getting as well informed of my rights and responsibilities as possible.

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Just a short one for today

The procrastination and apathy bugs have bitten me hard in the last week or two, and I’ve been having trouble mustering the motivation to write anything fot the blog, so today’s post is mostly an exercise in simply forcing myself to get some thoughts out of my head and onto my website.  A more detailed and well researched post on loan consolidation will follow later this week (I promise).

In the meantime I;m just going to make a few comments on random things that have been floating in and out of my head in the last couple of weeks.

First, What I’m reading:

Why People Believe Weird Things by Michael Shermer.
This is one that I’ve read before and continue to have around because I’ll always pick it back up.  An invaluable resource for the skeptically minded, Dr. Shermer covers a variety of topics from holocaust denial and intelligent design to objectivism and alien abductions.  By far the most valuable sections are those on how thinking goes astray and why smart people believe weird things.  This is the book that challenges me to be constantly and more importantly, consistently skeptical and always seek evidence for the things that I believe.

On the Line by Eric Ripert
An invaluable examination of the mechanics and philosophy of one the finest restaurants in the world, Le Bernardin in New York.  Absolutely fantastic whenever I need to know how good food can be.  for the uninitiated, it also provides a very thorough explanation of the logistics of operating one of the busiest restaurants in the restaurant capital of the world and making sure that every single aspect of the dining experience, from the moment that the guest walks in the door to the very moment that they walk out of it is second to none.

Marvel Comic’s adaptations of Stephen King’s The Dark Tower by various authors.
I’m a long time fan of King’s seven volume masterwork and I love seeing the story brought to this new medium.  It has a great pace, stunning artwork, and the new material is spot on in terms of voice and tone of the original works.  I’ve only read the first two story arcs but look forward to reading the rest as well as future volumes as they become available.

Second, my distractions (other than books):

I’ve long been a fan of fantasy RPG video games, especially the Legend of Zelda series, but just lately I’ve been spending some time (perhaps to much time) exploring the old Final Fantasy games for Super Nintendo, particularly the ones that weren’t originally released in the U.S.  I’ve taken a particular liking to FF5 and I’ve been playing it quite a lot.

In addition to these distractions I’m also seriously considering a trip back home to Missouri to clear out my dad’s garage of all of my old stuff.  I’d love to spend a week going through it, deciding what I can hock on ebay and either donating or disposing of the rest.  Now seems like it might be a good time to do that since I don’t currently have a job holding me in place, but I need to figure out whether I can offset the cost of the trip by selling my old junk.

That’s all for today.  Hopefully I can get myself together and write up a real post for Friday.  Hope to hear from all of you soon.

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Thoughts on my Career thus far.

I have been on unemployment for almost three months.   It feels weird to even write that down; I haven’t been unemployed against my will since I was 17 years old (I’m 28), and I know that I could have found some kind of a job since the restaurant were I was working closed.  What held me back?  I guess I’ve been reluctant to step back into a job that doesn’t further my career.  I’ve been holding out for an opportunity to get back into the type of kitchen work that I want to do.  Even if that means being a cook rather than a chef, and working on the clock instead of being salaried; I can do those things if I feel like I’m learning from the experience and its going to contribute to my ultimate desire to be a food expert.

Note that I did not say chef.  I write this blog because I have a huge amount of college debt, mostly because I decided to go to culinary school (which tends to be outrageously expensive), but I’m not sure that I want to be a chef.  Right now I’m much more concerned with learning everything that I can about food and the preparation thereof. What that means for me in terms of jobs is working in professional kitchens, and as good a one as I can get into.

I’ve always been a big believer in paying dues to get to the place that you want to be and for me that means being in the trenches of grueling restaurant world.  I want to be an expert on food and there is simply no better school than being a line cook or a chef.

I’m getting a late start on this career game, or at least I feel like I am.  I’ve worked plenty of jobs, but few that I consider to really be part of my career.  Most of the jobs that I’ve had in my life were simply to provide some type of income while I went to school or simply to have some structure during my summer vacations.  Well, I’m an adult now.  School’s finally out and summer vacations are a distant memory.

