Where, Exactly, Did All of That Student Loan Money Go?

You would probably be amazed how many times there are thoughts that I have in my head that I know I want to translate into entries on this blog, but never have the time (or memory) to get down on paper (or the electronic equivalent). That’s probably why I usually have so many half-finished entries in the “Drafts” folder of this blog – because I’ll start writing an entry and then not finish it in a timely manner since the thought that would finish the entry comes too late or when I’m not near a computer. For example, a few months ago I wrote about what I would have done with all of the money that I spent on student loans if I didn’t have to send it off to the loan companies and the government. Well, in the week since I wrote that entry I realized that I forgot to add a small addendum at the end of the post talking about where all of that money went.

And thus we have this entry. 🙂

Like the title of this entry says – where, exactly, did all of that student loan money go? There are a few ways to answer this question so I’m going to compartmentalize the response as best as I can. To answer this question one first has to understand that the money that I paid in student loans has been sent to four primary lenders: Monmouth University (MU), CitiBank, the New Jersey Higher Education Student Assistance Authority (NJHESAA), and the United States Department of Education (USED). With respect to the USED, the Department recently sold my loan to the Missouri Higher Education Loan Authority (MOHELA), so when I write about them I’ll reference MOHELA.

Monmouth University – Perkins Loan
This is the easiest one for me to discuss. Many years ago when I was an undergraduate attending MU I received a Perkins loan from the university. Perkins loans are provided by the government and can be offered from the university to help finance the cost of education. The university advanced a $1,400 Perkins loan which I repaid very soon after graduating in May 2003 (I can’t remember the date, but it was within the first 12 months of graduating; possibly within the first 3 – 6 months).

Where did that student loan money go? Well, the Perkins loan program is arranged to be a revolving loan fund at each university, so the money I repaid to MU was ultimately used to provide loans to other eligible students. And that’s not such a bad outcome for repaying this small student loan.

CitiBank – CitiAssist Graduate Loan
This was a private student loan that I took out from CitiBank while I was attending the Bloustein School of Planning and Public Policy at Rutgers University. In truth, I didn’t use all of these funds for tuition expenses. As I recall, I used the majority of these funds to pay for one semester of graduate classes at Rutgers and then used the balance to pay some living expenses as well as to purchase some textbooks.

Where did this student loan money go after I repaid it? This one is simple – the loan was a private loan fully-backed by the federal government so a full one hundred percent of the funds were returned to CitiBank. That includes the full $7,000 that I paid in principal as well as the $1,071.52 that I paid in interest. All of that interest money is profit to CitiBank that probably went towards paying someone’s salary or other forms of compensation (i.e. bonuses). Congratulations, CitiBank – you achieved a 15.3% return on your investment in me!

New Jersey Higher Education Student Assistance Authority (NJHESAA) – NJCLASS Loans
Is there anyone else out there on the internet who has blogged more about the NJHESAA organization than I have on this blog? I know that there are thousands of similar-minded current and former borrowers out there who are frustrated with the way that this organization treats its clients. To be fair, though, I haven’t been a client of this group for a few years now and I hope that they have learned from having their terrible customer service reported around the internet. In any event, I covered my relationship with this group quite a bit on this blog, not the least of which was a post I created on my final payment to the company, which you can read by clicking here.

With respect to where that student loan money went, it broke out as $40,095 repaid in student loan principal, $24,251.61 paid in interest, and $1,893.69 paid in fees. That’s a total of $66,240.30. The interest and fees were all profit to the NJHESAA organization so they could have used that money for whatever they wanted. As I understand it, the principal for the NJCLASS loan program while I was utilizing it was generating from the sale of tax-exempt bonds. So, one would hope that the principal I paid to NJHESAA was used to repay their bond financing, but who knows? What I DO know is that NJHESAA not only made all of its principal back off of my loan, but it made a 65% gain from interest and fees (because, you know, I didn’t need that to buy a house or a car or anything).

United States Department of Education (USED) – Direct Loan
This one is interesting and it’s not a loan that I’m fully ready to discuss or breakout yet. Part of that reason is because the USED sold my loan to the Missouri Higher Education Loan Authority (MOHELA; the Missouri equivalent of NJHESAA). I didn’t ask for that loan to be sold, I didn’t want that loan to be sold, and I’m not happy that the loan was sold. I wanted to finish up repaying this loan to the organization that originally advanced it to me – the USED. However, I was repaying the loan so quickly that the USED considered me a strong investment and sold my loan to a private loan company. Wonderful.

My early figures show that I took out $57,575 in USED principal, capitalized some $1,445.15 in interest, and paid $205.04 in consolidation fees. Those numbers aren’t worth talking about, though, since I’ve paid an incredibly amount of interest since this loan started and that figure isn’t captured anywhere. Plus, this loan will ultimately have to be broken out between both the USED and MOHELA.

What a pain in the ass.

Anyway, there are some figures for you – where did my student loan money go? Well, the one thing that we know for sure is that it didn’t go towards building the economy and it mostly did not go towards helping other higher education students achieve their academic goals. What a wonderful waste of money and, more importantly to me, my time.