Financial roulette with Sallie Mae

Like the devil, the corporate mistress of student loans will get you in the end; but in the meantime you can play her game for all you're worth.

By Kristina Blachere
October 12, 1998 12:44PM (UTC)
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Forget the Great Equalizer. Thanks to modern medicine and cryogenics,
it sometimes seems like the only certainties in today's world are debt
and taxes. And few people know this better than those who have taken out
student loans to pay for college. OK, they and the millions of
Americans up to their necks in credit card debt. But at least when
you're maxing out your Visa card you're getting valuable goods and
services, like that Miracle Mop they sell on QVC. To the average
22-year-old leaving college, going tens of thousands of dollars into
debt buys you a piece of vellum valued at over $100,000 and the option
to spend even more money on an advanced degree when you realize that
it's impossible to find meaningful work with a bachelor's in French

Yet more Americans are going to college now than ever, because
society has successfully indoctrinated us to believe that a four-year
degree opens social and economic doors. And some of us even harbor
romantic notions about improving our minds and nurturing our souls.
Since few people can afford the $24,000 or more yearly tuition for a
private college, the only options are cheaper state colleges, taking out
massive loans or praying for scholarships. So at the wise old age of 18,
you solemnly swear to pay back that $20,000 plus interest, and a mere
six months after graduation, reality hits. The little coupon books from
the Student Loan
Marketing Association
(Sallie Mae) start descending upon your
mailbox like crows on a wheat field -- evil omens of the inevitability
of repayment. No more flipping burgers, it's time to get a real job.
Preferably as an investment banker or a sex worker.


But if the thought of donning a suit (be it birthday or pin-striped)
makes you feel like you're becoming what you hate most in the world,
there are other ways to deal with the burden of a college education.

The most obvious tactic, and the one that seems most appealing to
recent graduates who wish they'd never learned to sign their names, is
simply not to pay. But here's a little analogy that you can keep and use
to study for the GREs: Sallie Mae is to college graduates what the IRS
is to the Mafia. She'll get you in the end, and it won't be a pleasant
fate. The letters will start coming -- three and four a day. The phone
will ring at all hours of the night. And your friends, family, neighbors
and garbage bins will become fair game for collection agencies as
ruthless as bounty hunters.

Not that the fear of reprisal stops most people from committing a
crime. We all know some poor soul who's tried the "ignore it and it'll
go away" tactic. It's usually the same guy who stood weeping next to a
pile of pink socks and underwear in the laundry room of the freshman
dorm. Now he just falls down on the floor and starts twitching every
time the phone rings, and begs his roommates to answer with foreign
accents. This guy will probably die of stress-related causes at the age
of 27 and be buried in a casket stuffed full of unopened notices from
Sallie Mae. But that's a better fate than living in fear and with bad
credit, which is another thing you can count on if you default on your
loans. You may have no interest in buying a house or getting a credit
card now, but a lot can change in the seven years it'll take you to
clear up your credit record.


Those with more finely honed survival skills are often drawn to
passive resistance. One approach is not to fill out the final paperwork
for graduation. It's just as easy as not answering the phone, and it can
even be turned into a political stand. After all, they made you pay
$100,000 to do homework, the least they can do is add up your credits
for you, right? But this won't fool your creditors for long. If you read
the fine print on your loan agreement (if you still have it, that is)
you'll find that most loans require you to begin repayment by a certain
date, whether or not you've got the diploma in your grubby little hands.

If civil disobedience is not your style, moving to a federally
designated disaster area is an excellent option. One former student
happened to be living in Portland, Ore., during severe winter flooding,
and even though she was perfectly able to take the bus to her
waitressing job every day, her loan company informed her that she'd won
a few months forbearance courtesy of the federal government. Granted, a
few months isn't much, but with a little planning and the help of the Federal Emergency Management
you could make disaster chasing a way of life. Think about
it: spring in the Mississippi Valley, summer on the Gulf Coast, winter
on the Great Plains. All you need is a hardy constitution and few
possessions and family ties, and you're in business.

Of course, if you want to be responsible about getting yourself out
of debt, you might consider joining the AmeriCorps program. This home-front
version of the Peace Corps puts you to work serving various community
needs, from teaching to protecting the environment, and there are local
programs across the United States. Another former student-in-debt signed
up for nine months of teaching inner-city Philadelphians to read. For a
50-hour work week, she received a $150 stipend, plus health insurance,
and when she was done, she got a $4,725 education award that she put
toward the $20,000 she owed in student loans.


And there's always deferment
or, even better, cancellation.
If you're a part- or full-time graduate student, you can defer payment
on Stafford and Perkins loans and waive the interest while you're in
school. And if you can prove economic hardship or that you're unable to
find full-time employment, you may be able to defer payment for up to
three years. Volunteers in the Peace Corps can also defer their
Stafford loans and even receive a 15 percent cancellation of the balance
on their Perkins loans with each year of service.

But forget indentured servitude for a minute. We've saved the best
news for last. If you happened to tune in to this year's State of the
Union address, you might have been shocked to hear a useful bit of
information for a change. Starting with your 1998 federal income
tax return,
you can deduct up to $1,000 of the interest on your
education loans. And by 2001, the amount of deduction will be $2,500.
Given how little most recent college graduates make a year, this break
might even bump you into a lower tax bracket. It seems only fair,
considering that some students leave college owing the equivalent of a
small mortgage.


Before you head off into the world, there's one
wolf-in-sheep's-clothing you should be especially wary of: loan
consolidation. You'll get a lot of tempting offers from banks and other
lending institutions promising one low monthly payment and only one
stamp required. But while a smaller monthly payment might seem like a
dream come true, the interest on a consolidated loan is often higher
than the interest on your original loans and consolidating usually means
stretching repayment out for a longer period of time. If you absolutely
can't make your monthly payments, look into it, but who really wants to
be paying for college when they're planning retirement.

A final word to the wise: In the United States today, romantic
notions about education and self-improvement are the provenance of the
very rich or the very naive. If you have a sneaking suspicion that
you'd rather be debt-free than read "Ulysses," learn to program computers
or go to trade school -- and get a library card.

Kristina Blachere

Kristina Blachere is an assistant editor for CNet and lives in San Francisco.

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