For many underprivileged students like I once was, student loans are a way to pursue higher education so you can change your life for the better.
But when you graduate with the excess debt, many student–including myself–don’t truly understand money and loans and how repayment works. Further, many students don’t even know how much they owe, what their interest rate is or do enough research on student loan repayment companies. You see, most of us graduated with Federal Student Loans and we’re not entirely sure what we’re supposed to do. Herein lies the problem and it’s a big problem that will impact your life for 10-30+ years depending on the amount.
I graduated in 2001 with a Master’s degree and accumulated $60,000 in student loans. At the time, the feds were charging almost 8% interest and for the first time in history, loan companies were offering dramatically lower interest rates. So I received some direct mail piece, called the number and decided to transfer my student loans to ACS. This single move would cause more stress than anything I have ever experienced in my life.
ACS offered me 5.75% interest and my repayments were going to be $400 for 30 years. It was a hard number to swallow. And stupid me at the time, I sucked at money and didn’t understand that this was way off. (Note: I just called ACS today on 3/16/2010 and asked the customer service rep how much would the payment be for a $60,000 loan with 5.75% for 30 years, she said $166. So why was I being forced to pay $400 is beyond me!)
When the repayments began, I just found a job and wasn’t making much money. So when I called and told them my situation and they said I could do a forbearance for 6 months. So I agreed. 6 months later when I started making my payment, my student loans went from $60,000 to almost $67,000. That’s over $1,000 a month!!
I was mad, but felt like I was trapped. When you consolidate, you can’t transfer your loans and you’re stuck. So for 5+ years, I sucked it up made $400 a month payments. In 5 years, I paid $24,000 and out of that $18,000 went to interest. Yes, $18,000!
Then about 2 years ago, my husband received a postcard from CFS (Collegiate Funding Service) about consolidating and I called and asked if there was any way I could consolidate my loans with his. I figured any way I could escape the clutches of ACS I would take. They said I couldn’t and then informed me of a loophole that Bush opened up. For the first time ever, students could transfer their loans to another loan company. I couldn’t believe it. Then I called Sallie Mae and they too confirmed it. So I hustled like it was no one’s business and in less than a week sent my loans to CFS. They offered me a benefit rate of 4.5% for making direct deposit payments and 2 years of on-time payments). Thank god, I hustled because less than 2 weeks later, the loophole closed.
Now get this. When I spoke with CFS, I explained that in 5+ years and $400 payments, I owed $60,000. Funny, how that was the original loan amount I graduated from school with. She crunched some numbers and told me if I continued to pay $400 a month, my loans would be paid off in 19 years–not 30 years! And I saved over $70,000 in interest. You have no idea how much I cried.
2 years later, CFS was sold to Chase and my loans have gone from $60,000 to $50,800. (I sent in a little extra some months) How in the hell do you explain that? In 2 years, I shaved off almost $10,000 and when I had ACS for 5 years, I barely shaved off $7,000. WTH!
So you can imagine my surprise when 2 weeks ago, I received a letter from Chase saying my loan has been sold to you won’t believe it, but ACS. Can you believe it? So of course I am worried and scared that something bad is about to happen.
I spent almost an hour on the phone with Chase yesterday begging for some kind of documentation of my benefits rate so I have something in case ACS tries to take advantage of me. They are sending me a document in a week.
I just called ACS today and she (Nicole) said when my Chase student loans are transferred, they will honor the 4.5% interest rate and my payment schedule and amount shouldn’t change. But only time will tell.
The lesson: research, research, research. Know what you owe, how long you will owe for it and ask for the fine print. And whatever you do, do not ever consolidate with ACS. Call me crazy, but check out all these complaints regarding ACS. Their stories and experiences are not only scary, but sad. I totally understand their stress and feel bad for them. Here are even more ACS student loan complaints. Here is a class action lawsuits against ACS.
No one can protect yourself from loan companies like ACS so your best course of action is to just avoid them entirely and know everything you can about your student loans so you never get taken advantage of like the way I did.
Here’s a great article about how a mother and her daughter got in over their heads with student loan debt. Remember, the profession you choose is more important than the name of the college you attend. Know what your potential earning salary is and then decide whether it’s worth it to invest tens of thousands of dollars toward it.
P.S. Future student should pray that President Obama’s student loan plan where the government becomes the source for student loans and not commercial lenders passes. At least, we could hold the government accountable if they tried to screw innocent kids over.
UPDATE: As of March 2013, I paid off my student loans. Yippee. I am free from ACS! See how I paid off my ACS student loans here.