Real New Yorkers: 160K Deep in Student Loan Debt

We’re all about living a financially healthy lifestyle, but no one is perfect and we feel that one of the best ways to get inspired to spend well, save money, and not get so overwhelmed about your financial situation that you go totally haywire is to commiserate with others.  Hence the emergence of a new series where we speak to real New Yorkers about their financial woes and how they’re dealing in a city that doesn’t bode well on the pocket.

Our first interview is with Rachel Kramer Bussel, a Brooklyn based writer and editor, who took on a whopping $160K in student loan debt over 10 years ago.  We spoke to her about how this debt affects her day to day living and future plans of having a child.

What inspired you to go to law school?
I was a poly sci major and I was always interested in law, as opposed to going into politics.  So, I thought I’d go into law school and maybe study constitutional law and be this lawyer/activist type of person.  I was interested in feminism and womens’ right and first amendment stuff at the time, but I was 20 years old.  Now looking back, I’m 33, I didn’t really have a solid grasp on what a lawyer actually does.

How much money do you owe in student loans total?  And how much for just law school?
Well, I don’t know exactly.  I paid off my loans from college which was only like 10-15K, because I got help and I went to school in-state.  For law school, I think the total was $160,000 plus interest.  At one point, I calculated that I was paying $16 a day in interest and that was back in 1999.  So, I don’t know exactly how much interest I’ve paid.  I’m down to 58K — I’ve definitely paid 100K plus interest, but most likely more than that.

I think when you owe that much money, you sort of lose track of what money is.  But I think I value it more now.  Sometimes I feel like, how badly do I really want to do what I do now?  [But] when I look at it now, I’d still rather do it like this, and pay what I pay.  I think for me, part of what sucks, is that I didn’t finish, so I’m paying all this money for a degree that I didn’t get.

I’m not poor, but I’m definitely not doing as well as I would be had I not gone.  [The balance is] better now, but if I’d only been paying the minimum all this time, I’d really be screwed.

How does having this much student loan debt affect your daily lifestyle?
It doesn’t affect my day to day so much.  I don’t live totally frugally — I mean I travel and I just recently joined NYSC.  There was a time, though, when I was just so obsessed with it — I logged onto Sallie Mae every day to check my balances.  I think it affects some of my drive to edit a lot of books because I have to keep working really hard until they’re paid off and in a way, I think that’s good for me because I keep coming up with ideas that will make me money, but also advance my career as a writer.

Has being in debt and living in such an expensive city caused you any major stress or anxiety?
Sometimes.  It depends.  Certain days I’ll just feel really overwhelmed by it — like, wow, I’ve paid 100K and what do I have to show for it? But for the most part, I just wanna keep working towards paying it off, and hopefully then I’ll be able to start saving some money.

And, I don’t know, I try not to let it overwhelm me.  I think if you start thinking like that, it just becomes pointless.  I would definitely advise people who are thinking about grad school to really think about it.   [Taking on debt] was sort of abstract for me “I just signed off for 40K [in loans]“.  I didn’t really have a sense of how much I’d have to work to earn enough to pay it off.  I think it’s hard sometimes in New York, because it can be a hard city to save money.

But sometimes it does make me worry — I’m 33 and I want to have kids.  I feel like if I can’t afford to pay off a student loan, how can I afford to pay for a child?  Hopefully I’ll figure it out in a few years.

Do you think that college advisers and counselors are effectively advising students to take logical career paths?
I don’t know — I don’t even really remember who I met with.  I was very convinced that I wanted to go to law school.  I had graduated college in three years, partly to save money, so in my case, it wasn’t something people pushed me into.  But I do think a lot of people go to grad school because they don’t know what they want to do.  I think it’s a good idea to work and make money until you know what you want to study or do.  And people who have an idea of the real world or working world, are going to bring something to grad school that people just out of college aren’t.

Did you feel pressured to go to a top school like NYU because you thought it would help you in your future career?  And has it?
No, it was just the best school that I got into. It was hard to be so young and studying all the time with all of the distractions that New York has.  I think if I had gone somewhere else, I’d have probably finished.  But as school went on, I felt really out of step with my law school peers — they were very focused and knew what they wanted to do, and I didn’t.  It was a very tough time in my life.

I’ve always thought that high school counselors always overstressed how important attending a top tier school is, and I don’t agree that that will always put you ahead of the game in terms of beating someone out of a job.  What has your experience been with that?
I think it’s becoming increasingly like that.  I could have gone to my state school, Rutgers, and it would have been much cheaper.  But so many of my high school peers were going, and I just felt like it’d be an extension of high school.  I think the idea of top schools are where you need to go are exaggerated, because ultimately it’s what you’re going to do with that.  I think you can go pretty much anywhere, and if you stand out, and make a name for yourself and do well, it won’t matter as much.

How long do you think it’ll take you to completely pay everything off?
I’ve given myself til 2033.  It all depends on if my novel (coming out in 2010) sells well, then it could potentially be sooner.  Once I get under the 20K mark, I’ll feel better.  Now it still feels really daunting.  Sometimes I get too into it, and try to pay too much.  I have to make sure that I don’t go too crazy with it.

I actually declared bankruptcy a few years ago, I had 30K in credit card debt and that felt much more debilitating.  The way credit cards do their fees, if you’re making not much money, you’re really screwed.  I’d try to pay them, and was only paying them interest.  The more I realized I had nothing ot lose by declaring bankruptcy.  It kills all your credit cared debt.  I was able to get small credit limits within a year, which has helped me build my credit back up.  My credit still isn’t great, but otherwise had I not done that, I’d be totally overwhelmed with that and my student loan debt.

