This Bright-Eyed Young Man Was Utterly Demolished By Student Loans

this bright-eyed young man was utterly demolished by student loansEven as total outstanding student debt rises to $1 trillion, lawmakers have yet to allow loans to be discharged in bankruptcy. Without an escape clause, these loans can strangle a person.

Take 36-year-old Nick Keith, who remains $142,000 eight years after graduating from culinary school. He's featured in a new film, "Default: The Student Loan Documentary," in which several college graduates expose the pitfalls of the private student loan industry.

"I want to educate the public about the facts," Keith told Your Money. "My life has become a daily swim in a tar pit with very little hope of ever getting out."

Without Family Support, Turning to Culinary School

Keith's father only agreed to co-sign a student loan if he stuck with an engineering degree at Iowa State University, but even with decent grades, he knew it wasn't a right fit.

He dropped out sophomore year and later turned to the California Culinary Academy -- without his dad as a safety net -- hoping to put his love for healthy eating to use.

"The culinary academy commercials were on the Food Network every 15 minutes," he said, and only required 12 months of study with a three month externship.

He fell for their sales pitch hook, line and sinker.

"I should have seen all the signs. [The campus tour guide] had a used car salesman answer for everything," Keith recalls. The magic answer was always "99 percent" -- whether Keith asked how many enrolled students graduated or how many graduates scored jobs afterward.

Feeling confident, Keith took out $46,000 in private loans.

He then took out another $14,000 in federal loans to cover his rent, since the school's fees didn't include room and board. But "I was lied to about the terms of the private student loan," Keith says. "And after completing the program, my first job in the culinary field (working on a meal assembly line) paid $10 per hour."

Not the First to Be Duped

In September, the California Culinary Academy agreed to pay $40 million back to thousands of students in a class action suit claiming they were misled about the program. The school allegedly boasted a "48 percent to 100 percent" success rate for graduates looking for work, but students claimed the calculation included jobs that didn't require a culinary education at all.

With just a part-time job, it took Keith three months to make the first loan payment of $1,300.

He was also paying a 19% variable interest rate – nearly triple the capped interest rate on federal unsubsidized loans.

"I spoke to (private loan issuer) Sallie Mae. I wrote to Sallie Mae. But Sallie Mae would not refinance my debt with a reasonable interest rate or reasonable payments," he says. "I could not afford to make a student loan payment because my choice each month was to either pay my rent or make a student loan payment."

Sallie Mae's best offer? A $50 to $100 reduction in his monthly payments.

Bankruptcy Wasn't an Option

No matter how deep borrowers find themselves buried in student loan debt, federal law prevents them from discharging it in bankruptcy court -- unless they can prove "undue hardship."

"Most bankruptcy attorneys do not pursue a discharge of student loans because the undue hardship restriction is such a harsh standard," according to Mark Kantrowitz, publisher of

With no hope of meeting his monthly payments, Keith threw his hands up and basically let the debt collectors have at him.

"They call every day, a couple times a day," he says. "I send their numbers straight to voicemail."

Eventually he stopped making loan payments altogether

Keith sought advice from a bankruptcy attorney as well as a couple of CPAs on how to handle his loans. Both gave him the same advice: Stop paying.

They reasoned that with so many students in Keith's position, Congress would eventually revamp its personal bankruptcy laws to allow loans to be forgiven.

Nearly a decade since he took out the original loan, his balance has ballooned to $142,000 with a 17% interest rate -- and the law hasn't budged.

And the Blows Just Kept Coming

"Just as I was getting close to getting my financial house in order, I was injured at work and became permanently disabled," Keith says.

Six years later, Keith's only source of income is a $1,200 monthly disability check, going so far as to collect cans and bottles for extra pocket money.

"I get groceries at the local food bank," he said. "I have sold or lost 99 percent of everything I ever owned."
The outlook remains pretty grim.