I can no longer afford myself the luxury of simply finding a job for the sake of having one.  It’s time to think about my career for real; jobs that matter to me.  That’s why I’ve let myself remain unemployed for as long as I have.  And I realize of course that many have been unemployed for much longer than I have been, and my heart goes out to them, but to me, not having a job for three months feels like an eternity.  It feels wrong.

All of that being said I’m happy to say that I finally had a job interview for a cook position that I feel will be a worthwhile step in my career, and no matter where I ultimately find myself, I remember that I am in control of my destiny, and only I can change it.

But that brings me back to what I said before.  I’m not sure that I want to be a chef.  So how long do I stay immersed in this world before I attempt to step outside of it and find a different path, and what kind of risk will that be for me?  Frankly I’m not sure.  I haven’t found my exact right path yet.  I may never find that perfect place, and I have to be okay with that.  I know that my career success will ultimately be determined by my attitude and my willingness to work hard and smart.

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As we enter the new year

I’ve been doing a lot of thinking about how I got to the place that I am at with my student debt.  Exactly what were the things that I did that got me to where I am today?  What other people and organizations were involved?  How much of the responsibility for my situation is wholly mine, and how much warrants sharing?

I do a lot of research on student debt.  I’m always looking for better and more complete statistics on the state of student debt today.  I’m having trouble finding statistics on graduates with BA degrees that have more than $30,500 in debt.  According to a study from Collegeboard Advocacy and policy center that is the cutoff point in their statistics for BA graduates with the highest debt.  That doesn’t mean that that is the high water mark for student debt, it just means that the number of graduates with more than that amount is small enough that it doesn’t warrant including a specific higher number in the statistics.

According to Collegeboard the BA graduates with the most debt are those that went to for profit four year schools with 53% graduating with $30,500 in debt or more.  This is followed by private not for profit schools with 24% graduating with that much debt, and of graduates from public four year schools, only 12% finished with a debt load that high.

Those are great statistics to know, and they reinforce that student debt is a growing problem in this country, but I want to see specific statistics on graduates with $50,000, $100,000, and $150,000 in debt as well, since I am in that category.   I know why these statistics are hard to find.  Most people that graduate with anything like that much debt have usually completed an advanced degree, such as a medical or law degree, not just a BA.  I went to culinary school, and managed to accumulate that much debt in three years rather than four.  I am still baffled as to the justification of the outrageous cost of the culinary school that I went to.  I take full responsibility for this.  However it is hard to assess the true reputation of a particular trade school from outside the industry.  I took my schools word that they were well respected and that the cost of the school was reflective of the type of salary I could expect to get as a result of going there.

Today I feel like this was an outright lie.

The only justification for the massive increase in school costs in the past ten years is that it is enormously profitable to both the schools and the organizations providing the financing that is required to pay for the schools.  Student loans are simply to easy to get.  Don’t ge me wrong here.  I believe that education is worth paying for and I wouldn’t begrudge anyone the right to get an education, but the current system is not set up to benefit the students; it is set up to benefit from them.

I started sign loan papers when I was 18 years old.  My previous experience with any type of credit at all was a $500 limit credit card that I racked up to $800 dollars and managed to settle for about $200.  My entire credit history was a black smudge on my credit report, but Sallie Mae stepped right up an handed me $6000 for school, virtually no questions asked.  Yes, I had to do online loan counseling, but to be honest, that barely registers in my memory and I certainly don’t feel that it in any way prepared me for the realities of graduating with a large amount of student debt.

The story was the same a couple of years later when my federal aid wouldn’t quite cover the cost of school and I sought out a private student loan from my bank.  I applied online and in a few clicks school costs were covered.

Should it even be this easy to get so much money on credit?  Especially with virtually no credit history, other than other student loans?

