Americans have $1.3 trillion dollars in student loans, according to Forbes, February 2017. Student loans are government guaranteed. Which means the only way to get out of them is to pay them off or die. They are not bankrupt-able.
If you happen to work at a not-for-profit organization (like me), you may qualify for a Student Loan forgiveness program. Loan forgiveness? Sign me up, amiright?
Never ever, ever, ever sign up for this program. I don’t care how good it sounds. I made the mistake of signing up for this late last year and oh how I wish someone would of smacked some sense into me.
Ok, here’s a little back story… About a year ago, I signed up for a student loan forgiveness program that was for employees of a non-profit organization. My HR department filled out the necessary forms for me and I submitted them to FedLoan.
Most of my subsidized and unsubsidized loans were transferred to the loan service provider (FedLoan) that I am told is regulated by the federal government. Some of my loans were ineligible because they were not direct loans.
Anyhow, by the time my loans were transferred, I was excited. Basically, the terms were that if I made on-time payments (that were income-driven) for ten years, whatever balance left would be forgiven. At this time I had over $50k in student loans so this sounded like a good deal.
About 2 months after signing up for this program, which at the time sounded sweet, I found Dave Ramsey and his Baby Step plan. After listening to his YouTube show and reading two of his books, I decided I did not want to wait ten years to be debt-free. And I started his Baby Steps.
Now, onto the reason I am writing this post…
About 3 months into this year, I received a notification from FedLoan that the service provider was capitalizing the interest on my loans and an additional $5,000 would be added to the principal. WHAT?! $5,000? Yes, $5,000. So, I gave FedLoan customer service a call. The rep told me that any time there is a change in my situation (still don’t know what that change was – maybe my change of hairstyle?) that the interest would be capitalized and the amount would be added to my principal balance. I told the rep, this never happened with my previous loan provider; is this something specific to your company or the program? He told me the company is regulated by the federal government and that’s basically the government’s call.
(As a side note, the customer service rep was very cordial and was trying to be helpful.)
I thought, OK I’m paying this off as soon as I can and I shouldn’t have any further changes to cause another addition to my principal. So I moved on.
Fast forward to July of this year. I received ANOTHER notification that they were capitalizing the interest on my loans and adding ANOTHER $3,000. WHAT?! Another $3,000? Yes, another $3,000.
We are in December and I still don’t know what that change was.
In one year, FedLoan has added over $8,000 to my loans. IN. ONE. YEAR.
Unfortunately, from what I’ve read, you can’t just transfer your loans to another service provider. The only options I have are 1. Hurry up and pay this off or 2. Consolidate the smaller loans into one big loan (which I don’t want to do).
If you are reading this and considering the Student Loan Forgiveness program, please, please, please do yourself a favor and forget about it. It sounds like a good deal for the people who are giving back to the community through their employment (hospital workers, teachers, etc.) but it is so NOT worth it.
**I am not a financial expert and I am not affiliated with Dave Ramsey nor am I making any money from mentioning him. I just think he has a great program that is changing lives.