On Student Loans

I've found it hard to write too much lately -- work is interfering with blogging!

Anyway, this one has been percolating for a while. I've hit a milestone, and I need to shout it from the blogaintops.

When I graduated from Penn State with my bachelor's degree, I was the proud owner of a little more than $34k of student loan debt. I had $23k in "NJCLASS" loans from the NJHEAA, and a little more than $11k in Federal Stafford Loans. I used to complain about the NJCLASS loans -- the price to be paid for being able to take out larger loan amounts was an upfront fee, having to pay interest quarterly as soon as the loan was issued, and higher interest rates. I needed the money to go to school, though, so I had to do what I had to do (I'll omit the obvious joke about stripping). On the contrary, Stafford Loans let you defer all payments until you graduate (including graduate school), and had decent interest rates.

I've been paying on my NJCLASS loans for about 8 years, and in those 8 years, I've managed to pay down the $23k down to just about $6k. I've always overpaid just a little bit (usually just rounded to the nearest multiple of $10, but more recently, I've been overpaying by $20 - $60 a month). The reason for my excitement is that I took out four separate loans (one for each year) that added up to the $23k, and I just paid off the first one. One loan -- gone.

As long as I'm talking about loans though, I get to rip on Sallie Mae -- this is my soapbox, after all. Five years ago, I consolidated my $11k of Stafford Loans with Shannon's, and the total for the consolidation loan was about $17k. Sallie Mae seems to go out of their way to make it difficult to repay on their loans, even simple stuff like changing each year who you're supposed to make the check out to (first it's SMSC then Sallie Mae Servicing, then just Sallie Mae, then whatever else they want you to call them). The thing that always got me, though, is that it says explicitly on the coupon that if you want to overpay, their default is just to advance your due date, unless you send them a letter requesting differently. This seems to me to be code for "we are going to do our best to keep you from paying down your principal". Since I only have a fixed amount I could afford to overpay on my loan payments, I overpaid on the NJCLASS loans instead of the Sallie Mae loans, just because of the ease (no stinkin' letter required!). The result is that I've paid, as I mentioned, $17k off of my NJCLASS loans, but only $3k off of my Sallie Mae loans. The monthly payment to Sallie Mae is lower, so I expected to pay down the NJ loans faster, but still, the fact that I was discouraged from even making little overpayments has kept me from paying off my Stafford Loans as quickly as I think I could have. Every time I see my balance from Sallie Mae I get angry.

These days, people in PA are questioning how PHEAA is being run, and good old Sallie Mae even tried to take over this organization, claiming they could run it more efficiently and make more money for the state. I don't disagree -- I'm sure they *can* make more money, by making it harder on people with outstanding student loans to pay them off. This is the first ever issue that made me write a letter to my state legislators -- I advocated strongly for keeping Sallie Mae away from PHEAA, and thankfully that is the decision they made. If this ever inches forward towards happening again, you can bet I'll be first in line in Harrisburg to lobby against them.


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