Yet a couple of years later and I was again changing schools, this time to culinary school, something that I thought would be a gateway to a high paying job and a satisfying career (for the record, I still believe that it will be exactly that, the only thing that has changed is my understanding of what will be required from me), and once again, there was an organization ready to put a huge amount of money at my disposal virtually hassle free.  That is one thing that I can say for sure about getting student loans, it’s easier than getting a pre-approved credit card;  there are always organizations ready to throw debt that they know there will be no way out of at you.

If you take nothing else from me, take this.  Do all of your homework before borrowing money to pay for school, know, implicitly, what you are getting yourself into.  Know that there is virtually no way out of it, and your lender isn’t likely to tell you that.  Education is the best investment that you can make, but like all investments, the decision should be made very carefully.

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A goal for the new year

As the year finishes out its a good time to access where I am with my student loans and make a goal for the next year.  I’ll take the time right now to say that I have had a number of experiences in my life and I have loved and hated many things.  I hate my student debt. I hate it like a living thing, but I can’t let that hatred of it consume me; I have to let it motivate me to conquer it.  It’s a monster in my life and I want to slay it.  As such I am setting a goal for 2011 to see 10% of the total debt gone by the end of the year.  There’s no way that that is going to be an easy thing to do so I’m going to have to hustle and sacrifice, but I’m making a public commitment to say goodbye to 10% of my student debt by this day next year.

Let’s have a look at my student loan debt load as it stands.  As of right now I owe:

VSAC:             $99,105.58
US Bank:        $21,931.88
DOE:               $22,445.24
Sallie Mae:     $   6,135.97
Total Debt:   $149,618.67

Just seeing that written down makes me angry.  But in 2011 I’m going to use that anger to fight the debt and by Dec 31, 2011 I will have payed $14,961.87 or more if I am able.  What does that mean for me in the upcoming year?  Mostly it means sacrifice and a lot of hard work and commitment.  I’ve never been up against anything like this before in my life and now that I am I’m surprised to find that though I am committed, I am not afraid of it.  I’m not pessimistic or defeated.  I have a voice now and I’m going to use it.  I’m going to win this battle, I will have this debt gone by the time I’m 35 and I won’t incur any more debt in the mean time.

This will mean learning to live without some things for a while, but it also means that I have an opportunity to learn exactly how this system works, where the loopholes are and where it can be exploited.  I intend to share all my finding with you here on the blog.

So I also ask that if you know anything about dealing with this type of debt that you share what you know.  I welcome everyone to collaborate and share information about your own experiences dealing with debt.  Consider this site and open forum.

As always, any funds collected through this site will be shared with another person in the same situation to be determined one year from today.

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The realities of student debt

As stated in a previous post, student loan debt is nearly impossible to discharge in bankruptcy, and because most are insured by the federal government, the worst case scenario for most people in serious trouble is defaulting.  Let’s take a look at the scenario the many people are currently facing.  You graduate from college with your shiny new degree and the knowledge that someone will give you a high paying job right away and you’ll be set for for life.  No one can stop you, you’re on top, the best, and anyone who can’t see that must be a fool that isn’t worth your time anyway.  What does it matter that you took out $34,000 in student loans?  There will surely be someone waiting on the other side of the stage at graduation to offer you a $100,000 a year job that you love as soon as you have that degree in hand… right?

The reality is that the job market for new college graduates is as bad as it has ever been and you’ll have to be very smart, self sacrificing, and above all, lucky to walk into any kind of outstanding job right after college.

The loan company on the other hand is going to give you about six months to make your dreams come true before they start wanting their money back.  For most student loans, public and private, this is the most common grace period that you’re likely to have before you start having to pay back your loans.  Since you’re unlikely to have that high paying dream job by this point, this could mean big trouble for you.

What will you actually be asked to pay?  Well, for our example let’s assume the principal on your student loans is in fact $34,000 with an interest rate of 6.8% spread over 120 months (ten years).  You’re lender is going to hit you with a bill for $391.27 a month and if by some miracle you manage to keep up with those payments for the full term of the loan; first, good for you; second, you’ll end up paying back $58,690.

