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JerseySmarts.com

Major Student Loan Announcement: My Student Loans Are Fully Repaid!

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When I was interviewed by USA Today about my student loan debt back in June 2006, I was so unsure of my financial position that I couldn’t even give them the correct total for my loans. That article cites a total of $116 thousand worth of student loans; believe it or not, I was about $5 thousand too low. All I was sure of was that I owed a substantial amount of money and it seemed there was no way to quickly repay the loans.

Before I started an aggressive repayment plan in December 2009 it seemed like today would be impossible to realize. Think about the situation that I was faced with (and remember that many current large dollar student loan borrowers are still in similar situations): How could a guy manage to repay approximately $121 thousand in student loan debt with a bachelor’s degree in English and a master’s degree in Public Policy? Further, how could a guy repay such an astronomical figure much quicker than the 25 and 30 year repayment plans his lenders put him on? Worse yet, how could anyone who worked at a nonprofit organization, did not rely on outside financial support, did not live at home, paid all of their own bills (on-time), lived in the most expensive state in the union, and who felt a moral obligation to annually donate at least 10% of his income achieve this goal? To say that the odds were against this day coming as soon as it did is an understatement! This goal was nearly impossible for anyone to achieve.

It's over!

And yet this day still arrived. As of this morning, my student loans are fully repaid. No more principal balance to report. No more interest versus principal calculations to make with each payment. No more wondering how much longer I’m going to make $2,500 per month payments (this was the amount of my average monthly payment in 2013). That’s $2,500 each month that I can now use towards what it should have been used for since July 2006: saving for retirement, investing in the market, investing in my continued professional and academic development, and purchasing a permanent residence.

During my last “major announcement” post back in December 2010 I happily reported that I was done repaying the New Jersey Higher Education Student Assistance Authority (NJHESAA). The NJHESAA’s series of smaller NJCLASS loans were – after consolidation – one of the two major student loans that I was obligated to repay after graduating from a master’s degree program at Rutgers back in 2006. The other major series of smaller loans – also consolidated into a single loan – were from the United States Department of Education (USED) and their Direct Loans program. Ultimately, the USED sold my loan to the Missouri Higher Education Loan Authority (MOHELA) – the lender that received my final payment earlier today.

I also had loans from two smaller sources including $1,400 from the USED’s federal Perkins loan program through Monmouth University and $7,000 (plus an additional $1,071.52 in interest) from Citibank’s student loan program.

Just as I reported after paying off my NJHESAA loan, here are the stats as they pertain to repaying my USED/MOHELA loan (these figures include both the amount of the loan and the capitalized interest; also, these are my figures and may be a few pennies or a dollar or two off from what the USED/MOHELA keeps on file).

Freshman Year of College (1999 – 2000): $2,639.27
Sophomore Year of College (2000 – 2001): $3,518.71
Junior Year of College (2001 – 2002): $5,529.88
Summer Session (2002): $0.00
Senior Year of College (2002 – 2003): $5,529.86
Undecided Graduate Semester (Fall 2003): $9,759.06
Part-Time Graduate Semester (Spring 2004): $0.00
Graduate Year One (2004 – 2005): $19,156.45
Summer Session (2005): $6,852.91
Graduate Year Two (2005 – 2006): $6,034.01
Total USED Debt at Consolidation (Plus $205.04 Refinancing Fee): $59,020.15

Total Principal Paid During the Life of the Loan: $57,575.00
Total Interest Paid During the Life of the Loan (Includes Capitalized Interest): $1,445.15 + $14,518.11
Total Fees Paid During the Life of the Loan: $205.04

Total Amount Repaid: $73,743.30

The list above shows the various USED loans that I consolidated into the final $59,020.15 loan that I began repaying in 2006. If you study that list above, there are three lines that will probably bounce out and hit you – my summer session in 2002, my part-time graduate semester in 2004, and my first year in graduate school as a full-time student in 2004 – 2005. The first two of these line items probably stand out because I did not incur any USED loans during those semesters. Why didn’t I take out any loans, you ask? Simple. As an undergraduate, the USED would not advance me any loans if I was a part-time student – that eliminated me from potentially getting a loan during the summer of 2002 (I made up the difference from NJHESAA that summer). And in the spring of 2004 I was still deciding if I wanted to apply to the Rutgers graduate program where I was a non matriculated student. Again, being a part-time student didn’t allow me to take out any loans from the USED.

Of course, I did wind up applying to the Rutgers program on a full-time basis and that first full-time year of graduate school is the other line item that stands out in the list above. This line item stands out because it is so much higher than the rest of the line items at a whopping $19,156.45. What in the world could I need that much money for in a student loan?! Again, the answer is somewhat simple: somewhere along the line I figured out that the USED would advance loan funds to pay for my “living expenses” while I was going to school full-time.

