I’m intelligent and in my thirties, which means that even though I didn’t watch my way through all of the Daily Show, I generally agree that the things pointed out by John Stewart and his kith and kin are preposterous and in need of change.
So I am, understandably, in love with the sarcastic, confounded things that John Oliver brings up and points out. Monday’s debt forgiveness notwithstanding (If you missed it, check it out here), I really do love the man’s mind.
But let’s talk about that debt forgiveness.
I applaud John Oliver pointing out this ridiculous scenario we have for debt. I’m not going to verbatim quote the segment like the BBC article, but I will say it’s a scenario of ongoing buying and selling of debt that is as preposterous as the other topics John Oliver brings up on his show. The debt market is atrocious, but I wasn’t as surprised as I could be, because I’ve already known about it for a while. Working on some blog articles, at one point, I did a lot of research into the student loan debt repayment scenarios that were out there. In my searches for information on that I ran into the Rolling Jubilee, which was an arm of the Strike Debt movement, which grew out of the Occupy movement. The Rolling Jubilee was set up to help forgive debt on a massive level, and according to their figures on their website they have eliminated just under $32 million in debt by spending just over $701,000. They don’t seem to have been active in purchasing debt since 2014, so the movement may be slowed down, but that’s nothing to shake a stick at.*
Your debt has to be delinquent to reach the debt market, though, and generally speaking federal education loans don’t qualify. (The exception is private loans taken out to cover education expense. The Rolling Jubilee, Strike Debt!, and the class action law suits against for-profit colleges enacting potentially predatory lending practices has been able to cancel, nullify, or otherwise forgive private loan debt taken out for educational purposes.) The thing about the debt market is that you cannot see the debt you’re bidding on until after you purchase it. The Rolling Jubilee website indicates that as one of the major stumbling blocks in targeting a specific kind of debt to eliminate.
I will admit that my personal debt soapbox is student loan debt. Probably because I look at student loans like a mortgage on that intelligence I mentioned I had at the beginning of the article, and, barring medical calamity, it can’t be repossessed. So it’s the only mortgage that is paying for itself as I repay it. I also admit that my personal student loan debt is not as bad as others. Also, I have a job that is currently paying it off.
I am not all of my friends, though, and student loan debt is the torch that I have picked up and the soapbox I stand on.
I will not, however, go into how much of the debt problems faced by students could be fixed by a basic education in finance. (That’s why I’m doing blog posts like these.)
I have two pieces of student loans, one set consolidated that currently has an interest rate down at 3.75% and another, unconsolidated chunk that is at 6.8%. And I know what you’re thinking, “CONSOLIDATE!” That’s what every media outlet tells us to do when we have separate loans, but I won’t, and here’s why.
Consolidation would raise that nice 3.75% up to 6.8%, as all the consolidation documentation indicates that your loans will be consolidated at the highest interest rate. That would make my entire principal balance repayable at the higher interest rate. Now this is possibly advanced debt consolidation concerns, but it boils down to this. I’ve run the numbers, and consolidating traditionally will basically do nothing but raise my payments and put them into a single source.
In human-geological terms, which in this case I am using to mean looking at the full length of the loan, which is 20-25 years. I consider this appropriate for discussions regarding loans that amortize over that much time. So maybe the consolidation only raises my total payments by $30. But if you multiply the $30 X 12 X 20, it comes out to an additional $7,200 over the life of the loan. That’s money I could put into an IRA or a high interest savings account to make a few dollars for myself.
Considering the fact that I am having no trouble paying the two separate payments, there is absolutely no incentive for me to consolidate the debt.
Sorry, financial institutions, I need an incentive. Average the interest rates if you have to, that might affect my decision, but the entire sale’s pitch being “pay your loans to one place!” is not enough for me.
There are, of course, companies that will refinance the debt for me. The rates are comparable, and you can get a lesser interest rate. Sure, if you pay the loans off faster. Which is a decent idea, in theory, but the only way to do that is to pay a higher rate. For instance, I could take my 6.8% loans and pay them off in five years, but my monthly payment on them is currently under $300 payment and would DOUBLE (depending on the interest rate, which depends on whether I do a fixed rate or a variable rate consolidation). That is not really a sustainable change for me.
I have a job, I am paid money. I have good credit, I just didn’t have a windfall from a family member to pay for education debt. I’m not bemoaning my student loan circumstances, but I will be honest and admit that because I act smart with my money there are things I cannot do.
The trouble is that my debt is in repayment, and it is not private loan debt. It’s all federal. Federal student loan debt is like the napalm of debt, because it can’t even become zombie debt. It doesn’t expire until you’ve hit the end of the repayment period lengths, and it cannot be cleared by bankruptcy. (As a matter of fact, at the end of the repayment period whatever principal balance is left gets added to your annual earnings as taxable income, sooo…)
I don’t even want to declare bankruptcy on it, I want to pay it, I just don’t see why the consolidation has to be so useless to me when it wasn’t the first time I went and did it.
I think there has to be a smaller way to attack this, something more localized and effective at tackling active federal student loan debt. What’s the way? I’m not sure. I’m still sort of working on that part.
I will, however, have more financial related stuff, and student loan stuff, on Fridays.
Ta!
[* I’ve read an article that states that John Oliver’s Last Week Tonight contacted the Rolling Jubilee regarding the manner in which they accomplished their dead cancellation. The article references a blog post from the Debt Collective’s website, an organization involved with the Rolling Jubilee and Strike Debt!]
reposted from my tumblr. original post from July 2016.