As loans go, those terms aren’t too bad, but if you graduate from college and all you can find is an $11.00/hr job at (insert big box retail store name here) then you are in for some tough times.  At that rate, you’ll be bringing home approximately $380.00/week after taxes, if you are lucky enough to actually get 40 hour/week.  Couple that payment with your rent, utilities, insurance, car, etc, and you could be in a bad way.

The real solution to this problem for most people is to hustle.  Work your butt off to find that dream job then work your butt off some more to be the best at it and success will probably follow, but there are no guarantees in life and you really do have to make your own luck.  Work ethic and atitude are everything.

Now let’s see what happens when you can’t make those payments.  Let’s say that you work full time, regularly pay your bills and just manage to keep the roof over your head.  You decide that paying for your rent and groceries takes priority (as they should) and you simply don’t have the money to pay your student loan bill.  After 270 days, your loan will leave repayment status and be in default, if it is a federally insured loan, then the government will pay the full balance of the loan to your lender and take possession of your debt.  Along with with, huge fees and charges have been added to the principal of the loan and your lender has just made a lot of money for themselves, but now you owe that money to the government.  What this means is that you keep going to work and trying to pay your bills, but now the government can simply take 15% of your wages before you even see them, forever.

This can take years and tremendous effort to recover from, and the best case scenario is that you make 9 qualified on time payments in a row so that the loan can be sent back to a borrower (now hugely inflated) and the process can start all over again.

What can you do about this.  First realize that you won’t ever get anything unless you ask for it.  If you are in danger of defaulting on your student loans, you should be in constant contact with your lender and realize that lending organizations are businesses and they would much rather get something than nothing, so negotiate to get your payments reduced or deferred.

Above all, get involved with getting these unjust systems changed, contact advocacy groups, call your representatives and tell everyone you know about it.  There are currently two bills in the house and senate respectively that would open new pathways to debt relief for students.

The first is  S.3219 - Fairness for Struggling Students Act of 2010, which was introduced to the senate on April 15 and referred to the judiciary committee where it has been ever since.  What this bill would do would be to amend the federal bankruptcy code to allow the discharge of student debt.

The second is H.R.5043 - Private Student Loan Bankruptcy Fairness Act of 2010.  Which is was also introduced on April 15, to the House of Representatives and also referred to the judiciary committee.  This bill would amend the federal bankruptcy code to remove qualified educational loans as an exception to discharge from bankruptcy.

The summaries and official text of both bills can be found over at opencongress.org:
S.3219 - Fairness for Struggling Students Act of 2010
H.R.5043 - Private Student Loan Bankruptcy Fairness Act of 2010

What I’m asking is for everyone to contact their representatives and ask them to support these bills.  There needs to be a major overhall of the student loan system in this country and these bills are the logical first step towards no longer treating students like criminals for trying to pay for their education.

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Christmas 2010

Being that Christmas is in three days I guess I should take the time to do my first holiday entry.  I think that I’ll break from the theme and just make a list of the greatest gifts that I’ve already gotten this year.

  • My home – this was the year that my girlfriend and I got our first real grownup apartment and it has been simply wonderful.
  • My college degree – not technically a gift, especially given that his whole blog is dedicated to how much I actually paid for it, but I feel grateful to have it nonetheless.
  • Being fired from a job for the first time – how is this a gift?  well, it saved me the trouble of quitting a job that I hated and open up an opportunity to take a job that I loved, if only for a little while.  Also, huge life lesson, as much as I hated that job, I’ll never forget the things that I learned from it.
  • Becoming a chef for the first time – I was forced to step up and be the chef at the restaurant were I was working as sous-chef just as the restaurant was about to close.  It was the most important thing that I have ever done in my professional life and the single greatest learning experience of my life.
  • My family – I’m the first to admit that I don’t stay in contact with my family as well as I should, but I often reflect how much support they give me and how grateful I am to have them.
  • Erin – She continues to be the best thing in my life and I love her with all my heart.

I’d love to here from everyone about the gifts that you’ve received this year.  Take a moment to reflect on the things that matter to you and share.

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