Where the student loan burdened crybabies and occupiers failed, I succeeded.

When 2011 began I had $54,385.85 in total student loan debt remaining payable to the United States Department of Education. When 2011 ended I had $34,911.14 in total student loan debt remaining (still payable to the USED). The reason why I share these numbers is because I want people out there with incredible amounts of student loan debt to know that you can defeat your debt and you can do it without the dream job or the six figure salary. You can defeat the debt by working hard and giving up many of the luxuries of life until you can afford them.

I’m not going to recount my point of view on these topics because I’ve done so over and over again in 2011 (and prior years). However, what I thought would be helpful is if I put together a brief list of links to other student loan entries from 2011 that focus on certain topics related to repaying student loan debt.

• January 2011: The Year Begins
• April 2011: Repaying Student Loans Versus Spending Money on Other Stuff
• May 2011: Quoted in USA Today – Again!
• August 2011: Responding to Dumb Comments
• August 2011: Pondering Post-Repayment Financial Goals
• October 2011: Thoughts on the Movement to Forgive Student Loans
• December 2011: The Power of Focus, Research, and Action

Personally, I think that the last entry linked above is a really good one. If you have a few minutes and you haven’t read that one yet, then I recommend giving it a go. Here are some other interesting tidbits regarding the repayment of my student loans in 2011…

• Daily Interest. When 2011 began I was accruing $6.71 every day in interest alone. Today, my student loans accrue $4.30 in interest on a daily basis. It’s not great, but I’ll take a $2.41 reduction in interest accruing everyday! Over the course of a year, that’s $879.65 saved in interest alone. Still think that it’s not worth it to drastically overpay your monthly bills?
• Principal Repaid. In 2011, I repaid a total of $19,474.71 in principal.
• Interest Repaid. In 2011, I paid a total of $2,133.68 in interest. Also, because the tax code is written to reward lazy people with a redistribution of wealth from those of us who work their asses off (i.e. people who aren’t rich, but still work like crazy to earn enough money to repay their debts), I won’t be able to count the full $2,133.68 as a tax deduction. Why? Simple – I worked too hard in 2011 and earned too much money so my eligibility to count the $2,133.68 as a tax deduction is nullified. Think about that – I worked extra hard to earn extra money that I did NOT keep or stick into an account somewhere. Instead, sent that money to the government to repay this loan and that same government is going to penalize me for that hard work in repaying their loan by not allowing me to count the $2,133.68 as a tax deduction. Now tell me how this government is working in the best interests of the hardworking middle class again???

Look folks – either you get busy repaying your debts or you get busy occupying public space and/or crying and whining about something that only you can really change. Getting busy repaying your debts works – my experience proves that time and time again. Bitching and moaning about how your debt is someone else’s problem isn’t going to get you anywhere – the public displays of childishness proved that throughout the latter half of 2011.

Here’s to pushing harder than ever to have my student loans totally repaid by the end of 2012!

To begin, if you really want to read up on this issue you should head over to the Forgive Student Loan Debt website – tons of information over there on the idea and concept. More recently, the New York Times commented on the concept of forgiving debt in a commentary posted to their website, which you can access by clicking here. The New York Times piece makes a good point about the downside of forgiving debt, in general, when it suggests:

To start, writing off debts would not necessarily increase economic growth. Every liability is also an asset, so while a dollar that is no longer required for debt repayment might add some cents to consumer spending, it is also a dollar cut out of a bank’s capital or of an investor’s net worth — subtracting from resources and confidence.

And write-offs big enough to change consumer behavior would probably be big enough to destabilize banks. The Federal Reserve or the government would need to help, presumably by injecting newly printed money as capital. Such government control is usually inefficient, and abundant printing of money increases the risk of uncontrolled inflation, which has its own way of making people feel poorer.

The issue of moral hazard also cannot be ignored. Much of the excess debt was incurred through irresponsible mortgage refinancing, which peaked in 2006 at $322 billion, representing 2.4 percent of G.D.P. The reckless use of houses as A.T.M.’s was a major factor in decapitalizing and destabilizing the American economy. Forgiving such debts will teach the wrong lesson: borrow in haste, repent never.

Okay. They’re right. I get it. Makes sense. But what about student loan debt? Does forgiving student loan debt make any difference in this equation? I think so.