If there is one thing that I can point to that inflated my total student loan debt more than anything else it would be the ability to add my “living expenses” to my student loan requests. Even though I worked part-time at two different jobs during my undergraduate years and full-time during my graduate years (in addition to owning and operating a small business), I still included my living expenses in my student loan requests. Those living expenses including my monthly rent payments, cell phone payments, food money, automobile payments, and Lord knows what else. Unfortunately, I can’t tell you the exact amount of my student loans were allocated to these living expenses, but let me put it in perspective this way…

Pretty much all of the tuition I was charged during graduate school was paid either by me, my family, or scholarships. You read that correctly – I did not need to take out student loans to pay for my tuition at Rutgers. In other words, if you look at the list above and add up the line items titled Graduate Year One (2004 – 2005), Summer Session (2005), and Graduate Year Two (2005 – 2006), then you’ll have the total dollar amount of student loans that I requested for reasons other than tuition. After doing the math, you can see that this amount equals $32,043.37. Just to be clear, of the $120,720 that I took out in student loans, at least $32,043.37 were for expenses other than tuition. I won’t set this number in stone as the definitive total amount of loan funds that I received for non-tuition expenses because I also applied for and received living expenses (primarily rent costs) from the NJHESAA’s NJCLASS program, too.

However, to estimate that approximately a third ($40,420) of my total student loan debt was for living expenses and not tuition would be a pretty good guess. Pretty frightening, I know.

And yet today still arrived. From an above-the-fold cover story in USA Today in June 2006 to fully repaying my NJHESAA loan in December 2010, to a nice mention in an online story on USA Today in May 2011, to the milestone of having repaid $100,000 in principal, to today – it’s been an incredible ride. If you’ve been following my student loan story from the beginning, then I offer my heartfelt thanks for your patronage and willingness to read my repayment story to the end. For those of you who have added comments to these blog entries from time to time, I thank you for being a part of the conversation. If you’re one of the many folks who’ve e-mailed me saying that I inspired you to take a more aggressive stance in your own student loan repayment, then I wish you luck.

Quickly and efficiently repaying a student loan is possible; even if that student loan is $120,603.31 on day one and you wind up paying an additional $28,851.81 in interest over the life of your repayment. The great truth that I learned over these past few years is that if you want to do something, then you will find a way to achieve it. In other words, no one can stop you – except you.

And if you’re trying to repay an enormous student loan, then contact me and share your story. Good luck!

In July 2006 I began repaying $120,603.31 in student loan debt. This debt was comprised of $106,070.00 in loan principal, $12,434.58 in capitalized interest, and $2,098.73 in closing and refinancing fees. I made the final payment on this debt in August 2013. My lenders included the United States Department of Education’s (USED) Perkins loan program, the USED’s subsidized and unsubsidized Direct Loan programs, the New Jersey Higher Education Student Assistance Authority’s NJCLASS program, CitiBank, and the Missouri Higher Education Loan Authority (the USED sold my loan to MOHELA in April 2012). In total, I paid $149,455.12 to these lenders including $120,603.31 in consolidated principal and $28,851.81 in interest. You can read my entire student loan repayment story on JerseySmarts.com.

What To Do With Madoff’s Assets

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Bernie Madoff has instructed his lawyers to prevent any seizing and monetizing of his assets. The suggestion is that these assets are in his wife’s name and thus they are unrelated to the ponzi scheme that Madoff was running. What hubris on the part of Madoff! This man is the lowest form of life on the planet. Not only is he the largest individual criminal in the history of the world (think about that for a minute – he’s stolen more money than any other person ever born), but now he wants to be flagrant about using loopholes in the law to keep those assets. What a disgusting pig.

The request was acknowledged, but not granted, in court documents filed on Monday both by federal prosecutors and the trustee overseeing the liquidation of Mr. Madoff’s estate for the benefit of customers who say they have lost billions they entrusted to Mr. Madoff over many years.

Mr. Madoff’s assets were frozen in December after he was arrested on charges of operating a worldwide Ponzi scheme, with losses he allegedly said were as high as $50 billion. In January, his wife agreed to a voluntary asset freeze when prosecutors, citing the couple’s effort to mail out expensive jewelry to family and friends, sought to revoke her husband’s bail.

The New York Times’ Deal Book blog posted the above piece in the story about Madoff. My suggestion is to liquidate the assets and give them back to the folks that this disgusting human being ripped off. Giving the money back might actually be a hard case since you have to figure out who gets the money first, but I would probably err on the side of giving the dollars back to the elderly first, then the foundations, and then the rest of his investors. Granted, no one will be receiving the entire value of their deposits. However, if you’re in your 80’s and you went from $50 million in assets to $0, then I’m sure you’ll take even $50 thousand if it comes your way.

