Social Question

Dutchess_III's avatar

Is there some legal statute against this?

Asked by Dutchess_III (45312points) January 21st, 2022

I recently discovered I have paid $17,000 on a $10,000 student loan since I began paying in 1991. Shouldn’t they just call it good and get off of me?!

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52 Answers

ragingloli's avatar

That is the power of interest, baby! Praise capitalism.

zenvelo's avatar

@Dutchess_III There used to be usury laws that limited the interest payable on a loan, but Reagan got rid of them.

elbanditoroso's avatar

Look at the loan contract. My bet is that you signed up for this.

KNOWITALL's avatar

That’s extremely common here, it’s sad.

Dutchess_III's avatar

“Usury” was the word I was looking for.

janbb's avatar

There’s interest on all student loans as far as I know. It’s like mortgages.

Dutchess_III's avatar

But that is not reasonable interest.

KNOWITALL's avatar

@Dutchess_III They don’t even forgive people on disability. They take their taxes every year. I can’t believe our government is so hateful to seniors and disbled, shameful.

KNOWITALL's avatar

@ragingloli How does it work in your country? Do you get interest-free college loans?

@Dutchess_III I wonder if you can refinance student loan debt?

ragingloli's avatar

@KNOWITALL
It is called BAföG, and yes, it is interest free.

JLeslie's avatar

What was the interest rate, and how long was the term of the loan? Is the loan more than 30 years? Or, do you mean you just finished paying and realized you paid $17,000?

Let’s see $10,000 at 4% would be $17,186,95 for a 30 year term.

4% isn’t very high. In 1991 that was low compared to mortgage rates, which were probably 7 or 8% I don’t remember exactly. Savings accounts were earning better than the 4% back then.

That’s not usury. The US has practically done away with usury laws, which bothers me a lot, but in 1991 4% was not usury by any definition.

JLeslie's avatar

@ragingloli I thought Germany has free college education?

ragingloli's avatar

Technically yes (for public universities), but you still need to pay an adminstrative fee per semester, which is about 300€. But that includes a train ticket and free entry to museums and the lot.
You also need to pay for living expenses, and BAföG covers that as well, so you do not have to have a part time job.

Blackwater_Park's avatar

You have been paying since 1991, the time value of money factors into this. It’s something few consider when paying back loans with interest. A $100 in 1990 is worth over $200 today so in reality, you have done well here if it’s paid off soon.

SnipSnip's avatar

bankrate.com has a calculator. A $10,000 loan for 30 years at 4.5% interest yiels $8200 interest. Your story is not surprising. Get a pay off letter and try to pay it off if you haven’t already. I’ve never advised students to take on student loans.

KNOWITALL's avatar

@ragingloli Wow that’s really great.

Blackwater_Park's avatar

Something I see a lot that irks me are people who are complaining about 20–30k in student loan debt yet there is a $50k SUV sitting in their driveway. Student loans are not free money, people act like it should be a crime to have to pay it back. Unlike a mortgage or a car loan there is no collateral. It’s not like they can strip your degree from you if you don’t pay so in that sense I can see why some just don’t want to pay it back. The real crime here is that just about any student with a pulse can get one of these loans. They’re pushed hard when you apply for college and that’s just wrong. More money and more students drives up tuition and causes more loans. Even state universities are becoming lavish with all new buildings and sport centers etc.. If you live near a college town odds are you’re seeing perpetual construction and improvements. It’s all ultimately funded by tuition but they’ll claim it was from “endowments” or whatever. Your generic state university is in a frantic race to one up the other’s in the rankings right now. The education part is losing out to the prestige of going to such and such university. Yet… students don’t find work when they graduate. Meanwhile…Community college is free in many states and at this point the job prospects are even better for skilled trades. This has all the makings of a bubble and I’m surprised it has not popped yet with this pandemic.

ragingloli's avatar

What irks me more is capitalists saying they can not afford to pay their employees a living wage, while they have ten yachts and 5 private jets parked in their megavillas on their private island.

Blackwater_Park's avatar

@ragingloli Same thing, same mentality, same type of people.

gondwanalon's avatar

Did you expect to get an interest free loan?

How much more do you owe on the loan?

You agreed to the conditions of your loan. What do you expect if you pay back the loan just slightly above the interest rate.

Man up and deal with your obligation.

Response moderated (Writing Standards)
elbanditoroso's avatar

Lets look at the math.

You said that you borrowed $10000 in 1991. Interest rates in 1991 were between 6.9% and 10% depending on the type of loan you took out and the exact time of the year.

If you use this interest calculator and plug in the numbers, assuming you paid $50/month, you would have paid $10000 in repayment and around $8900 in interest, which more or less matches what you wrote.

If you had paid $100/month, you would have incurred less than half the amount of interest. (around $4000).

What you need to do immediately is get on the phone with the people who hold the note and pay it off – like tomorrow..

janbb's avatar

I was just reading a post on FB that there is a program started last year to get some student loans forgiven if you worked in public service. You have to apply for it by October. I don’t know whether your years of teaching would qualify you but it is something you could research.

JLeslie's avatar

I’m pretty much with @Blackwater_Park, and I’m not fond of forgiving loans, I’m not sure how he feels about that particular topic. I much prefer stopping the high tuition ridiculousness to begin with. $10,000 isn’t a very big loan, especially today, I realize that was in 1991. I assume there isn’t much to pay on that loan if anything. @Elbanditoroso is right, the OP should pay it off now if she can.

