As Default Rates on Borrowing for Higher Education Rise,Some Borrowers See No Way Out

[keepinitreal]

only 40% of that debt is actively being repaid. The rest is in default, or in deferment, which means that payments and interest are halted, or in "forbearance," which means payments are halted while interest accrues.

Although Dr. Bisutti's debt load is unusual, her experience having problems repaying isn't. Emmanuel Tellez's mother is a laid-off factory worker, and $120 from her $300 unemployment checks is garnished to pay the federal PLUS student loan she took out for her son

http://online.wsj.com/article/SB10001424052748703389004575033063806327030.html?mod=WSJ_hpp_sections_personalfinance

[keepinitreal]

They garnisheed 40% of the mother's unemployment check. Wow!

[Flamingo]

This woman is 41 and what one can gather from the article she was in her mid-30's when she finished medical school. She is far from stupid for going that far but now she only states that "half is her own fault." It doesn't take a degree in mathematics for an adult to figure out what would happen when one graduates after taking out the previous loans and what could happen if payments are not made after deferment. It's all spelled out in the paperwork received when the loans are taken out. What did she think was going to happen when she graduated after going to school for all those years and not paying a cent? Hello!! Heck my daughter is 22 going to school utilizing deferred Stafford Loans and she is well aware of what will have to be repaid upon graduation. We sat down and fully went over the situation to ensure she would have a handle on the situation and not borrow too much to get her in trouble. People have to realize the big great job at the end of graduation may not be there and need to plan accordingly in case their dream job does not materialize right away. Should there be a longer deferrment period after one graduates to ensure they can find a good job before repayment begins? Or if one cannot get a job right way can the length of the payment period be extended out temporarily to lower payments with a block put on interest and penalties?

Over the past 20 years, Americans have learned not to plan as to finances because there was always a way to borrow more money somewhere to either get what they want or finance it in some creative way. The Predatory Mortgage mess shows what can come out of that and the next big bust is the student loan area...

[BobMango]

I'm having some difficulty finding a lot of sympathy for the good doctor. The situation she finds herself in is entirely of her own making. Taking out ill-advised loans, not reading the paperwork, not making payments, etc.

Many of the folks here are here because of job loss or business failure or real estate implosion, combined with some degree of poor credit usage prior to those initiating events. In this case there is no job loss or other "event" to cause the situation, it's simply poor management by the doctor. Additionally her refusal to let SallieMae talk about the case while she is spilling the beans makes me think there is another side to the story she may not want told.

[tigergem]

This makes me very happy that I am an underachiever without a graduate degree.

[bulletproof77]

Me too...just a cop with a High School diploma and one year of JC....

[keepinitreal]

Emmanuel Tellez's mother is a laid-off factory worker, and $120 from her $300 unemployment checks is garnished to pay the federal PLUS student loan she took out for her son.

By the time Mr. Tellez graduated in 2008, he had $50,000 of his own debt in loans issued by SLM Corp., known as Sallie Mae, the largest private student lender. In December, he was laid off from his $29,000-a-year job in Boston and defaulted.

The Tellez family was the interesting case. Because I'm currently receiving unemployment, the fact that $120 of the mom's $300 check was garnished is scary. I thought 25% was the maximum that could be garnished, but this is 40%. Does anyone know if there IS a maximum amount that can be garnished?

[lrprn]

Does anyone know if there IS a maximum amount that can be garnished?

Actually the Education Department is allowed to garnish 15% of each paycheck for defaulted government student loans like ParentPlus loans - see http://www2.ed.gov/offices/OSFAP/DCS/awg.html for the details.

Ms. Tellez also had the chance to prove to the Education Dept that paying even the 15% would be a hardship. Considering she's collecting unemployment, paying anything out of her unemployment check is a hardship. Could it be she didn't understand her rights in this unfortunate situation?

Also makes me wonder if Ms. Tellez has other garnishments besides the ParentPlus default? 15% gov't + 25% garnishment allowed in most states = 40%. Or maybe the reporter on the story made an error?

[BCA2009]

I worked my way thru college. It toke me 5 1/2 years to get a 4 year degree, but I didn't owe a dime when I graduated and I appreciated that hard work went into earning the degree.

But, I have to say that I have have alot of heartburn over student loans. They are targeted (obviously) to 18 - 20 year olds. And they freely give large sums, knowing that the loans can't be discharged.

I believe all loans ought to be discharged. Actually, I believe all loans should be discharged rather easily with only the collateral being taken back. If that were the case, banks would be making responsible loans with plenty of collateral to back them up and the economy wouldn't be in the shape it is right now.

The soapbox is available for the next person now.

[banca rotta]

This makes me very happy that I am an underachiever without a graduate degree.

That's the way it seems. I think anyone can see especially in this job market that the "underachievers without a graduate degrees" are already ahead of the "smart people" going to college.

I remember listening to Donald Trump once say that when he had his financial difficulties many years ago he noticed that the homeless man in the street was in better shape then he was. The homeless man had a net worth of zero and trump at that time was worth neg 1 billion.

Hopefully college grads can turn things around as Trump did.

