How to Pay Off Your Student Loans When You're Young and Broke

Most people think they don't know how the student loans system works, but the truth is, the system doesn't really work at all. Over 40 percent of borrowers no longer make payments, and the rest of us have sold our futures to pay for our groceries.

But if Donald Trump has taught me anything, it's this: Debt is always negotiable, and sometimes even optional. You just have to know the rules.

"President Obama passed many wonderful loan programs to assist student borrowers with their federal student loans," Stephen Dunne, a Philadelphia-based debt attorney, told VICE. These loans allow a graduated student loan borrower to pay a percentage of their income for approximately 20 years. Then, all the loans get erased."

Federal loans account for the vast majority of student debt. After the Great Recession destroyed all our futures, Obama decided to make up for it by creating programs that would encourage college grads to not just default.

"The most popular one is Income-Based Repayment," said Dunne. "Another one is called Pay As You Earn."

What these programs do is charge you a low monthly fee based on your discretionary income (the amount of your paycheck leftover after paying taxes and necessities like rent and food), and forgive the debt if it hasn't been paid off in 20 to 25 years. If you're really broke, you could be paying monthly payments of zero for 20 years until the debt is gone. And that's without fucking up your credit.

The thing is, according to Dunne, "about 99 percent of students that are eligible have no idea this exists."

Before these laws were passed, Helena Haze (who asked that VICE not print her real name) spent 15 years on "forbearance," meaning her payment was delayed while her student debt accumulated in interest, from about $48,000 to $68,000.

"So much interest," Haze told VICE. "But I chose not to care, because I thought I'd never pay, and because for a long time making payments wasn't really in my budget anyway. So [saying] 'Interest is building up' is like saying, 'When you own a mansion, you won't be getting a gold toilet.'"

Unlike most people drowning in debt—and qualifying for $0 loan payments—Haze figured out a way to float. She has perfect credit, a mortgage, and a car. And all it took was one phone call a year.

"The biggest advice I have is call them," said Haze. "They don't want you to default. They want you to pay—even if it's a trickle. So organize with them, [say] 'Hey, I don't have any cash, my rent costs this much, I gotta eat, what can we do?' And they will usually find a payment plan."

Even if you can't pay, as long as you have an arrangement, your credit won't suffer.

"Don't try to be the hero who picks up five extra shifts so you can pay that loan; be the negotiator who calls Sallie Mae and says, 'Hey, I need some help,'" Haze advised. "Once they sell your paper to the debt collectors, it's out of their hands. And that's when you get into wrecking your credit."

There are also programs like the Public Service Loan Forgiveness Program, which excuses debt for people working in public service. Say you graduated and started teaching urban youths to rap about Shakespeare, or got a government job. As long as you're working for a nonprofit with a 503(c)(3) tax designation—with some exceptions—you can have your loan forgiven after ten years of monthly payments.

But these programs only apply to federal loans. Private lenders like Wells Fargo and Sallie Mae don't give a rat's ass whether you're teaching Liberian children or not. The downside to private loans is they tend to have higher interest rates, but the upside is they're easier to ditch.

According to Dunne, there are two main options with private loans: "First, what you can do with private loans is deal with them directly. Basically tell them what your income expenses are and try to strike a deal to get a monthly payment."

When a loan lender representative calls you, it's actually in their interests to do exactly that.

"If they get me on a plan, they did their job," said Haze, who after 15 years of negotiating developed quite a flare. "If I can't pay and they can't get me on a plan, it's not good for the person on the phone either. Because when they sell that debt to collections they get pennies on the dollar, so even partial payment from me is better than nothing."

Haze recommended being pushy, but polite.

"Notice the person's name when they answer the phone and call them by it. Be super nice and say things like, 'Gosh, I am so hoping you can help me!' and they'll help. And if they won't help, hang up and call back," said Haze. "It's a call center, you'll get a different person."

If negotiation fails, though, Dunne says you can try ignoring them, since there's a statute of limitations on private debt. If, say, you took out a loan in Pennsylvania, where the statute of limitations is four years, and the lender sued, you could get the case dismissed if four years had passed.

"I would basically plead the statute of limitations, and the judge would simply dismiss the case," said Dunne. "And now you're free of private student loans."

I asked Bruce McClary, a former student loan lender who now works in PR for the National Foundation for Credit Counseling, if there were any consequences to doing exactly that.

"The one consequence there is that they would have to rebuild their damaged credit," McClary told VICE. "If they cannot find you in order to serve you, then you can't be served."

Lenders use a process called "skiptracing" to track down debtors, whereby people are tracked down through credit card records or even magazine subscriptions. But if, say, you moved abroad and waited for the statute of limitations to expire, you'd be in the clear.

And in certain states—Pennsylvania, North Carolina, South Carolina, and Texas—private debt collectors aren't legally allowed to garnish your wages. So the sole consequence would be destroyed credit.

"I'm pretty sure it fucked my credit 'cause my credit's fucked," said Loreta Gomez (not her real name), who defaulted on her loans in 2011. "But I don't have the strong desire to go into debt and buy things."

Gomez makes much of her income as a contractor, buying things with cash and finding apartments through personal relationships. She described student debt as a "paper tiger."

"I don't actually feel limited in any capacity," Gomez told VICE. "I'm just operating within a different set of rules."

Each choice comes with its own risk: Paying nothing on your federal loans now means that interest will accumulate, which could force you to pay through the nose if you get a decent job in the next 25 years. Damaging your credit could compromise your ability to get a mortgage on a house. But the worst possibility is probably already happening, which is suffering in a terrible job and forking over too much of your paycheck to pay back your loans.

As for Haze, her plan is to just renegotiate her growing debt every year until she dies.

"That, or win the lottery," said Haze. "I'll totally pay off my loans if I win the lottery."

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