I wonder if the OP would be surprised that a $100,000 house loan would cost $70,000 in interest with a 4% 30 year mortgage? (Rounding). I really don’t understand the surprise. Maybe some people think 10,000 at 4% will only be $400 interest?

elbanditoroso's avatar

@zenvelo usury laws are irrelevant in this question. Usury is/was when people were charging 50–100% interest or more on a loan. That’s not the case here.

When @Dutchess_III took out her loan, interest rates were in the 7–10% range across the board, and her loan isn’t out of line for what was normal back then. It was probably a better interest rate, because it was a student loan, than what you or I would have been charged to buy a car.

Usury is a problem, in general, but this isn’t an example of it.

Dutchess_III's avatar

But I’ve damn near paid back 2X what I borrowed! I mean, I paid them back.

JLeslie's avatar

@Dutchess_III That’s how the time value of money works. $10,000 is not worth the same back then as now.

If you didn’t see the total you would pay on the documents you signed (it should be on the original documents you signed, not necessarily the documents that told you about the loan) then all you had to do was multiply the amount you pay every month by the amount of months of the loan.

When is the last payment? Seems like you should be done by now. It’s been 30 years, how long is the loan?

jca2's avatar

@dutchess your original documents would lay out all the details. They will have the length of the loan, the interest rate, the total amount being paid at the end of the loan. With interest, the total amount paid back by the time it’s over is going to be more than the amount you originally borrowed. That’s how interest works.

That’s why when I buy a car, I try to put down as much as possible and I try to make the term shorter rather than longer, because the more you borrow and the longer the term is, the more you’re going to pay in interest.

Dutchess_III's avatar

I understand all of that. It’s just not like a car loan that you pay off ~5 years, with reasonable interest.
Getting ready to call them and pay the damn thing off.
And the pontoon boat.
And the truck.
And then I’ll be debt free and super confused.

ragingloli's avatar

Also, generations were indoctrinated with the mantra, that you need to have a university degree, or else you will never have a career, and you will end up as a burger flipper or a barista.
And the reality is now, that even with a university degree, you end up as a burger flipper or barista. And even if you are lucky enough to end up in the field you studied for, you get paid like a burger flipper and barista.

Blackwater_Park's avatar

@ragingloli Except for the guy fixing the toilet at the place they’re flipping burgers. He’s doing pretty well these days.

Blackwater_Park's avatar

If you can fix, repair or construct about anything you’re probably doing well.

JLeslie's avatar

@Dutchess_III It sounds like very reasonable interest. Around 4% at a time when interest was double that. That’s what many of us are trying to tell you regarding your idea that it’s usury. It’s not even close. You obviously don’t understand how interest on a loan is calculated.

@ragingloli As much as I support vocational education and not requiring college degrees when they really are t necessary for a job, I also don’t like people saying a college degree isn’t worth it. Education is good, even learning about something that might not be helpful in a particular career. The problem is the gouging tuition prices, but when the OP was in college the prices were not like today, they were more reasonable. Her degree is in education, if I remember correctly, and you need a degree for that. Schools all over the US need teachers.

jca2's avatar

@dutchess : good for you that your goal is to be debt free. Financial advisors always say you should try to get rid of debt.

Dutchess_III's avatar

@ragingloli…I know we were. I wish I’d focused on trade schools for my kids instead of the college thing.

I’ve got the money to do it….why am I feeling so panicky?

JLeslie's avatar

Maybe you’re panicky because you have been paying it so long and it will be a change. Change is difficult whether it’s positive or negative.

Blackwater_Park's avatar

I guess the good thing about trade school is you can still go to college either before or after trade school It’s nice to have a fallback trade and an education.
@Dutchess_III I know the panicky feeling about money well. I get that feeling when I have any debt. For some it’s when they have to make large financial decisions.

Dutchess_III's avatar

No….it’s weird. I feel panicky about paying it off!

Dutchess_III's avatar

Calling Navient again to see if I can do some wheeling and dealing.

janbb's avatar

@Dutchess_III I think Navient is the company I saw mentioned as having recently agreed to doing some student loan forgiveness. I doubt you could claw back what you already paid though.

Dutchess_III's avatar

I just paid them. It’s done.

I sent checks off for the boat and car loans.

Waiting for a call back from the hospital and I’ll pay them off.

Blackwater_Park's avatar

@Dutchess_III Oh wow, That’s exciting! Paying down debt like a boss!

Dutchess_III's avatar

Yes I am! It feels good. After I talk to the hospital I’ll be debt free. I can’t believe it.

chyna's avatar

^Wonderful!

JLeslie's avatar

Awesome!

elbanditoroso's avatar

I’m curious @Dutchess_III what did they say the student loan balance was? What ws the payoff?

Dutchess_III's avatar

I was hoping they’d settle but you have to be some ungodly number of days delinquent before they do settlements.

jca2's avatar

When I paid my last auto loan, every month the invoice showed how much the balance would be to pay it off immediately or pay the monthly amount. I had the payment coming automatically out of my bank account so it was never late or forgotten or lost in the mail.

Dutchess_III's avatar

Me too. Until the money ran out, lost my job.
I put all the bills I can on auto debit.

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