Sure, I agree with the New York Times about the moral hazard issue and I would hate to see folks incur massive amounts of debt only to discharge that debt via bankruptcy a year after graduating. That wouldn’t be right. However, I would like to see a system that allows for some level of forgiveness for student loan debt after a certain period, time spent working at a certain job, or some other logical qualifier. The federal government has a program that like that right now where after working for a nonprofit organization or for the government for ten years, the balance of your student loan can be forgiven (the program is so much more complicated than that, but you can look it up if you want to know more about it).

Megan McArdle wrote a very good article in The Atlantic the other day about this issue. I think that my point of view is very much in like with Ms. McArdle’s thoughts. In her article, she writes:

By allowing students to shift forward the additional income that their degree will earn them, student loans have allowed universities to capture a huge portion of that future income stream–which really hurts those for whom that stream doesn’t materialize. Moreover, it allows students to make the sort of stupid choices that most 19-year-olds will make if they’re allowed. I don’t have a lot of patience for university administrators claiming that they just can’t possibly charge less than $25,000 for 15 hours a week worth of classes, but they do have one point: they build expensive new facilities and load on the services because students demand them, and threaten to go elsewhere if they can’t get them. Colleges look ever-more like four year resorts with a sideline in academic research.

If students actually had to earn the money to pay for that world-class fitness center, the 2,000 different clubs, and the off-campus apartment with the pizza parties, there would be a lot less of those things. And while I like both world class fitness centers, and apartments, they’re not the sort of thing that should be funded with borrowed money. If the degree caused pain now rather than pain later, they might also think harder about whether what they were studying was likely to deliver a solid return on that investment. I’m not faulting the students–the future is a pretty hazy concept when you’re eighteen. I’m just arguing that it’s not necessarily helping to enable them.

For me, this is the crux of the issue. I’ve been saying for a while that I really don’t like the social system we’ve built in this nation where we tell young people that their ideal life is to do well in high school, immediately go to college, and then begin working for the next 35 – 40 years of their lives. That’s not conducive to the type of futuristic, 21st Century society that we should be building. Yet, we’ve not only created this social ideal, but we’ve found a way to fund it in a manner that allows colleges and universities to make a ton of money! That’s not conducive to many things including increasing the value of a college degree in the workplace (which colleges should be concerned about) and increasing college graduates’ personal wealth (which all college graduates and their families should be concerned about). So, as the folks at the Forgive Student Loan Debt website can tell you – the system is clearly broken.

I’m not the type of person to throw the baby out with the bathwater, though. And it is in that mindset that I believe we shouldn’t forgive 100% of student loan debt. Instead, we need to fundamentally change the system for both current borrowers and future borrowers. For example, to address the concerns of those borrowers who currently have outstanding student loans and are struggling to repay them, we need to create truly flexible repayment programs. In other words, we don’t need to capitalize interest on loans that are in deferment – we need to eliminate the interest on those loans, period. For a private banker, that’s the epitome of a risky loan so I understand that this type of recommendation will likely create a culture shock at the local bank. However, if I’m the guy who runs the local bank, I’m more concerned about having my principal repaid – even if it’s over time – than having a loan go into default because the total burden was too much for the borrower.

And on the same note, if banks continue to want to fund student loans, then they need to do better underwriting to make sure that the person who takes out the loan can repay it once the time comes for repayment. But that’s a topic for another post entirely.

For future borrowers, I’d be in favor of a graduated borrowing schedule and a total student loan cap. I don’t know what number would work or what the system would look like in its final form, but I don’t see why we couldn’t form a program where students are allowed to borrow (for example) up to $10,000 during their Freshman year, $8,000 during their Sophomore year, $5,000 during their Junior year, and then $3,000 during their Senior year. In total, that’s $26,000 worth of student loan debt (which should also have flexible repayment options and a very low interest rate). Repaying that amount of student loan debt is totally reasonable. Plus, a graduated debt schedule might entice students who do not currently work to get a part-time job (or two) while in school. It would also encourage students to think twice about those stupid choices that Ms. McArdle references above.

What it comes down to is education about the system. In the current system or in a revised system, more people just need to understand the entire student loan industry before they choose to take out those loans. And I think we’d be hard pressed to try to force all of the knowledge into the heads of young people. Instead, we need to be sure that the parents and guardians are more aware of what the implications of these students loans are in the long-term and hope that they educate their kids about the possible outcomes. There are always going to be outlier situations, of course, where some folks get themselves in very deep debt. But if we – as a society – understand the issue better, we might be able to find a reasonable way out of this hole.

