When I was wait-listed at my first choice college, I enrolled in a tech school. I qualified for a Pell grant and received state lottery assistance, so I only spent $US250-$US300 per semester.
When I transferred to the College of Charleston in 2005, I assumed I’d be granted a full scholarship, thanks to my strong GPA and SAT scores. But after meeting with the financial aid office, I was floored to learn I was fully responsible for my tuition.
My mum took out a loan for me the first year, which she defaulted on. The following year I was offered a $US10,000 federal loan — even though my tuition was only $US4,000 a semester, and I lived at home and didn’t participate in the meal plan.
The financial aid department assured me that I wouldn’t have to pay it back for a long time, so I figured it couldn’t hurt to have extra cash.
The Road to Default … When I graduated in 2009, I owed $US26,500 and my monthly payments were $US200. The job market was dismal, so I waited tables.
I’d had a baby in 2008, and my partner had lost his job. We were just squeaking by, so my student loans dropped to the bottom of the priority list.
Part of me knew I should try to get a deferment or forbearance, but I felt like I was already so far behind that it was pointless — and I didn’t want to make an embarrassing phone call.
Instead, I pretended my student loans didn’t exist.
In 2010 I landed a temp job for a nonprofit personal finance and housing counseling service. I moved up quickly and was hired full-time — ironically, as a money management counselor — with a salary of $US28,000.
Even so, I was barely making ends meet — and kept ignoring my loans. I had just separated from my son’s father, so I was a single mother.
My wake-up call? When my HR manager had to tell me that a collection agency was threatening to garnish my wages and withhold tax refunds.
I was forced to sort things out — and it wasn’t pretty.
My credit score was in ruins (435), and with penalties and accrued interest, I owed significantly more than $US26,500 on my student loans.
My Post-Default Plan … I entered a debt rehabilitation program, which had me making nine consecutive monthly payments of $US245.
It was a real struggle. I was living on ramen, and had to go to a payday lender to cover my son’s day care.
I accumulated $US500 in interest, but once I completed the program, the penalty fees were removed, my loans reverted to a current status, and the default was erased from my credit report.
To keep my good standing, I applied for an income-based repayment plan, which lowered my monthly payments to $US20.98. I remember the exact amount because I was so relieved!
My credit score is now at 650, and I’ve been able to open a credit card. I pay $US230 a month toward my loans, which I can afford, because I earn more and I’m married.
When I first landed in debt, I was so naive. I’ll never again brush things under the rug, because I’ve seen that it will come back to bite me much worse than if I’d faced the situation head-on.
Kristin Bastian, 29, is a financial education manager in North Charleston, South Carolina.
This post was excerpted from “3 Grads Confess: ‘I Defaulted on My Student Loans. Here’s My Story‘,” originally published on LearnVest.
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