Joseph Chanlatte?s father was the director of a university when political turmoil forced the family to migrate from Haiti for Brooklyn in the early 1980s. So even though both his parents were college-educated, when it came time for Chanlatte to apply, they weren?t much help with the American education system. On his own, he learned how to fund his schooling, which he began at a two-year junior college and finished at a four-year for-profit university.
He took out the maximum amount he could in federal loans ? $64,000 ? but, in order to make his final payment in 2007, his senior year, he took out one additional loan, a private one, for $10,000.
?I assumed the terms were the same as the federal loans,? he said. That mistake turned into what he calls his ?financial prison.? Private loans offer worse terms than federal loans. Even if the interest rate is lower than the federal one, it is usually variable, wreaking havoc on a budget. The interest on Chanlatte?s $10,000 loan ballooned so much that, at one point, the balance was $19,000. In 2009 after he relocated to a new city, he was unemployed for about half a year and deferred his payments. ?During that time, they did these capitalized interests that they kept adding onto the loan,? he said ? $5,816.29 from March 5, 2009 to November 10, 2009. After he complained to the Federal Trade Commission and the Consumer Financial Protection Bureau, the interest rate, which at one point hit 16.3%, suddenly became a fixed rate of 12.25%.
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