For me, though, I’m in favor of some form of forgiveness of student loan debt. I’d probably focus on eliminating the capitalized fees, interest, and penalties from the student loan balance first. Then, I’d try to encourage the expansion of the debt forgiveness program I referenced above. Again, we don’t need to eliminate the entire system – we just need to recognize that it is broken and begin working to really fix it – right now.

Unfortunately, it appears that the second half of my student loan repayment plan may not occur as I had originally anticipated. Even though I was told by the United States Department of Education (USDOE) that I qualified for the Public Service Loan Forgiveness Program and that I was already enrolled in it due to the excessive amount of student loan debt that I was carrying, it turns out that information wasn’t entirely correct. Yes, I still qualify for the forgiveness program, but no – I won’t be taking it up as a repayment option.

Why, you ask?

Simple. I called the USDOE about a month ago to get an update on all of the details on this program and how I could possibly use it to my repayment advantage. As it turns out, the first person that I e-mailed back and forth with (linked above) was incorrect when she implied that I was already in the forgiveness program, which forgives the balance of your debt after 10 years of consecutive repayments assuming that you meet certain parameters. Right now I’m 4 years into my repayment, so if the first person that I talked to was correct with her information, then I would be nearly halfway done with my $55 thousand USDOE debt. Well, she was wrong.

Apparently the forgiveness program requires you to complete a simple application to enroll and part of the approval process includes wrapping up all of your debt into one big loan with the USDOE. There is no way I would do this. I currently have a private loan with about $30 thousand outstanding at 7.33% interest. If I can stick my repayment plan (and I’ve done so well so far), then I can have the private loan repaid within 12 months. If I consolidated with the USDOE now, then I would wind up with a blended interest rate of above 5.5% and I would have to carry that for the life of my student loan repayments. Currently, my interest rate with the USDOE is 4.25%.

In other words, if I consolidated with the USDOE and stuck to my current repayment plan, I’d wind up increasing my interest rate by over a point. What’s the sense in that?

So… I’m not enrolling in the Public Service Loan Forgiveness Program. And now I’ll have to reformulate the second half of my repayment plan for my student loans. At this point, my reformulated plan is to keep all things the same and just continue the automatic monthly payments out of my checking account straight to the USDOE. But, as I continue to demolish the private loan debt we’ll see if I come up with another repayment plan.

My name is Joe and I am contacting you about the Public Service Loan Forgiveness Program created by the College Cost Reduction and Access Act of 2007. I have been working, full-time, for nonprofit organizations since May 2005. I have approximately $56,000 in federal student loans (a Direct Loans consolidation loan) and $48,000 in private student loans.

I understand that the private student loans do not qualify for the new provisions, however, I want to confirm that my Direct Loans consolidation loan does qualify. Also, I’ve read that the new regulations apply to payments made from October 2007 forward. Since I make my payments each month, does this mean that I can count my last 14 payments towards the 120 required for the balance of the loan to be forgiven? Is there anyway to count the previous monthly payments that I’ve made since I began repayment in July 2006?

Please let me know if you need any additional information. This is exciting news!

And here is the response from the program administrator in Washington, DC.

Good Morning Joe,

Your Direct loan consolidation loan will qualify for the forgiveness, and will count payments beginning on October 2007 forward. So, all payments made from the Oct. date on will count towards the 120 payments. Sorry, none of the payments made before that date can or will count towards the 120 payments. I’m glad that the public service forgiveness program will be a great benefit for you. If there is anything else I can do to help, please let me know.

A very friendly response from the feds – I like it! I thought that I should return the favor with a comment or two of my own and another question or so.

Thank you so much for the information! A final question or two.

First, do the 120 payments need to correspond to 120 months? Or if I make two payments in one month does that count as 2 payments towards the 120?

And finally, is there anything that I need to sign up for in order to be a part of this program? Or do I just track the payments on my own and when I hit 120 payments I contact Direct Loans?

And, within a matter of minutes, the program administrator replied as such…

One payment per month is what counts towards the 120 payments and direct loans will track the payments for you, we are also in the process of developing a form to have your employer sign as a public service position to tie the job with the payments.

This was perhaps the most pleasant experience that I’ve ever had dealing with my student loans. The representative, Ms. Nikki Harris, was professional and courteous and showed the utmost in professionalism in her prompt responses to my questions. And on top of that, I might be looking at getting some of my student loans forgiven after another 106 payments!

