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Education

Woman shares harrowing story of student loan debt doubling after her mom passed away

So many reforms don't address this fundamental issue.

Photo credit: Canva

This is why we need student loan reform.

College is expensive. Parents work multiple jobs, put pressure on their children to perform at the top of their class in order to earn merit scholarships, all in the hopes for college to be mostly paid in full. Inevitably many students and parents have to take out student loans in an effort to fill in the gaps left by financial aid.

In the case of one X user, Michelle Miller, her mother agreed to pay back half of Michelle’s student loans to ease the burden on the new graduate. After graduation the daughter owed approximately $30,000 and, split between the two of them, it meant they would each need to pay back $15,000.

Michelle lamented about how her mother insisted on paying back her agreed-upon portion of the student loans though the daughter offered to take over payments. When Michelle’s mother informed her that the original $15,000 turned into $40,000 after interest, Michelle decided to save money in preparation to take over payments. However, her mother refused to allow it. Miller’s mother was expected to pay $400 a month on the student loans, but this would cut into her retirement, leaving her below the poverty level.

To her mother, it was worth it to hold up her end of the bargain. Unfortunately her mother became unexpectedly ill and passed away before she was able to retire or pay back the loans. When going through her mother’s paperwork after her death, Michelle was met with a shock. The loan amount had doubled. Michelle’s mother hid that the interest rate on the loans had brought the grand total to $80k that she could never afford to pay back.

But this story is not unique. Many borrowers go into debt thinking the benefit of the degree will outweigh the burden of student loan debt but the cost of an education continues to skyrocket and the interest rate on loans makes paying it back nearly impossible. When you go to school and take out loans, you expect to be able to afford monthly payments and hope to pay it back in a timely manner, eventually freeing up income, but that’s not always the case. A lot of people find themselves in a similar situation as Michelle’s mother. They take out a dollar amount that is repayable, only to look up and see they’ve repaid the original balance but they still owe more than they originally agreed to borrow.

If stories like Michelle’s are the norm, why aren’t we doing more to regulate student loan companies? Presidential candidates like to talk about student loan forgiveness. And in a recent announcement, President Donald Trump said he planned to “immediately” transfer the country’s $1.6 trillion student loan portfolio to the Small Business Administration, an organization that not only has zero experience handling student loans, but will also have its workforce decreased by 43%. Which is concerning, assuming it gets passed.

- YouTubewww.youtube.com

And even still, changes like these don't solve the long term issue of student loan practices. The truth of the matter is that children who three months prior had to ask permission to use the bathroom are now expected to understand the long term implications of borrowing money from a company that doesn’t care that the average person can’t pay it back plus interest.

Seventeen- and 18-year olds with a dream of attending college and questionable loan practices is a perfect storm for continued crisis in the student loan arena. Until we can figure out how to better regulate the lending companies in charge of student loans, the next generation will repeat the cycle. People shouldn’t have to choose between pursuing their dreams and taking debt to the grave.

This article originally appeared three years ago.

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6 numbers that explain why millennials are moving back home.

Millennials moving back home seems to be one of the themes of this generation.

Image from iStock.

But the narrative around "moving back home" can be muddy. Why is it happening? What is it like to live at home? Is it a last resort or a smart choice? Here are six numbers that tell the story many people are missing:

39.5% (How many millennials lived with family in 2015)

That's a 75-year high, according to an analysis by real estate site Trulia. Though the economy's recovered since the 2008 economic crisis, the share of 18-35-year-olds living at home has continued to rise.

24.1%  (The number of kids living at home in the 1960s)

Though the number might seem high, it's worth remembering that there's always been some proportion of young people who live with families. The 60s were kind of the low bar for living at home, but that said, 24.1% of young adults still lived with family in 1960. Afterward, the number rose again, staying mostly in the low 30s from 1980 onward.

1940  (the last year so many young adults were in this situation)

In that year, about 40.9% of young adults lived with family, according to the Wall Street Journal. At the time, the U.S. economy was still recovering from the Great Depression and was still a few years from the giant post-World War II boom.

$30,100  (the typical amount of a millennial's student debt in 2015)

Student debt has become an unprecedented problem for young people. The median 2015 undergraduate will end up owing more than $30,000 in debt. That's up more than 50% in the last 10 years, according to the Institute of College Access and Success.