Keith's expecting about $16,000 from the $40 million CCA settlement in July, but that's only if the school doesn't file another appeal.

In the meantime, his credit score has fallen below 550, he's had trouble securing even auto insurance, and finding work is a struggle–not to mention the fact that none of his CCA credits will transfer if he decides to go back to school.

"Any employer that checks my credit history will surely have to raise questions as to why my credit shows only defaulted or charged-off accounts," he says. "All of my good credit that showed I paid everything in full and on time is now past seven years old and has fallen off my credit report."

For the time being, he's living out of his van.

Keith camped out in his dad's heated garage for the better part of 2011, hoping he'd be able to either find a job or sell enough of his belongings to afford to move back West for work.

When we caught up with him in late May, Keith said things with his father turned sour and he used the $2,500 or so he raised on hotel stays instead. As of last week, with the rest of his savings dried up, Keith officially joined the ranks of the homeless.

He's living out of an aged minivan, taking advantage of Salvation Army for meals and groceries. At night, he crashes at highway truck stops, where he says he's rarely bothered.

"All that I, and the rest of the folks in this mess, are asking for is that Congress simply return the "Truth in Lending" policies and procedures to all student loans (both federal and private)," he said. "As well as return the ability to discharge student loan debt through bankruptcy."

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Donna Greci

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December 16 2014 at 7:00 AM Report abuse rate up rate down Reply

And before there is a huge backlash of how I am such a winer - let me just say that I do not believe that giving up is the best thing to do. Or that everyone's debts should just be forgiven because it's "hard".
I struggle everyday to make money to live and pay my loans. I was unable to find full time work when I left school or even multiple part time jobs for that matter. I have some graduate schooling even in biology, but just could not afford to keep going to finish past that. I had to start a dog walking company that is doing well now. But I am serious - I started my own business just so I could make full time hours for myself. I defaulted on my loans while struggling to find work and then start the business. I would have been homeless and not even able to try to start a business if my boyfriend had not let me move in with him (I am still so ashamed of the fact he had to "save me"). Now I am on my way to back on track, but I will be paying penalties and sums of money on interest that mostly serve to just keep me in debt longer. I doubt that I will be able to go back to finish my research and full degree. So - pretty much I should have just become a dog walker right after I gave my valedictorian speech at high school graduation and I would not have all of this debt weighing down the rest of my life. No matter what - my actual career path seems completely unattainable. I can honestly say that college is the worst idea for anyone that their families or that federal loans and aids are not paying for 100% of the costs.
Adults need to realize that this is the way it is now and be up front with today's youth about this. I am not sure what the best alternative is - but I know college is not the best place for our young people now. Neither is the job market. It's bleak. Starting your own business is good, but banks are not exactly just giving out small business loans. So - pick something with low start up costs... Not sure if there is any good advice for young people now as far as career goes...

