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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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

ya think the moron(guy who borrowed the money) reads the comments?

June 01 2012 at 11:00 PM Report abuse +2 rate up rate down Reply

utterly demolished by poor life choices and watching too much TV ( saw ads for culinary school) thought that was the ticket to a great life, once again too much TV.

June 01 2012 at 5:18 PM Report abuse +4 rate up rate down Reply

We We tried to make something of ourselves and we borrowed student loans. It was easier than buying an ice cream. Only a small percent of these students will succeed especially in this economy.
We live in a nation that says, in effect, Wall Street casino-gamblers can steal, cheat, get bailouts and bonuses but no jail time. At the same time we throw the book at a wanna be chef. I don't blame these folks for taking to the streets and saying enough is enough, There is a big differrence between borrowing to become educated and stealing to be 1%. And it's time we look at that carefully because it just keeps going on!

June 01 2012 at 3:14 PM Report abuse -2 rate up rate down Reply
1 reply to tmcgiffert's comment

You have a very valid point about Wall Street banksters and "wise guys." However, the student borrower was naive at best, and was more than a bit irresponsible taking on so much debt for that questionable culinary school. .I also blame the lenders. You shouldn't be able to get a loan that easily, especially to study in fields where you are less likely to get a real job. Young people need to develop some "common sense" and not just follow their hearts mindlessly into fields that often hold no promise of finding a decent job, regardless of the state of the economy.. In this case, he should really have listened to his dad or taken a year or two off to see what the hand writing on the wall was as far as career choices and job opportunities were. Schools like that California culinary school should be shut down. However, out in the free market place it has always been "buyer beware."

June 12 2012 at 3:01 PM Report abuse rate up rate down Reply