I hope they throw this Madoff character in jail for the rest of his life.

The FAFSA May Be On The Way Out

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The New York Times printed an article this morning talking about how the Free Application for Federal Student Aid (FAFSA) is too cumbersome for most families to fill out. They cited how some families are even turning to paid consultants to complete the form, paying somewhere between $80 and $100 per application (which defeats the whole purpose of a free application).

Clearly, if you’ve read this blog over the years, you know that I have a long and storied history with student loans. Over the course of my 7 years as an undergraduate and graduate student I filled out a bunch of these things; my Mother and I filled out my first few FAFSA forms and I filled out the last few. What I remember about filling out the forms was not that it was tedious (filling out any government form is tedious), but rather that the results reports were not good enough.

In other words, you’d put together this FAFSA and then get a report back (mine was from my undergraduate institute) telling you which aid you qualified for based on your responses. The report didn’t speak to potential repayment scenarios or to existing debts under each program; both pieces of information could really help students and their families make better decisions. I’m not sure why this information isn’t included in the report as both the federal government and the college have the information at their fingertips.

The FAFSA should be changed, but this change should be a part of changing the entire student loan process.

Bad News On Credit Card Payments

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Right at the end of January, USA Today published an article that talked about how consumers were paying less money each month towards their credit card balances. This is bad news. On the one hand it’s good to know that consumers are making their monthly payments, but on the other hand it’s horrible to hear that people are sticking closer to the monthly minimums than has historically been true.

Credit cards are great tools to help build a credit history, but they have to be used properly or they can demolish a person’s financial status. Anyone who knows how to use money to their advantage can tell you that not all debt is bad debt. Sometimes a person can use debt to their advantage (for example, the right types of student loans and home mortgages). Consumer debt, though, is a different story.

The right types of student loans and home mortgages are investments in the long-term future of you and/or your family. Consumer debt, though, is more of an investment in the here and now – this is why it should be used sparingly. Sure, everyone falls victim to the use of consumer debt to meet their immediate wants. Hey, I spent a great deal of money buying a television last month just because I wanted it! Well, the old television was broken, too, but that’s a different story. That said, though, I do not believe that people should avoid credit cards. I think each person should have one or possibly two credit cards, but no more. I keep one to both maintain a good credit history and just in case I need access to a large dollar amount quickly (since I don’t keep much cash in my checking accounts – the money stays socked away in the savings and investment accounts).

In any event, I thought the USA Today article was pretty good and wanted to share. Enjoy!

Send A Message to President Obama NOW!

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President Barack Obama has pledged to be one of the most open Presidents in American history. To show that he is both tech savvy and willing to hear the comments from all American citizens, he’s transformed WhiteHouse.gov into a blog-style website. The new style of the site comes complete with a contact form where you can send a message to the White House with the hope that President Obama will actually read it.

The link for that portion of the White House’s website may be found by clicking here. I hope that Americans really take this opportunity to send messages to the White House to talk about the things that are affecting them everyday. Personally, I’ve sent two messages to the White House so far – both of them dealing with a tax issue related to student loans.

For those of you who have student loans, you’ll know that you can deduct the interest paid on your loans on your taxes. The problem is that you can only deduct up to $2,500 per tax year. Well hey, if you have massive student loan debt, you may be paying upwards of $5,000 or $6,000 per year in interest alone!

If you’re out there in the world and making good money, but are saddled with gigantic student loan debt, you know that being able to deduct the entire amount of interest paid on student loans would be a great way to put more dollars back in the pockets of the working class…the very people who would not have been able to attend college if it were not for those loans. So this is what I’ve been sending Obama – that you can go ahead and fix the economy, but if people with massive student loan debt are still spending an exorbitant portion of their income on this interest, then fixing the economy won’t matter.

One way to mitigate this problem is allowing Borrowers to deduct the entire amount of their student loan interest. If you agree, here is a short message that you, too, can send to the White House on the contact page listed above:

Tax policies should be revised so that 100% of annual interest paid on student loans can be deducted on personal taxes. Many Borrowers with high student loan debts pay a high portion of their annual, post-tax income as interest on student loans. Currently, only $2,500 may be deducted annually. Borrowers with larger student loan debts routinely pay upwards of $5,000 each year in interest. Allowing the total amount of interest paid to be deducted will better position these citizens in the economy.

You’ll see that you can only submit 500 characters worth of a message to the White House (which makes sense). The italicized blurb above is 500 characters on the dot. So if this is something that you can agree with, please copy and paste the text above into the contact form on the White House website!