I work at a prestigious bank that is one of the top student loan lenders in the nation. I was recently promoted and now have to work our “escalation line.”
I received a call recently that I just can’t seem to get over. As most of us know, crippling student loan debt is never fun… The golden rule with student loans is to never take out more than what your annual salary will be. For example, if you are going to be an Art major, making maybe 25k a year, you probably shouldn’t take out 100k in student loans at a private university in Downtown Minneapolis.
On to the tale.
Hop onto the escalation line, typically I only have to work this line 2 hours of my 8 hour day, and a “sup” call comes in. The rep tells me they have tried to explain that we can’t refinance this customers loan in his name only, over and over again:
Me: Good afternoon customer, I hear you are curious about the decision on your refinance, how can I help you today.
Cus: Hello, yes I am, I have 80k in private student loans through you guys and I’m trying to refinance them in my name and you people won’t let me.
Me: Sure! Well let’s take a look at your situation and I’ll see if I can explain the decision more clearly. I see your 6 Student Loans with us all have two cosigners on them. So, it looks like we are willing to move forward on your refinance; however, you are still going to need a cosigner to move forward.
Cus: I know… that’s what the last person told me. But, how do you expect me to move out of my parent’s house when I have an $800 private student loan payment to make every month.
I will take this time to explain the situation more clearly
This particular customer is a 25 year old Male who payed 80k just in private student loans for a Biology degree. For private student loans we do a Inquiry on the customer’s credit and are able to see pretty much everything about them. We also gather all their income information to make an informed decision on if the customer is able to afford the payments or not. So, I took a look at the customers current income and credit profile a little deeper as he was explained his situation to me.
This customer’s student loans went into repayment in December of 2017. In September of 2017 this customer went and bought a $18,000 vehicle, and also has 1 bank credit card that is almost maxed out, and 3 retail credit card that are almost maxed out as well.
Let’s do some math: This individual has a $300 car payment and almost the same in credit card minimum monthly payments as well. So, almost $600 in debt that he has chosen to take on. He also has several Federal loans on his credit report as well, which totals to an additional $300 monthly payment, and of course, our payment.
Remember how I said we also take income information? This customer is working at a small biotech company in the Midwest and making roughly $16 an hour. Not only do credit factors account for a large portion of an approval for a refinance, but Debt-to-Income Ratios (DTI) do as well. That means this customer is making roughly $2500 a month after taxes. Which would make his DTI around 55%. To be approved for a loan of 80k, you would have to have above a 700 FICO score and lower than a 40% DTI. Did I forget to mention that this customer has a 670 FICO score… My bad.
Back to the call
Me: Right, well I hear your frustration, that must be a difficult situation to be in. I’m around your age and I’m going through some similar struggles you are. It can be hard to try and make it these days with those student loan payments to make. However, to give you some perspective, your student loans all have 2 cosigners on them, in addition to yourself. We have decided that in order to move forward with a refinance of your students loans we are going to need to continue to have a cosigner on them. The risk would be too high to move forward with you by yourself on 80k of student loan debt.
Cus: Well, that doesn’t make any sense!!! I’ve been making the payments all by myself for the last year with no help from those cosigners, so how do you explain that.
Me: That’s great! I’m glad you’ve been able to keep up on the payments so far; however, we are not able to justify removing your cosigners on that principal alone. We must take into account all the credit and income factors and make a decision from there. In your case you do not meet the eligibility requirements on your own. Does that make sense?
Cus: No!!! I’ve been with you’re bank for years. Are you really going to tell me that you, my bank, aren’t going to help me out of this situation and help me move out of my parent’s house?!
Me: I’m sorry sir, it’s just not that simple, we take into account all of the factors I’ve mentioned. Your continued relationship is important to us, and I thank you for that; however, in order to move forward we will need to explore that cosigner option.
Cus: Well just so you know, one of the cosigners on those loans has died, and the other one is now retired and on a fixed income. Therefore, she can not afford to cosign again.
Me: OK… I hear what you’re saying, and I’m very sorry for your loss. But that cosigner is already liable for the 80k, so it’s not like they would be taking out any additional student loans. You would just be refinancing the loans you already have.
Cus: Well… that is not an option.
Me: Alright, well, again, at this point that is the decision that has been made.
Cus: Alright… well then I guess I will have to explore options at other banks and see if someone else is willing to help me.
Me: OK, well shopping around is always encouraged. I wish you the best of luck. If you don’t find anything else we will be here waiting for your cosigner. Do you have any other questions or concerns?
Me: Alright! Well it was a pleasure speaking with you customer, I hope you have a great day. Let us know if you have any other questions. Thank you for your time.
Cus: Oh wait, do you know of any other banks that will be able to help me?
Me: Ummm, yea, great question. So let me make sure I heard you right, you are asking me if I know if any of our competitors that would be willing to refinance your student loans in your name only?
Me: Well unfortunately sir, I don’t have any recommendations for you. But again, if you need anything else, you let us know.
Cus: Whatever disconnects
Moral of this tale. Please make informed decisions around borrowing student loans. Get as many scholarships and grants as you can. Speak with your Financial Aid Office, and for god sake… Don’t go buy a new car before your loans come into repayment.
I think the thing that got me the most out of this interaction is the fact that I could hear this customer driving his car throughout the whole conversation. It took everything fiber of my being to not suggest that he move out of his parents house and live in his brand new card, lol!
This post is much longer than I intended, and I don’t think many people will read it, but hopefully I can shed some light on the current student loan crisis that is happening for even one person, and help put it all into perspective.
TL;DR don’t take out more student loans than your annual salary