Thursday, March 11, 2010

Default On Your Student Loan? A Big Decision, But Make It!

First, do the math. Can you possibly afford to make the payment? I hate this process, I hate the Department of Education, I hate the banks, I hate Sallie Mae, and I especially hate all those collection agencies, but still, if you can make the payments without too much hardship, make them. I do not advocate complete anarchy here.

If you have one of these law school debts of over $100K, you’ll probably be making monthly payments up to $1K per month. So, again, do the math. Can you afford this, plus your rent ($1,500-$2,000), plus any car payment ($300 per month) plus living expenses (which includes credit card debt: another $1000 per month)? Let’s round up to $5,000 per month, which is $60K per annum. If you make $60K per annum, read no further and pay off your student loans.

If not, listen to these words: you cannot afford this. Change your mindset and prepare yourself for a life you probably didn’t expect, but it isn’t the end of the world.

It’s funny how some people go through college and don’t understand that if you default on your student loan (that is, if you miss enough payments—usually around six) the FBI does not show up at your door and arrest you. You don’t have to move out of the country if you stiff the Department of Education!

Here’s some things you should learn about the employment world as it stands today in America. The current minimum wage is $7.25 an hour, and it appears that it will stay that way for a while. That means an 8-hour day will earn you $58; a 40-hour week (8 hours x 5 days) will earn you $290; a full time job at minimum wage will earn you ($290 x 4 weeks) $1,160 per month, which is $13,920 per year. The official poverty level for a family of two is $14,000 per year, so this minimum wage job puts you just under it.

Now look at what you have to make to afford your student loans, or $60K per annum. That’s $5,000 per month, $1,250 per week, $250 per day, or $31.25 an hour. There might be some adjusting to do with vacations, February, which has only 28 days, and other facts of our Western calendar. Round up to $32 per hour. If you are not making $32 per hour, you should not be attempting to pay back your student loans.

So what happens if you simply don’t pay? Again, I’m not a complete anarchist, so if you can pay something, anything, say $100 per month, do it. You’ll default and be making those payments to a collection agency, but so what. In fact, the collection agency will tell you not to send them a payment if it isn’t for the full amount. Send it anyway. They’ll take it. If you stiff them cold, they will remember that. Don't stiff them cold if you can avoid it.

Oh yes, and their hardship plans are usually bogus. They'll try to sell you those. Listen to them. But usually don't sign up for them. If the collection company treats you like a rogue because you won't sign up for their hardship plan, tell them tough titties. If they start to come down on you hard, hang up the phone.

Even if you are unemployed and have no money whatsoever coming in, a $100 payment to them now and then (say once or twice a year) will keep you out of the worst of their categories. It all goes under the general category of how to handle bill collectors.

This advice goes for stiffing credit cards as well. Do it only if you don’t have the money coming in, but don’t be afraid to do it. When the collection companies start calling, it is important NOT TO TELL THEM ANYTHING. They will say they have the force of the law on their side, but that is a bluff. Collection companies will use every trick in the book to make sure you don’t have enough money for food that month. They are despicable. Treat them like criminals, because that’s what they are.

If collection agencies start harassing you (and they most certainly will), you must demand that they stop all collection calls. You have to do this in writing. Write your demand to stop all collection calls to them in crayon. They must. Oddly, this is one of the laws they honor.

Make your priorities: stiff student loans and credit cards first; don’t stiff auto insurance if you don’t want to be fined (depending on the state you live in); don’t stiff the auto payment if you don’t want your car repossessed; and don’t ever, ever, ever stiff the IRS. With all the conservative propaganda horror stories out there about the IRS, as long as you don’t owe them mega-bucks, they are the puppy dogs of collection outfits. If you owe back taxes, set up a monthly payment with them. If you can’t afford what you owe at the end of the year, make sure you at least file on time. Send them what you can. Their collection letters are intimidating, but they are nothing like the lawless collection agencies that the Department of Education or credit card companies will sic on you.

There are a few other laws to know about. The Fair Labor Standards Act (FLSA), which goes back to the New Deal during the Great Depression, is what you need to invoke if your employer works you overtime without paying you “time and a half.” If you receive an hourly wage and your employer works you more than eight hours, you can sue and usually collect twice the amount of your damages. The problem is, of course, you are going to piss off your employer if you sue them, so you have to decide if this is really worth it. Still, it is more than interesting when you work for a company and lo and behold they simply show what they are made of by completely dishonoring this law. This is one of the laws that I’m sure young JDs will be encountering when they get these temporary positions with law firms. Other employers will try to grant you “exempt” status, by making you a vice-president or something. McDonalds once thought it could successfully skirt around FLSA by making all of its burger-flippers vice-presidents, so they could work overtime. Once you thoroughly know this law, you’ll see just what your employers are made of and why you should be very suspicious of them at all times.

