BOYNTON BEACH, Fla. - Students are dealing with the rising cost of tuition by taking government and private loans. A Boynton Beach woman learned there is a big different in deferment of these loans.
When Jemima Pierre graduates from nursing school in December, she hopes to buy the home she's renting with her family.
"I like it because it's big and the neighborhood is really quiet. It's peaceful," Pierre explained.
That peaceful life turned rocky when Pierre's private student loan was turned over to a collection agency in May.
"It really hit me," Pierre explained.
That delinquency ended her dream of buying a home.
"They could settle it for $6000, but I don't have $6000. I can't pay a lump sum," Pierre said.
Even if she borrowed money from friends and family, the delinquency would still be on her credit report.
"Even though you try to do your best, something always gets in the way," Pierre said.
Pierre said she tried for months to get the loan deferred until she finished her schooling, but paperwork issues delayed the process.
When Citibank received the paperwork in May, it showed Pierre's school isn't accredited. That meant she did nto qualify for a deferment.
At that point, the loan was already 120 days delinquent and it was sent to collections.
"That's definitely earlier than you usually see," said Kevin Maher of Debthelper.com.
Maher said loans are typically sent to collections at 180 days, but students need to understand private student loans are not as forgiving as government loans.
"Personally, I am not a big fan of the private loans and that's because you have more options with the federal student loans. Like the income based repayment program that make payments a function of your income," Maher explained.
Citibank told the Consumer Watchdog Pierre has other options but she never requested them.
Citi said in a statement, "In the event there may have been a misunderstanding, as a courtesy we will offer this borrower a six-month forbearance."
That will delay payments, and remove the delinquency from Pierre's credit. Now she has time to find a job before paying her loans and she can continue on her path to homeownership.
The newly formed Consumer Financial Protection Bureau recently began monitoring the student loan industry. You can file a complaint there, or use their worksheets to figure out how much it will cost you to repay your loan.
Maher suggests you consider other alternatives to avoid a big debt when you graduate.
"Your degree is never going to say University of Florida or University of Miami but by the way you went to two years of community college. It's going to say you got this degree. If you have to go to community college to keep the costs down or work your way through school and take more time, maybe it will take you extra years, but if you can avoid paying $300 a month for the next two years that same $300 a month can help you retire as a millionaire," Maher explained.
Citi full statement:
"Enrollment in an unaccredited school does not qualify a borrower for an in-school deferment. However, borrowers may request a six-month forbearance on their payments. In this case, the forbearance was not requested. In the event that there may have been a misunderstanding, as a courtesy we will offer this borrower a six-month forbearance. That would bring the loan current, and if the offer is accepted, we will submit an update to the credit bureaus requesting that the default status be removed from the credit report to reflect the loan payments were deferred for this forbearance period."