Student Loan Defaulter Calls For Solidarity

Originally Published on forbes.com on March 29th,2012

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Timothy Smith writes The Echo Boom Bomb, a blog featuring financial, economic and socioeconomic analysis of the Millennial generation (also known as Echo Boom Generation or Generation Y).  The Echo Boomers or Millennials are people born between 1982 and 1995. Mr. Smith currently advises corporations and organizations on how to market products, services and ideas to the Millennial generation. Mr. Smith recently interviewed Natalia Antonova, who is having trouble paying her student loans.  Student loans were one of the major grievances noted by Occupy Wall Street. 

“Interview: “I Can’t Afford My Private Student Loans”

I claim that an education bubble is growing, and one key that will lead to it’s eventual collapse will be the stories that the current generation tell to the next generation.  Was school worth it?  Many in Generation Y have said that it isn’t.  One Generation Yer, Natalia Antonova, recently wrote about having trouble paying back her private student loans.  A brief bio directly from her: “I was born in the USSR, in Kiev. My family is mostly ethnically Russian. We moved to the United States in the mid-1990′s. In 2007, I went to seek my fortune abroad (wisely so, as it turns out). I work as a journalist, a playwright and a translator.” Natalia owes $42,000 in private loans (with accrued interest, not the principal amount) and another $30,000 in federal loans.

1.  I read your story that you finished school with a large student loandebt load and after making numerous payments since 2006, the balanced hasn’t decreased much.  What are you doing now with this student loan balance and what made you decide this?

Right now I can only afford to concentrate on my federal loans – I can no longer afford my private loans, and am sliding into default. My federal loans were consolidated through the College Foundation of North Carolina, an organization that, I believe, actually contributes to society in tangible ways, so I am doing everything in my power to keep up with those loans. Defaulting on federal loans also carries consequences which are even harsher than a private loan default.

I don’t plan on being broke forever, and hope to work something out with regard to my private loans, eventually, but keeping up with my monthly payments is not feasible at this time. Forbearance, meanwhile, is just designed to push you further into debt – it’s a sick joke, when you think about it. I just can’t participate in this charade at this time, especially after taking huge risks with my health to avoid defaulting in the past. It has dawned on me that I am a serf to this system, and I can no longer play this game.

I actually didn’t think that I would need to borrow so much money for school – my family was doing alright when I was applying to universities. But when our financial problems began, the reversal of fortune was pretty swift and merciless. I gambled on my Duke education – and in one sense, I won. I do, in fact, have a great career now. But even this great career can’t make up for the fact that I’m stuck making these payments while having practically zero consumer protections – and I’m feeding a beast that’s destroying people’s lives. Since I went public with my loan problems, I’ve had people writing me and saying things like, “My brother defaulted – and killed himself. Creditors started harassing our mother after his death.” Or someone will write in to say, “My daughter is forced to leave the country, she can’t keep up with her payments, and I’m partially disabled, I can’t help out.” What’s happening to people out there is horrible – and when we advise children on what to do after high school, we should be keeping that in mind.

2.  In the United States, we’ve told kids to go to college no matter the cost.  If students don’t have the money, we encourage them to borrow money because they’ll make more money if they go to school.  I’m assuming here that you heard some similar advice.  Now that you’ve been through school, and with your student loan balance, how do you feel about that advice now?

I think this advice is a double-edged sword. On one hand, you have to be realistic – having a college education is usually the only way to have a decent career in the States right now. But on the other hand, costs are ridiculously inflated and the job market for new graduates is awful.

You keep hearing these “miracle” stories about people who didn’t have an education and totally made it – but I think those stories are means of pacifying people. In the current volatile job market, with the economy suffering, with many graduates unemployed and underemployed, how does one keep pretending that there isn’t something horribly wrong with our system? Well, one way to avoid that discussion is just to tell people, “You’re just lazy. If Steve Jobs had a great career – so can you!” By doing so, we can keep sweeping systemic problems with the education system and the economy under the rug. With all due respect – people like Steve Jobs are the exception, and they shouldn’t be our excuse when we’re refusing to deal with a broken education system.

3.  I argue that an education bubble is forming and will pop soon.  In fact, one of the reasons that the education bubble will pop, according to my theory, is that those who attend school now and feel ripped off by it financially (like you and others) will advise the next generation (Generation Z) to be careful (very similar to the housing bubble).  If a young person asked you for advice on attending school, before they bury themselves in student loans, how would you advise them?

Oh God, I don’t know. I think it really is a lose-lose situation at the moment – if you don’t have a trust fund or a scholarship at the moment and are forced to borrow, who knows what might happen to you? I think the only real advice I could give to young people today is to be politically active and to organize. We need to fight for consumer protection for loans. We need to fight to have education costs brought down. None of us can afford to be passive about these problems any longer. So if you have no choice but to bury yourself in loans – be active! At the very least, you won’t be taking the loan industry’s shenanigans lying down.
4.  The media overall tend to ignore the education bubble, and this issue of the student loan disaster.  Why do you think that this is?

I think it’s a generation thing. Most older people I have spoken to about this issue think I’m a lazy brat who lived beyond her means and ought to pay the price. There’s actually a lot of venom and hate out there – I’ve had anonymous people leave comments on my website that amounted to: “You ought to have your child taken away. They ought to strip you of your citizenship.” A lot of these people have no idea what my generation is actually facing, they went to school at a time when costs were at least somewhat manageable.

I also think it’s a class thing. I think there is this sense that people who borrow money for school are “getting ahead of themselves.” They’re peasants, essentially, and they should not be trying to rise above their station. This isn’t spelled out, but it’s certainly implied. A Cold War that lasted for decades have made Americans very averse to all of these vaguely socialist-sounding concepts, such as the concept of a class war. But that doesn’t mean that we don’t have an actual, real class war going on in our country right now. 

5.  What can students, who feel powerless when looking at their student loan balances, and other activists do to end this crisis?

We need to organize. And we need to learn to help each other out even as we face a large battle. People in default suffer in a variety of ways – they can’t rent anywhere to save their lives, for example. They’re doomed to poverty, because they’re being made examples of. It’s a way to keep us all in perpetual fear of this system. I think that borrowers need to start actively helping each other out and networking among themselves, so that they can resist the loan industry’s tactics. Lending each other some moral support is certainly a start.

And we need to be educating those around us. I have engaged people who have spewed insults at me. In most cases, they’re not bad people – they’re just scared that something like this could happen to them, so they’re projecting their fears onto me and people like me. They need to paint us as the bad guys, otherwise, they face an uncomfortable truth about today’s economic reality. Many of them are fellow borrowers. What they need – what we all need – is solidarity.

You can follow me on twitter @peterreillycpa.