ERISA, which dates from 1974, is another important law, which deals with pension plans. Employers are aggressively trying to make a buck by getting you to sign up for their pension plans, and sometimes you don’t even know you have signed up for one. If you stop working for a company, make sure that they haven’t signed you up for a pension plan and if they have, make sure that they return the money they took out of your paychecks, if you are not yet vested. I don’t care how fancy the office building is where you work, these companies are ruthless. Make Xerox copies of all of your paychecks, because they will often skimp on the information provided to you on your pay stubs.

Also watch for the part-time/full-time shuffle. I worked for a company once that had me employed 7.75 hours a day, and considered that part-time employment. No, it was also not some fly-by-night organization either.

If you are a young lawyer, you have no doubt entered into the legal field at a time when downsizing is going to cream you if you let it. Don’t let Judge Judy intimidate you when she says you are a bum if you don’t have a job. Many of these places are simply not worth working for. Sometimes it is better to simply stop paying your bills than to put up with the nonsense that an employer is going to try and pull on you. It will waste your time and it is not worth the money.

Above all, make sure you get enough to eat and have a roof over your head. You are not a bum if you don’t pay back your student loans, no matter what that television tells you.

And if you get in a jam, go see a lawyer! Their first consulation is usually free.

Monday, March 8, 2010

En garde! Taking on the Trolls

Even if you are of strong character and sound mind, trolls have the ability to knock the wind out of you. We bloggers know there are trolls out there, they get into our blogs and stubbornly fire away at everything we might stand for.

Why should we be so surprised? In a way, we pick the fight with them by taking a stand against the status quo. If we know what the law school crisis is, we try to fix it by informing others and making sure that the snake-oil salesmen out there don’t fool you with their claims.

I recently read an extraordinary feature by a writer for the Sacramento News & Review, R.V. Scheide. It’s about the current public education crisis in California:

Scheide got the progression of what you have to go against if you are going to fight against the status quo these days: 1) Ronald Reagan; 2) Howard Jarvis; 3) Ayn Rand; and 4) Milton Friedman. The trolls have their way of thinking, and they will never give in. They are fiercely loyal and will essentially fight to the death.

They will tell you “never give a sucker an even break.” And if you are a recent JD graduate who can’t get a job, to them you are a sucker. There will be no civil effort to fix the problem as far as they are concerned. It doesn’t matter how much you argue or how much you isolate a substantial, destructive problem and identify it. Their creed is to make sure you stay at the bottom.

I mention Ronald Reagan because he was the one who originally led a political campaign against education, not when he was President, but when he was Governor of California (1967-1975). He believed that universities were harboring Marxism and should therefore be starved out of money, and maybe even eradicated altogether. His biggest enemy was UC Berkeley, where protesting against the Vietnam War had heated up to boiling point. If you want to know why tuition in law school (or any school) has continuously gone up over the years, Reagan’s attempt to crack down on universities and public funding for them was a powerful cause for the conservatives who have shaped this country for the past 30 years, since Reagan became President.

Howard Jarvis appeared on the California scene shortly after Reagan served out his term as Governor, but his tax revolt (which was the essence of his famous Proposition 13, which the voters affirmed) cut property taxes in California which were funding the public education system. The spirit of this tax revolt appears the same today as it did then: it presents itself as a grassroots movement, but in essence, it gulls the grassroots into supporting the interests of the wealthy.

And please don’t buy into the stuff you read about Ayn Rand, for example, that her Atlas Shrugged is the most important book since the Bible. Rand is a warped, pernicious thinker, angry at the world, believing through a twisted logic that religious, spiritual people are leading the planet towards death. She is the heart and soul of the conservative movement, even though she is a staunch atheist. She practically condones criminal behavior if you are among the elite of the world. She espouses a circular, tautological philosophy attracting young people by the droves because of its angry tone.

And Milton Friedman, who stood by Governor Arnold Schwarzenegger’s side at the beginning of his first term, is one of the chief voices of the Libertarian Party and the Chicago School of Economics. He would just as soon auction off the departments of the Federal Government to the highest bidder: I often wonder what would happen if the Mafia bought the Department of Justice. He tells you there is no such thing as fat cats, and that the free market is the only way to structure a society. He has successfully taken the 19th-century version of anarchy and wrapped it in sheep’s clothing. The wolf that jumps out to eat you will be those wealthy “fat cats” that will make sure you remain jobless, unless you get down on all fours and service their needs (to put it mildly).

I realize this is California stuff, but it is apropos of the issue at hand. If we are trying to preserve the American experiment in Democracy, every voice shall be heard, even if the trolls are going to yell at the same time. Trying to solve problems with logic will make you vulnerable to their guile, but stand firm and right with the truth. Expect a fight, but it needs to be fought.