June 02 2014 at 11:52 PM Report abuse rate up rate down Reply

Wow at most of the heartless comments on this page! Are most of you ancient!?! I am sorry, but going to any higher education institute is nothing like it was for students 3 decades ago! Tuition has skyrocketed in comparison to wages. This is a very common story for young people these days. Working full time while going to school is still often not enough to cover all costs. I know because I did work full time during my entire time of going to University of North Carolina full time. I even was valedictorian and had scholarships to help. Also, they do have time frames where they will expire your credits. So, taking time off to just work is difficult. Many people are being pushed by counselors and adults in their lives to go to college so they will "make something of themselves". But then there are no jobs to be found when they get out - so - again - working multiple jobs to pay is not a great option either. Have any of you looked at the stats for jobs for ppl aged 20 to 30? It's still terrible and has been stagnant for a decade. Young ppl have been wedged out of the work force nearly.
Sallie Mae is terrible. They will NOT help you! You pretty much have to show that you will be disabled for life and never able to work again to give them their money before they will discharge based on that. Their interest rates are insane and they are not up front about that!
Government funding to education continues to be cut and they just raise tuition to cover the costs. Then that money is used to build state of the art gyms and computer labs to beautify the school instead of making their actual education quality better.
It's a vicious cycle that has turned this country's education system into one big scam and joke. Those diplomas are not worth the money they are printed on, but Sallie Mae sure has made an awful lot of legal money in the private and federal student loan business... I guess that's what really matters.
Give me a break! I am all for personal responsibility, but the government should have already stepped in and put a stop to malicious private student loans. How about also acknowledging that the current state of education in this country is a joke, unaffordable for most, and misrepresented to the American public! This is true of public universities as well. It's not just the non profits that should be held accountable!
So much in life depends on who you know - not what you know. Luck plays a role in everyone's lives no matter how hard anyone works. This guy thought he was doing the right things to set himself up for success.
I was told growing up that I needed to go to college so that I would not have to flip burgers. Now I hear - "so, you're too good to work at McDonald's to pay your loans?" I could have just not worked hard in school and arrived at the same place without any debt! If young ppl seem unmotivated or disgruntled - I feel that much of it has to do with the above mentioned attitudes that were fed to us.

June 02 2014 at 11:31 PM Report abuse rate up rate down Reply

It used to be impossible to make a living in S. American countries because S. Americans thought like Americans do today. The poor had it so bad that their life was not worth living, so every ten years they staged a revolution, and confiscated the property of all wealthy individuals Meanwhile, Western democracies created safety nets, and experienced political stability. The political stability allowed everyone to benefit. Now Americans are thinking like S. Americans. We will just make laws that protect the rich, that will leave too many people willing to risk their lives to destroy the existing system. Revolution and political instability will eventually come to the US. Conservatives will be happy that were able to prevent the poor from getting a free lunch. They will be happy even they will be living in some underground fortress eating K-rations. They will feel smug that their paranoid survivalist instincts were correct all along. As they live in their Mad Max post-apocalyptic world of their own making eatng spam, they will continue to believe they are superior human beings. Never once will it down on them that they could be living a much better life if only they had been willing to share more of their wealth with the less fortunate, and willing to make laws that protected the poor from exploitive practices. Political stability requires some wealth redistribution, but it is a worthwhile business expense.

July 28 2012 at 5:33 PM Report abuse rate up rate down Reply
Scir Ninetyone

if you're not studying math or science in college, you don't belong in college.

July 27 2012 at 6:09 PM Report abuse rate up rate down Reply

Keith should have been respectful and honorable enough to have listened to his father. If he is the poster child or student loan debt, then he should pay his bills and stop complaining.

June 27 2012 at 8:36 PM Report abuse rate up rate down Reply

No one should be bailing out people that make stupid descisions like going to high price colledges and taking courses that will never give them a job paying enough so as they can pay back the loans .taken out by them.

June 07 2012 at 4:47 PM Report abuse rate up rate down Reply

As an attorney I have dealt with these student loan issues for clients. The rules are as onerous as reported. There are 3 issues in this case that bear mention. One, if he was disabled enough to get SSI, then there is a process, a disability application, that can be utilized. Two, if they are true student loans guaranteed by the Department of Education (and not just a "qualified education loan") eventually that Department will pay off the private lender, take the loans and sue in Federal Court. Three, Bankruptcy Court's have been hearing the people and broadening the scope of "undue hardship" which appears in 11 U.S.C. §523((a)(8). He should consult an attorney again.

June 07 2012 at 11:17 AM Report abuse rate up rate down Reply

Pursuing your passion and making a stupid decision are also 2 different things. I am sure he just loves cooking even though he didn't work a single day during his culinary school career at a restaurant.

June 05 2012 at 11:33 AM Report abuse rate up rate down Reply

If any kid reads this, LISTEN TO YOUR DAD!

June 03 2012 at 3:33 AM Report abuse rate up rate down Reply