In a recent article, I wrote about a former student who was struggling with more than $100,000 of student loan debt.

He’s not the only one.

About two hours after my article hit the wire, I received an email from a grad who’s five years out of school, working a great job in a professional field and looking forward to a bright future. He also happens to be more than $150,000 in the hole for his undergrad and graduate schooling—a combination of $60,000 in fixed-rate federal student loans and $90,000 in adjustable-rate private debt.

Over the course of the next few days, I learned that his student loan debt-load — the monthly payments themselves consume more than 30 percent of his pretax earnings — has caused him to run up even more debt (credit card) as he struggles to cover his living expenses. But despite his trouble, he didn’t blame his family’s limited ability to fund his college experience. Nor did he point a finger at the high school guidance counselor who neglected to tell him about potential tuition-saving resources, such as the College Level Examination Program (CLEP). He didn’t even rail about his schools’ (undergrad and grad) failure to provide good advice regarding the level of debt he was accumulating, or how the lenders — government and private — made it so easy to draw down this funding during his deferment period.

Instead, he wanted to focus on the steps he could take to change course. In particular, he wanted to explore the strategies for negotiating more favorable repayment terms for his government and private loans.

The federal part turned out to be surprisingly straightforward. He qualifies for the newly implemented Pay As You Earn Repayment plan (PAYER), which will help him to reduce his monthly payments. Unfortunately, though, his interactions with the private loan servicing company — not the lender itself — have not been nearly as satisfying.

Short-term solution, longer-term pain

He said their customer service representatives were more interested in pitching temporary payment-eliminating or payment-reducing forbearances than they are permanent loan modifications. Not only don’t these short-term accommodations address the underlying problem, but they also prolong the pain. That’s because in either case, the full amount of the interest continues to be accrued on the loan, only to be added back to the balance on which even more interest is then charged (a.k.a. negative amortization).

One option I shared with him is that he can go back with a specific request to extend the duration of his loan so his payments will be reduced to a number he would then be able to afford, while preserving his right to prepay principal. That way he’d have the benefit of a lower payment for as long as he needed without having to forgo the advantage of accelerating his repayment schedule (by adding extra principal amounts), as his cash flow permits.

Sadly, the customer service representative from the loan servicing company stonewalled him. The grad then asked to speak to a supervisor who, after a protracted and heated conversation, reluctantly gave him the actual lender’s number to call so that he could make his appeal on a direct basis.

The wrench in the works

As it turns out, the lender financed the loans it made with securitized debt of its own, meaning the lender had sold his debt to investors. As many know, this was not an uncommon practice in years past and probably the reason the servicer gave him such a hard time: securitized debt is much less flexible than loans that are actually owned by the lender. Here’s why.

Imagine dumping tens of thousands of contracts into a financial Cuisinart where the resultant ball of dough, so to speak, is rolled out and pizza-wheeled into hundreds of thousands of really thin slices that are then sold all over the world. As such, it would be difficult — if not impossible — to reconstitute and revise the hodgepodge that’s now owned by so many different people in so many different places, right?

So how is it that the loan servicers have the ability to offer forbearances as a matter of due course, but not a permanent modification when both involve extensions of the original loan’s duration? Either way, the securitization investors would have to accept something less than what they originally bargained for.

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