-$2,362  (how much real wages have changed — yes, it's a negative number)

If you adjust for inflation, median young households are making more than $2,000 less than a Gen-Xer did in 1998, per year, according to the Pew Research Center. It was $63,365 back then versus $61,003 today.

(That said, millennials are still up about $1,000 from boomers in 1980, but if you factor in student debt, an extra $1,000 doesn't seem to count for much.)

$234,900 (how much the typical new home will set you back today)

While wages haven't been going up, home prices have. According to CBS News, a new home will set you back almost a quarter of a million dollars, on average, as of this writing. That's up about 7% from last year. Rental prices have also been rising pretty dramatically.

Put together, the economic bar for independence is rising while wage stagnation and debt are pulling millennials down. Of course, millennials are still a major force in the housing market. About 35% do, in fact, own their own homes, and millennials make up the biggest share of first-time home buyers. There's just so many of them.

Today's young adults live in a different world from their parents. These numbers explain a lot about their new reality, and they show that some things will need to shift.

Image from iStock.

Things like stigma or expectations or even maybe policy about housing will need to change. And of course, everyone's going to have to do what's best for them. For some people, the best thing to do might mean moving away. For some people, that means moving back home.

So the next time you find yourself in another conversation about millennials, remember these numbers. And that behind them are real, difficult, complicated, weird, but most of all human stories and decisions.

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Watch John Oliver forgive nearly $15 million in debt with the push of a button.

It's not quite Oprah yelling 'You get a car! You get a car!' It's better.

Just by pressing a button, John Oliver made the largest one-time giveaway in TV history — nearly $15 million.

All GIFs from "Last Week Tonight with John Oliver."

The money went to nearly 9,000 individuals, and while they won't be receiving a check or a fancy car, their lives will be getting so much easier thanks to Oliver and his team at "Last Week Tonight."

During his segment on debt buyers and collectors, Oliver focused on a specific kind of delinquency: medical bills.

According to the Centers for Disease Control, in 2012 nearly 1 in 6 families in the U.S. has struggled paying their outstanding medical bills; 1 in 10 families weren't able to pay bills at all.

That's billions of dollars worth of debt from millions of people.

The fact that medical bills are a typically unexpected expense makes that particular form of debt ripe for a very opportunistic and surprisingly unregulated industry: debt collectors.

Here's how debt buyers and collectors work.

It starts with a debt. One of the examples Oliver used was the case of a man who was hospitalized for four days with respiratory issues, later finding out that his insurance wouldn't cover the cost. This left him with $80,000 worth of debt he had no way of paying.

If the debt goes unpaid, the hospital might sell the rights to collect on it to a third party (a debt buyer), and then they can go about trying to collect it.

The problem here is that there's very little documentation that goes along with the sold debt, making it hard to prove who owns it and whether or not it's been paid off. While there is a statute of limitations on debt collection, debt buyers bank on the fact that the average consumer doesn't know that and will continue to try to collect — some with less than friendly tactics.

Basically, it's a big, stressful, anxiety-inducing mess for the person at the center of it all.

To prove just how easy it is to get into the debt-buying business, "Last Week Tonight" started their own collection agency.

After paying $50 to start their own agency, with Oliver listed as the chairman of the board, the "Last Week Tonight" team was offered the opportunity to buy nearly $15 million in medical debt from a group in Texas. The price? A little less than $60,000.

In exchange, Oliver was given a spreadsheet with thousands of names, phone numbers, social security numbers, and debt amounts. If they wanted to, the "Last Week Tonight" agency could have set about trying to collect on the nearly $15 million.

But they didn't.

Oprah's famous car giveaway was valued at around $7 million. Oliver nearly doubled that.

And unlike Oprah's car giveaway, there won't be any adverse tax consequences for the people whose debt has just been forgiven.

So. Freakin. Cool. Right?

You can learn more about credit buyers by watching the video from "Last Week Tonight," posted below.

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These 5 money-saving details about your credit card are unforgettable.

These fine-print tips could help you better understand what you're signing up for.

When a shiny new credit card shows up in the mail, what's the first thing you do?

If you’re like most people, you activate it, peel off that sticker, and load it into your wallet like artillery in a spending cannon.

