Monday, May 7, 2018

College borrowers who see their student-loan debt triple will never pay off their loans: The tragic story of Rick Tallini

Pope Francis once said that a life prison sentence is essentially a death sentence, and of course he is right.

Something similar can be said about college borrowers who see their debt load double, triple, or even quadruple. They've received a life sentence of indebtedness, and a death sentence to any dreams they may have about retiring or purchasing a home.

Here's an example of what I'm talking about. Rick Tallini borrowed $55,000 to go to law school back in the 1990s.  Had he gotten a good job immediately after graduating, he would have been fine. But Tallini didn't find that good job, and so he put his loans in deferment for extended periods of time, while interest accrued at 8 or 9 percent.

Around ten years after he graduated (according to a CNBC story), Tallini's loans went into default, and his student-loan creditor tacked on additional fees. By the time Tallini consolidated his loans, he owed $150,000--nearly three times what he borrowed. Apparently, his debt continued to grow due to accruing interest, and now he owes $330,000--six times what he borrowed!

Will Tallini ever pay off this debt?  Of course not. The federal government sentenced him to a lifetime of indebtedness--an economic death sentence. Although the CNBC story did not say, Tallini probably does not own his own home, and he probably has inadequate savings toward his retirement.

Mr. Tallini, who is 61 years old, really has only two options: He can file for bankruptcy and attempt to discharge his debt in an adversary proceeding. If he goes that route, he could be in litigation for years because the U.S. Department of Education and its proxy debt collectors will overwhelm him with their teams of heartless attorneys.  And he might not prevail.

Alternatively, Tallini can sign up for a long-term income-based repayment plan that can last 20 or 25 years.  He could be dead before his repayment obligations are met. And if he is fortunate to still be above ground when his income-based repayment plan terminates, the IRS will send him a bill for the forgiven amount of his loan because the IRS considers forgiven debt to be income.

In my view, Mr. Tallini's case demonstrates irrefutably that America is no longer a just society and our colleges and universities are no longer working for the public good. Higher education (including legal education) is a racket financed by student loans owed by people like Rick Tallini, who went to law school more than 20 yeas ago hoping to build a good and satisfying life.

And look at what he got instead. Crushing debt he will never pay off.

Rick Tallini owes $330,000 in student debt. Photo credit: CNBC
References

Annnie Nova. He had $55,000 in student loans, now he owes $330,000 . . . Here's how it happened. CNBC.com, May 6, 2018.

Annie Nova. These are the ways student loans stop people from buying houses. CNBCcom. March 31, 2018.

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