As a single parent in California trying to stay off of welfare, I decided to try and earn and education. Someone had told me of the fantastic opportunities that were available from student loans through the government. This excited me that I could make a life for myself and my children and possibly break the cycle of welfare that was passed down through generation. I had two children, an x-husband that did not have a job so paid no child support and I had no education, so raised my children serving food in restaurants.
Because I had two dependants and my annual income was way below poverty level, it was no problem qualifying for student loans. I was able to get the maximum amount to pay for my tuition, books and then there was money left over for which I would purchase school clothes for my children or pay rent or some other bill that was delinquent. Life seemed to be looking up. I finally had money and didnt have to worry about feeding my children and the best part was that the money didn’t have to be paid back until I was done with school.
The problem with the way that was set up was this: I was given two years that the government of California would give me food stamps and pay me additional welfare money while I was in school. When the two years term was up, I went to get a job and start my new found career with the new found education that I had earned. The money that was offered for the education I earned was less than what I was making as a waitress on a Friday night in a restaurant. My dream of being financially secure and raising my children off welfare and government assistance were crushed. Now, not only was I ineligible to get the monthly welfare check and food stamps I was getting prior, but I had a big fat bill for student loans.
The good news was that the loans did not have to be paid back until I was done with school, so through a counselor, it was suggested that I transfer to a university and work on a four year degree which would earn more money in a career. So again, I took out student loans in the full amount offered so that I could pay for things that my children needed. Ultimately, what I was doing was going to school to raise my children. The way the system worked was that I simply traded welfare for student loan money. At the time, this was OK with me because I was no longer on welfare, and again, felt a though I was moving farther away from the poverty life I had lived in the past. And there was this prestigious feeling that “I” was attending a university.
The problem didnt really strike me until several years after school was done. I had consolidated all the loans into one so that I could pay them off in one payment instead of twenty small ones. I was finally educated and my children were grown. I made it! My children had everything they needed growing up, I had an education and now all I had to do was pay back my student loans.
My payments were the same each month and the amount I owed was nearly $38,000 (a small price to pay for all I had gained). My payments were always on time and now I was even building a positive credit score. Life was good.
Then one day, I got one of my bills in the mail and realized that I could access my account on-line – something I had no idea I could do. So I went on-line to review my account, only to realize that the $38,000 that I owed two years ago had now become $39,320! How could that be? I had been making payments for two years in the amount that was on the bill sent to me each month.
In my panic, I called the company that consolidated my loans and they explained that I had only been paying interest for the past two years and the interest payments were not actually enough to cover the interest that accrued each month, so my principle went up just a few dollars each month and on top of that, I was charged interest on the interest!
Being a single mother at the time that the money was given to me, I was grateful for the help that the California government offered to me, but wish that someone would have sat me down and explained EXACTLY what I was getting into. I may have made the same choice to take the money at the time, but I may not have. Today, I owe more than I started owing and I have been paying for over two years now.
My caution to any single California parent is to be well aware of what you are getting into. Seek financial advise from a counselor and make sure you are well informed of the future payback plan. It may seem enticing that you are offered such a significant amount of money, but there is a price. I will be paying for my children’s clothing and food that I purchased 6 years ago……….for the next ten years and they are both adults now!