Welcome to adulthood! Image by Sean MacEntee/Flickr.

But what about all that other stuff that comes along with the card? Petite as they are, credit cards usually arrive in thick envelopes, jam-packed with all the information issuers have to disclose by law.

That, my friends, is your credit card agreement, and every time you swipe that cut of beveled plastic, you’re giving two thumbs up to everything therein.

During my first few years out of college, I had no idea what terms like "overdraft protection" or "cash advance" meant.

I paid plenty of fees as a result, some of which I got refunded by calling and asking nicely. But if I’d read and understood my credit card agreement, it would have saved me hours of frustration.

Recently the CARD Act outlawed a few of the worst practices that some credit card issuers use (things like "universal default" and "double-cycle billing"). But no matter what, you do need to know the nitty-gritty details of credit cards before you start swiping. Here are five areas of your credit card agreement that could throw you for a loop if you’re caught unaware.

1. Cash advances

First, you should definitely check out the Schumer box on your credit card agreement, which outlines stuff like annual percentage rate (APR), grace period, and annual fees (if applicable). That’s a good place to start. (If you're like me and you’ve already tossed your credit card agreement, you also can pull up a copy online, either on the Consumer Financial Protection Bureau’s credit card agreement database or on your card issuer’s website.)

Photo by _Dinkel_/Flickr

But here’s something I found out after I’d had a credit card for a while: Many issuers charge a transaction fee for cash advances on a credit card, plus interest that starts immediately, not after a grace period. "Even if you did read all the fine print, that’s something you might not understand,” says Beverly Harzog, credit expert and author of "The Debt Escape Plan: How to Free Yourself from Credit Card Balances, Boost Your Credit Score, and Live Debt-Free."

Unfortunately, it’s easy to take a cash advance without even realizing it. For instance, if you overpay your bill and transfer the extra money back to your bank account (as I once did) or you mistakenly use your credit card instead of a debit card at an ATM.

2. Late payments

Grace periods can vary from card to card and not every card has one. Paying your bill late not only damages your credit score, but if you pay more than 60 days late, it could trigger a higher penalty APR. “You could end up with that penalty rate retroactively against your whole balance,” Harzog says.

Plus, your issuer could revoke any rewards you’ve earned (buh-bye, Bermuda trip!). "If you do make a late payment, call the issuer right away and let them know what happened," Harzog says. "If you’ve got a good payment history, they might not do anything to your rewards."

3. Fees on top of fees

You probably know you’ll be charged interest on any unpaid balances. But what about things like balance transfers, foreign transactions, and overdraft protection? Alas, you don’t even have to leave your home country to get hit with a foreign transaction fee, I’ve learned. If you’re ordering online from a company that uses a foreign bank, the fee may still apply and it typically adds 1-3% to your transaction.

Photo by wsssst/Flickr.

With a prepaid or secured credit card, your issuer may also charge you a monthly fee and other fees that you may not expect unless you read the agreement closely. Knowledge is power, people!

4. Mandatory arbitration

If something goes wrong, you can always take them to court, right? Power to the people! But not so fast ... some credit card agreements actually strip you of this right, so if something goes wrong, you can’t sue them in court. Instead, a third-party arbiter would rule on your dispute and their decision would be binding.

In some cases, you even have to pay filing fees if you initiate the claim. Total lame sauce!

5. Terms are subject to change

Now that you’ve untangled the terms of your credit card agreement, here’s the kicker: Almost everything is subject to change. That’s right: card issuers can devalue your rewards, increase your APR (although usually not in the first year you have the card), or remove perks like warranty coverage or travel accident insurance.

For most changes, they must notify you in writing, so don’t toss any communications from your credit card issuer before reading it thoroughly. If you have a card with a low introductory APR, the card issuer doesn’t have to notify you when the introductory period ends and a higher APR kicks in automatically.

The bottom line: Read your credit card terms carefully, no matter how boring they are.

That's true adulting. “If you don’t understand something, call the company and ask,” Harzog says. “If the customer rep doesn’t understand, ask to speak to their manager.”

It's better to spend a few minutes familiarizing yourself with the agreement and to walk away armed with knowledge than find out the hard way about late payment fees or penalty APRs. Take it from someone who's been there.

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