Student Loans: an Argument for Repayment

I paid my first student loan bill today!

Although my student loans now make up a significant chunk of my monthly income, there are a lot of reasons I'm paying at least the minimum - and hopefully will be able to start paying down more than that after April.

I was having a bit of difficulty getting my money into my account back in the US in time to begin payments, and was starting to get pretty anxious. I talked with a friend about it, and he asked why I wasn't deferring payments, as so many I know have done. In terms of straight up income, I would probably qualify for a deferment - especially with the weakening Turkish lira.

For me, financially, it just doesn't make sense. Right now, over 20% of my income is going towards paying student loans, which seems like an incredibly high number given that I don't really have significant debt. Even with that fairly insignificant number, the interest that I accrued while in school kills me. Every month that I deferred, or every month that I had to pay less, would end up costing me thousands of dollars over the course of my student loans.

I know there are times when it would make sense to defer, but I think it's best to look at student loans as only a tiny step up from consumer debt. It's good debt, sure, and I had an amazing experience at law school, but it's still debt. That being said, paying off student loans isn't my primary focus right now - instead, I'm trying to save as much for my 2008 IRA as possible. After that, I can think about what else I can be doing. For now, though, I'm glad that I can pay the minimum balance, and grateful that I'm able to do it.

Photo by Strevo

Foreign financial crises - job loss abroad

There was an interesting international news article in the New York Times yesterday about the droves of foreign workers leaving Dubai, which, like many other countries, is in the midst of an economic depression. Abandoning their cars and mortgaged houses, these unemployed or underemployed workers have been fleeing the country to escape from their massive, criminal debt that they have no way to pay off.

First, as a caveat and bit of a personal story: this article highlights how lucky I feel to have stable employment. In my last semester at law school when I was planning to practice in Michigan, I started applying to hundreds of jobs. Each job, hundreds of other highly qualified candidates would apply as well (I am not exaggerating these numbers - after a while, the whole process became too defeating to continue). I soon realized that with many law students and seasoned attorneys in the same predicament, I would be better off looking in a jurisdictions where my skills would be a unique asset. I applied for a job in Istanbul and here I am, while many of my classmates struggle, nine months after graduation, to find a job. In a way, my flight was from Michigan, where my being a native English, US-trained, jobless just-graduated-law-student would never set me apart from the hundreds of others vying for the same job.

But this article raises unique questions and challenges that I have little experience with for the expatriate employee. How deep are your ties to a country? How deep is your debt? It also highlights one of the benefits (and more unethical aspects) of expatriate living: sometimes, it’s easier to just cut and run and go back home, or somewhere else, than dealing with the impacts of your financial woes. This is obviously not to advocate that, but is certainly how many have reacted to the deepening global financial crisis.

If you are thinking of taking on debt in a foreign country, do you know the debtors’ laws? In Dubai, for instance, failure to pay bills is punishable by jail. I’m not planning on acquiring any large debt like a mortgage or house payment any time soon, but this really does highlight the need to speak to a qualified, educated individual before taking on any sort of major debt in the country. I would never have guessed not paying bills could land me in jail, and I would hate to have to face the book-it or be-booked dilemma that many in Dubai are now facing.

Finally, it also, of course, highlights the need to have an adequate financial cushion to help ride out the bad times. This is something that I myself am still working on, thinking that problems like this will never happen to me. It’s easy for me to think my job is secure; I could go anywhere. And, though the people in this story were in the wrong place at the wrong time, hopefully other workers, foreign or domestic, can learn from their unfortunate stories. I've always planned to build up a safety net sometime in the 'future', but articles like this drive home that future should be now.