[OhioFiler]

I feel nothing for Dr. Bisutti. The most troubling thing to me is she essentially forced her father into paying Wells Fargo $550 per month for a year.

She knew what was going on and understood the terms of her loans. She just assumed she'd be rich or marry a rich man to deal with this mess.

[backtoschool]

I don't see anything in the article posted above to suggest that Dr. Bisutti expected to "marry a rich man to deal with this mess". That is quite a chauvinistic remark Ohiofiler. Dr. Bisutti is a doctor who defaulted on her loans, and because she defaulted on them, they ballooned with extra fees and interest. Believe me, I know how Dr. Bisutti feels, it is very difficult to keep track of loans and consolidate them etc, when you are in graduate school and work long hours. The loans change hands many many times and often it is difficult or impossible to keep track of who is your current lender. I had to consolidate my loans twice to get them all.

In my case, most of my student loan balance is not for the loans themselves but is the added collection fees and interest on the original loans. At the time, I consolidated, rehabilitation was way too expensive for me to be able to afford, and I ended up consolidating instead, which doubled the size of the loans.

Getting a medical degree involves long hours and a lot of work. Medical Interns do not get paid a very large salary either. I am sure that Dr. Bisutti did not have the time to track her paperwork down, and it was very easy to let the loans slip into default.

As someone still burdened with student loans, I can sympathize with Dr. Bisutti. I do not think that one form of debt is more "righteous" than any other. Defaulting on credit cards, second mortgages, car loans or student loans is still defaulting on a contract.

The only difference is that student loans are not ever forgiven.

[OhioFiler]

I don't see anything in the article posted above to suggest that Dr. Bisutti expected to "marry a rich man to deal with this mess". That is quite a chauvinistic remark Ohiofiler. Dr. Bisutti is a doctor who defaulted on her loans, and because she defaulted on them, they ballooned with extra fees and interest. Believe me, I know how Dr. Bisutti feels, it is very difficult to keep track of loans and consolidate them etc, when you are in graduate school and work long hours. The loans change hands many many times and often it is difficult or impossible to keep track of who is your current lender. I had to consolidate my loans twice to get them all.

In my case, most of my student loan balance is not for the loans themselves but is the added collection fees and interest on the original loans. At the time, I consolidated, rehabilitation was way too expensive for me to be able to afford, and I ended up consolidating instead, which doubled the size of the loans.

Getting a medical degree involves long hours and a lot of work. Medical Interns do not get paid a very large salary either. I am sure that Dr. Bisutti did not have the time to track her paperwork down, and it was very easy to let the loans slip into default.

As someone still burdened with student loans, I can sympathize with Dr. Bisutti. I do not think that one form of debt is more "righteous" than any other. Defaulting on credit cards, second mortgages, car loans or student loans is still defaulting on a contract.

The only difference is that student loans are not ever forgiven.

Dr. Bisutti had to have had some plan for repaying her debts. The conclusion I reached was based on her expecting her father to pay her debts previously. She established a pattern of reliance on men to pay her debt and she doesn't indicate anywhere in her whine how she ever intended to repay her debt. She fell prey to the "not reading the fine print" demon that is often cited as an excuse. Personal responsibility be damned. I'm certain she intended the problem would go away once she met Mr Right.

[backtoschool]

Dr. Bisutti had to have had some plan for repaying her debts. The conclusion I reached was based on her expecting her father to pay her debts previously. She established a pattern of reliance on men to pay her debt and she doesn't indicate anywhere in her whine how she ever intended to repay her debt. She fell prey to the "not reading the fine print" demon that is often cited as an excuse. Personal responsibility be damned. I'm certain she intended the problem would go away once she met Mr Right.

Did you intend for "Ms Right" (or Mr. Right. ) to help your debt problems go away Ohiofiler? I don't see anything in Dr. Bisutti's behavior that is any different than any other debtor that is in over his/her head. I am not sure why you are attributing motive to Dr. Bisutti that is not in the article.

In any case, your tweaks aside, I can sympathize with anyone who is burdened by student loans. It is so easy for them to snow-ball and be unmanageable. Being burdened with student loans for life is a life altering event for many.

[OhioFiler]

Did you intend for "Ms Right" (or Mr. Right. ) to help your debt problems go away Ohiofiler? I don't see anything in Dr. Bisutti's behavior that is any different than any other debtor that is in over his/her head. I am not sure why you are attributing motive to Dr. Bisutti that is not in the article.

In any case, your tweaks aside, I can sympathize with anyone who is burdened by student loans. It is so easy for them to snow-ball and be unmanageable. Being burdened with student loans for life is a life altering event for many.

If the trustee handling my case is Ms or Mr Right I expect them to make my debt problems go away.

I see Dr Bisutti as someone who was so driven to become a doctor that she failed to recognize the cost.

I assigned motive to Dr Bisutti based on what I read in the article. She established precedent.

I too can sympathize with Dr Bisutti and others in her situation. That doesn't mean I can't comment on her case.

Furthermore, what is her motive for going public? I believe her motivation is to find a solution to her debt problems. I can't believe she went public simply to warn others of the potential pitfalls of going to school on someone else's dime for 15 years. Given there is no relief available to her via bankruptcy court I conclude her story is a personal ad.