I should have known things were going to get weird when my wife got to our meeting with the financial planner at the credit union two minutes late, and the building’s automatic lock — not yet reprogrammed from a recent change in hours — left her outside, knocking for 10 minutes until someone took notice.
With two daughters in college, tuition loan repayments were stacking up, and my wife and I felt the weight of multiple monthly payments kicking in. We began to realize what a job it was to keep track of all the loans, and figured there had to be a better way.
Remembering we’d gotten good advice from the credit union on retirement accounts and mortgage refinancing, and eager to avoid any lender that smelled like last year’s banking industry meltdown, we called our adviser to set up a new strategy for squeezing tuition payments into the family budget.
The good news came quickly. “Call the loan office in the morning,” our adviser said. He agreed that using the equity we’d built up in our home to pay tuition bills would liberate us from the structured federal loan programs. If things went as expected, it would allow us to repay on our own terms, at 3.99 percent (I know!), and ‘defer’ if we needed to, by making only minimum payments in tight months.
This was no bailout plan. We would start making payments right away. Big ones. But things looked rosy for our little debt-restructuring program. We would live cheaply and pay like hell while we could, and hopefully come out with home equity, savings accounts and sanity intact.
We walked out smiling like Gordon Gecko. We hadn’t gone in greedy, but we could smell the money now, and it smelled good. Paying for college would be easier, and maybe cheaper than we imagined. It was July 2009, the bottom of the real-estate market and home values were going back up. College would practically pay for itself!
If only I’d thought of my sweet wife, locked out and knocking, knocking, knocking…
She called the credit union loan office the next morning. Yes, we could arrange a home equity line, but — the voice hesitated — they could not offer as much as our guy had thought the night before. With housing values down so much — she hesitated again — we might want to wait to apply “until things improved.” We might not like the answer, nor would we like the black mark a downgrading could put on our spotless credit report.
There was one other thing we could try, she said. Despite the tightening in the credit markets, banks were still looser with cash than credit unions were right now. Things could change, what with credit reforms coming and all, but we could consider them as a backup.
Caught off-guard, we hung up to regroup. A bank loan? Wouldn’t this make us, allergic to easy credit, complicit in the banking industry’s crimes? Still, we needed the money, and we’d quickly grown attached to the cushion it promised.
We thought about it for, oh, maybe five minutes, and made the call. This should be fine, the voice at the bank said, and really, they were wonderful to us. They had a loan that would work, and would run a quick check on the value of the house and then get us in to sign the papers later that week. They were also more conservative than we’d given them credit for.
Willfully blind to the bear market’s claw marks on our own house, we waited impatiently, and smiled hopefully into the phone when it finally rang. The appraiser had driven by our house, and though it was in beautiful shape (great paint job! love the rock garden!), average values were down, and our house — along with everyone else’s — got us about 40 percent less credit than it would have a year ago.
Too resigned now to fight back, we said to go ahead. We got 4.99 percent and just over half the cushion we’d been hoping for. We headed to the bank and signed the papers like we were settling out of court — just names, dates, and the empty feeling that we’d come in second best. We hadn’t gotten rolled in the alley, but even our own spotless credit wasn’t immune to assault from the credit meltdown.
Steve Young-Burns is a freelance writer living in South Minneapolis. He hopes the economy stays strong until he and his wife finish paying for their daughters’ college educations.