I have to figure out what I’d like to do with this, actually. I’ve been making excess payments on both my private NJHESAA loan and my Direct Loans consolidation loan. However, since I am being charged more on my NJHESAA loan and there is a possibility to have the Direct Loan forgiven at some point, it might make sense to begin adding more to my monthly payments to NJHESAA and then see where I’m at in a few years with the Direct Loans. The problem that I have with NJHESAA, though, is that you can’t make online payments – it’s so archaic.

Anyway, I take this information about the Public Service Loan Forgiveness Program as a good sign. This is a good way to begin the new year!

1. What is the Public Service Loan Forgiveness Program?
The Public Service Loan Forgiveness Program is intended to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their eligible federal loans after they satisfy the Program’s public service and loan repayment requirements. Those individuals with certain federal student loans for college (Federal Eligible Direct Loans) may qualify to have the outstanding principal balance and accrued interest cancelled under the following conditions: (a) the borrower makes 120 monthly payments on the loan after October 1, 2007; (b) the borrower is employed by a “public service organization” at the time that loan forgiveness is requested and granted, as well as during the period the borrower makes the required 120 monthly payments; and (c) the loan is not in default at the time of the request.

“Federal Eligible Direct Loans” is defined to mean a Direct Subsidized Loan, a Direct Unsubsidized Loan, Direct PLUS loan, or a Direct Consolidation Loan. Your loan documentation should identify the type of federal loan you have.

2. What is a “public service organization?”
Public service organizations include full-time jobs at a nonprofit that is a Section 501(c)(3) organization under the Internal Revenue Code. Other public service organizations include federal, state, local or tribal governments, agencies or entities; public child or family service agencies; Tribal colleges or universities; and private organizations that provide public services like emergency management, public safety, public interest law service, public care for children, elders or disabled, or public health, education or library services.*

3. When and how can I start counting my ten years?
The Program applies to payments made after October 1, 2007. Every month you work at a public service organization and make your loan payment on time counts towards the necessary 120 payments. Your service does not have to be consecutive however (e.g., if you worked for a nonprofit for a year, then a business for a year, and then again at a nonprofit, you just starting counting payments where you left off).

4. Do I have to keep working in the same public service job?
No. For a payment to count towards the forgiveness period, the borrower has to have been employed full-time by a public service organization when the payment was made. As noted, there are many types of public service organizations.

5. What does it mean to work full time?
“Full-time” means working in one or more public service jobs for the greater of: (a) an annual average of at least 30 hours per week, or for a contractual or employment period of at least 8 months, an average of 30 hours per week; or (b) the number of hours the employer considers full-time.

6. What if I am a teacher?
For borrowers with a contractual or employment period of less than 12 months, qualifying payments have to be made each month for all 12 months. Teachers who work on an academic year basis, often for only nine months in a year, would still be required to make payments on their loans during the summer vacation period.

7. What if I was/am an AmeriCorps or Peace Corps volunteer?
Full-time service in an AmeriCorps or Peace Corps position counts as employment in a public service job. AmeriCorps Segal Education Awards or Peace Corps transition payments used for loan repayment may qualify to meet the 120-payment requirement.

8. How do I keep track of this?
It is the borrower’s responsibility to collect and retain the documents that support eligibility for this benefit.

9. Does this just apply to loans taken by the student, or does it also apply to the loans a student’s parent(s) have taken?
For the most part, this just applies to eligible loans the student has taken directly. Parents with outstanding loans would need to contact the Department of Education to learn the conditions under which part of their loans could be forgiven.

10. What if I have further questions?
For further information on the Public Service Loan Forgiveness Program, contact Nikki Harris at the Department of Education. Telephone: (202)219-7050. Internet: Nikki.Harris@ed.gov

*This last category of private organizations providing public services do not include the following: for profit organizations, labor unions, partisan political organizations, or religious organizations (unless the activities of the religious organization are unrelated to religious instruction, workshop or any form of proselytizing).

Disclaimer: The information in this courtesy fact sheet is provided for informational purposes only and is not a substitute for expert legal, tax, or other professional advice specific to an individual’s circumstances.

Again, this information comes from the National Council of Nonprofits and I trust in their review of this program. For those of us with tremendous student loan debt – be on the lookout for more information about this program. It could be big!