February 4, 2013
Frustrations of Managing College Loans
During FAFSA season, remember this: getting the college loans is easier than managing them post-graduation.
Multiple telephone calls to Sallie Mae and the U.S. Department of Education (DOE) – and a reporter’s tenacity – were required to get to the bottom of what seemed a simple question: is my niece, a recent college graduate and special education teacher, eligible to have some of her loans forgiven?
Our maddening quest for an answer is one small example, but it raises serious concern about whether freshly minted graduates can navigate the student loan maze and figure out their best strategies for paying back their loans. Yet their success will be critical to ensuring they don’t pay more than they should and that they are able to take advantage of the federal government’s repayment and forgiveness programs.
Squared Away invites graduates and parents to share their experiences, as well as tips for managing loans, in the comments section at the end of this article.
Our saga began last summer, during an interview with a financial adviser who mentioned that the federal government offers a forgiveness program for special education teachers. I immediately thought of my niece, Rachael, who was hired last fall in a suburban Chicago district. Now I needed to confirm it.
The reason I had to make five calls is that the DOE and Sallie Mae —Rachael’s biggest single lender – repeatedly conflated my question with a loan forgiveness program for teachers in low-income school districts. Yes, I agreed each time, there is a program for teachers in low-income schools – but that’s not what I’m calling about. My question is whether special ed teachers qualify for forgiveness regardless of the income level of their school district.
My 26-year-old niece is a straight-A student and has a graduate degree and the determination learned from playing basketball in college. But when it comes to her loans, she admits, “I don’t know what to ask.” Once we entered the college-loan maze, I learned how confusing this process is – even for this veteran reporter who does know what to ask.
Here’s the chronology of calls – the first one led by my niece – between December 26 and January 2:
Call 1, Sallie Mae: I said several times there may be forgiveness for all special ed teachers, but the customer service representative wasn’t buying it. I asked her to check with a supervisor. She came back and admitted she was wrong: special ed teachers do have their own forgiveness program that doesn’t require the low-income school designation. After so much confusion during this 20-minute wrangle, I had zero confidence it was accurate.
Call 2, Sallie Mae: After making very clear upfront that I was not calling about the low-income program – nip that in the bud, I thought – it kept popping up in the conversation anyway. This led me to think this phone representative might not know what was going on either. More wrangling, until I apparently convinced him. After some more research, he relented and agreed there was a separate program for special ed teachers. I remained unconvinced.
Did I talk him into something that didn’t exist because I wanted it to be true?
I needed facts. Time to try the DOE’s student loan hotline (800-433-3243). I’d like to interject here that forgiveness program information is on the DOE’s website, which I found confusing.
Call 3, DOE hotline: Another attempt on my part to persuade. Still not feeling confident.
Call 4, DOE hotline: See call 3. Exasperated by now, I asked to speak with a supervisor. At that moment, we were disconnected.
Call 5, DOE hotline: Finally! Someone stated confidently upfront that there was a separate program for special ed teachers in which low-income school employment was not required. Not only that, but he provided other information: $17,500 in Stafford loans is the maximum amount – Rachael has Stafford loans. Careful not to raise my hopes, I asked, Are you certain? Yes, he said, adding other details that bolstered his credibility.
So, can Rachael now be confident she’s on solid ground when she applies for Stafford loan forgiveness in five years? Not so fast.
Sallie Mae’s media office apologized for the information provided by the company’s telephone service representative but declined to comment further about it. DOE’s student loan specialist provided an accurate answer to my question. [It also gave me this useful chart, which I hadn’t found on my own.]
Call 6, DOE: According to student loan specialist Ian Foss, teachers may be eligible for forgiveness programs in three circumstances, categorized by loan type:
- Stafford loans. Teachers working in school districts designated as low-income by the DOE are eligible after they have taught for five years. Special ed, math and science teachers are eligible to have up to $17,500 forgiven – some other teachers can get up to $5,000. This may even be granted if the teacher has deferred her payments or made smaller payments based on her income – the key is not to be in default and to have taught full-time for five consecutive years.
- Perkins loans. Special ed teachers – whether they are or are not working in low-income schools – can be forgiven for 100 percent of Perkins loans, which go to college students with exceptional financial need. The amount forgiven increases over five years, based on a formula.
- “Direct” federal loans. Under the broader public service forgiveness program, employees of state, federal and local government – from teachers and the mayor’s secretary to public defenders – can have all of their remaining loans forgiven after they have paid them for 10 years under specified repayment plans. Subsidized, unsubsidized, PLUS and consolidated loans made directly by DOE are eligible.
The good news in this tale of woe is that the federal government provides avenues for financial relief. The College Student Relief Act of 2007 slashed interest rates on Stafford loans and also created new repayment terms and forgiveness programs for public service. These programs are a way to lure students to study in high-need occupations that don’t pay very well. Current and incoming students should also check out the forgiveness programs before determining what type of loan to apply for.
But I shudder to think about the phone conversations going on every day as graduates try to get accurate information about their loans.
Rachael has more work to do – more calls – to devise her loan-payment strategy. Graduates must be meticulous in asking detailed questions and aggressive in pushing for accurate information that jibes with what they read online. Calling to see if you get the same answer twice to a question isn’t a bad strategy. If you don’t, it’s time to turn up the heat on the DOE representatives and demand a supervisor.
Unfortunately, navigating the loan maze now goes hand-in-hand with a college degree. On the bright side, graduates will be better prepared to figure out their 401(k) investments – if they can afford to contribute to it.