Photo credit:  Hilary McHone

Monthly Mashup: January Edition

Reflecting on the past is necessary in order to move forward and make positive changes.  With that idea in mind, we’ve kicked off the new year with lofty goals for the site and new ideas for future series and events.  And keeping in tradition with the start of each new month, we’ve taken a look back at our top posts for the January edition of the Monthly Mashup.  Scroll on down for a few of LifeStyler’s most popular articles this month and our Editor’s favorite January postings and other newsworthy articles from the depths of the blogging realm.

Recession-Proof Activities:  Part 2 – Continuing with our previous list, we’ve gathered up more fun and free activities for New Yorkers including free comedy shows, science lectures, and online gaming.

Food stamps and other badges of shame – Local Brooklyn blogger, Bed-Stuy Banana, breaks down stereotypes about government assistance and bravely details her experiences using EBT.

Is Going Back to Scool in the Recession a Good Idea? – Statistics show that a large number of young adults are deciding to go back to school during the recession — mainly due to lack of a job after graduation or to facilitate a career change.  We think it’s better to ride out the economic storm without adding more debt to your plate.  Keep on reading for our reasons why.

5 Types of Overspenders – David at Money Under 30 takes a look at the 5 most common types of overspenders, the characteristics that define them, and how to remedy careless spending.

Knowing Your Employee Rights (If you get laid off) – With unemployment rising weekly, it’s important to be on top of your employee rights in the event that you get laid off from your job.  We help you sort through the bureaucracy and lay all of your employee rights out on the table.

Money Makeover:  5 Sites for Your Finances – Need help organizing your finances?  Smart Money features 5 web applications that will help you save money, manage your finances, and plan ahead for the future.

Coping with Crushing Student Loan Burdens – Aside from credit cards debt, paying off student loans can be one of the most stressful and burdensome financial processes you undertake.  Especially if you choose to take out private loans instead of government backed Stafford loans.  We mull over one student’s outstanding debt and take a look at who’s to blame for our culture of borrowing.

10 Financial Commandments for your 20’s – Kiplinger takes a look at the 10 most important Financial Commandments for 20-something’s such as developing marketable skills, establishing good credit, and cutting the financial umbilical cord.

7 Great Online Classified Sites – Think Craigslist is the only place online to find a good bargain?  Think again.  The Budget Fashionista, with her superior budget shopping skills, has dug around and found the best online classified sites on the web.

Does Bank of America owe you $78? – According to Wallet Pop, Bank of America was recently involved in a class action lawsuit due to negligence in alerting customers about transactions that were triggering overdraft fees and deliberate changing of transaction posting order in an attempt to maximize revenue from overdraft fees and non-sufficient fund charges.  Keep reading to find out if you qualify for a piece of the pie.

Coping with Crushing Student Loan Burdens

I’ve been reading more and more stories lately on how the high interest loans are putting an extraordinary burden on recent graduates paying off what they thought were federally controlled student loans. These loans were extended via private companies, but carried variable interest rates that, like a lot of mortgages, fluctuate with current interest rates. The ending result? Sky rocketing interest rates on loans for tens of thousands of dollars and none of the benefits you get with federal student loans like deferment and locked-in rates.

The LA Times published an interesting article about a young woman who recently graduated with a degree in photography. After taking out $140,000 in loans, she now has to pay out $1,700 a month towards these loans. And with some of these loans at a debilitating 18% interest rate, paying $1,700 a month isn’t going to go all that far.

To give a frame of reference, if she had taken out the entire $140K in private loans at 18% interest, she would have to chuck away $2,010 a month towards her loan, and then she would only be able to pay it off (at that same rate) after 30 years, all the while racking up a total bill of $618,464 — almost five times the original amount! Add in a missed payment one month, and you can see how this issue is gaining momentum as one of the most serious problems for new graduates — coupled with low employment rates.

While I think that loaning organizations are practicing dubious policies and purposely muddling the information that is given to the students who apply for loans, I also believe that a large part of the blame should go towards schools for not educating students on how to effectively finance their college education and what to realistically expect after graduation. FinAid, an online comprehensive financial aid guide, says that a good rule of thumb for taking out loans is that “…your total education debt should be less than your expected starting salary.”

I think that most students would pass up $100,000 in loans for a photography degree if they understood that they’d likely be making less than $40,000 in their first job after school. It’s unrealistic to think that a six-figure loan will be easily paid off after school unless you’re diving into a career in banking — and I don’t think that colleges are cementing this understanding to their students. According to a quote from the LA Times’ piece, Luke Swarthout (a former advocate at the U.S. Public Interest Research Group) said “The students think it’s an investment in their future, and the colleges are willing to let them borrow heavily because it helps them fill in their enrollment.”

I, for one, was never required to take any classes or lectures on how student loans work or where to look for financing. It was just assumed that you would take out loans and they pretty much had the paperwork ready. All they required was a signature. I guess I was lucky that I did indeed have a Federal Stafford Loan with a locked interest rate of 6%. I also went to a state school with relatively low tuition, so my student loan bills were far less of a burden than many of the students that I’m hearing about now.

So, just for argument’s sake, where do you guys believe the fault lies? Is it in the hands of the private loan sector for purposely providing confusing information and not disclosing full loan amounts? Does the blame go to the college for not providing better financial aid counseling? Or does it belong to the students for being too naive when agreeing to these terms?