My bank erased my $60,000 student loan

There aren’t many people in my situation in the United States. In fact, I’ve never met anyone else who can say this: even though I was over $60,000 in debt, the bank forgave my student loans.

Until it happened, I was like most other people my age in America, who owe the bulk of $1tn in student loans: throwing away sealed envelopes, ignoring calls from unknown numbers, considering grad school. Wondering when your life will begin – your real life, the one where you can afford to travel home for the holidays or take a vacation.

Debt means regularly fantasizing about floods, explosions, and comets – anything that will wipe your slate clean.

It didn’t start out like that. Sure, I graduated from college in 2008 with $90,000 of debt, which included that $60,000 bank loan along with $30,000 in government loans, but I was determined to find work. For three months, I interviewed, temped, and worked part time before landing a “full-time” job at a salon (I made $10 an hour and had no benefits or sick days).

My bachelor’s degree and I swept hair, scrubbed heads, and dropped off towels at the laundromat 45 hours a week. It was the same job I had in high school and throughout college.

Two weeks into my new position, Lehman Brothers collapsed and the market crashed. Three months after that, I began receiving bills in the mail.

I had two kinds of loans: one bad, one good. My government loans had decent payment plans, low interest rates, and forbearance options.

My private loans were accompanied by angry calls and ever-climbing minimum payments. I didn’t have the income to pay the bank what it insisted on. Paying any bill beyond my federal loan would have left me immobilized: unable to save, take risks or survive an emergency.

So I paid the government loan and ignored the private one. Six years later, the government loan was paid off. The bank loan took a different route.

Shortly after graduating, I heard somewhere that your debt disappears once the statute of limitations on it runs out. Your credit score would be nil, but you wouldn’t have debt any more. For a long time, I held this thought. It sustained me through spells of under- and unemployment.

I don’t know if I actually believed I would be absolved of my debt if I were patient – but after the bank threatened that I either pay $60,000 in full immediately or be sent to collections, my desperation compelled me to find out.

I took stock of the situation: since I’d used plastic to purchase clothes for jobs I never landed, my credit score was already in shambles by the age of 21. (Side note: “Dress for the job you want” is stupid advice if you’re broke.)

There was also the threat that I’d be sued. I had zero assets and was making less than $25,000 a year, so that didn’t bother me either. Instead of haggling with the bank, I continued to work, advance my career, and dream of collections agencies bursting into flames.

By 2013, I was making enough money to start saving. I could have begun paying the loan, but whichever collection agency owned it had lost track of me years ago. I wasn’t exactly on the hunt for them, either.

Then my debt caught up with me, but not in the way I expected.

In 2014, I received a letter informing me that the bank was writing off my student loan. Wiping it out. I didn’t owe it any more. $60,000 in debt, gone.

I held the letter against my chest, my heart pounding. I whispered the news to my sleeping boyfriend and texted my dad, the only person I could talk to candidly about the various financial mistakes our family had made in the name of higher education.

When I got to work, I emailed my accountant.

He was as amazed as I was. It turns out that having your student loan written off is not unheard-of – but neither is it cheap.

He listed the consequences. I’d have to claim the written-off debt as taxable income (there are a few exceptions, like insolvency).

My credit would also take a hit, but the privilege of living in a city with public transportation and plenty of roommate options has allowed me to manage with terrible credit for seven years – what would be seven more?

What he couldn’t tell me is why my debt was being forgiven. Searching online for an explanation led me to stories of credit card forgiveness, mortgage forgiveness and student loan forgiveness for people living with disabilities.

There was not one tale of being let off the hook for going delinquent. Was I alone?

“Student loan debt is almost never forgiven. It’s extremely rare,” Jennifer Gellner, LLM told me. She’s director of the Federal Tax Clinic at the Gonzaga University School of Law.

When I asked why she thought I was being forgiven, she replied: “You’re lucky, is what I think! There’s a lot of credit card debt that’s forgiven, that’s probably the most common one I see. [But] currently, there’s a very strong message that [banks] are not going to forgive [student loan] debt. Period. Whether you’re in bankruptcy, whether you have no money and no job, it doesn’t matter.”

This wasn’t always true. Four decades ago, all student loans – both issued by the government and private lenders – were eligible for discharge.

The restrictions gradually tightened under pressure from the credit card industry, peaking with the much-lobbied for Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Now, the law treats both public and private educational loans the same it would debts incurred by fraud, felony, unpaid alimony and back taxes.

Student loans are treated in an extraordinary fashion, unlike every other legitimately contracted consumer loan. It’s a little strange, right? If students are no more trustworthy than felons, why loan us tens of thousands of dollars?

Weeks later, I’m no closer to understanding why my debt was forgiven, but I do have a theory: my original lender was acquired by a second bank, so it’s possible the second bank didn’t prioritize collecting the debts it inherited. More likely, my loan was consolidated upon acquisition – transforming it from a student loan into something more generic, something more “worthy” of forgiveness.

Regardless of the details, I have a loophole to thank for my luck – that, and the fact that I never caved in and paid the loan. (Not that I can recommend that.)

Gellner warned that paying, and thereby acknowledging, a defaulted loan renews the debt, resetting the clock on the statute of limitations. My accountant reinforced this when I asked what the worst-case scenario was: “You feel a moral obligation to pay what you owe.”

I’ve been trying to figure out how I got into this mess, and “morals” seem to be the answer. My parents felt a moral obligation to send me to college, even though they couldn’t afford it. And at 17, I felt a moral obligation to comply.

I’m grateful my student loan is gone, but not that it was because of a fluke. My sister and mother are both still paying off educational debts, along with the majority of my friends.

Lenders who prey on families like mine – barely able to keep up with anything like $90,000 in student debt – believe our morals will pay their bills; and debtors believe it’s their moral obligation to pay what they borrowed, plus unregulated interest and fees until the end of time.

That, or they’re rightfully afraid of what might happen if they don’t.

But until educational loans afford the same protections as other consumer loans, doing the “right” thing seems just as risky for the borrower. What if investing in yourself, not your debt, is the only way to succeed in a system that’s against you?

Maybe that line of thinking is irresponsible, but private lenders – and the laws passed to protect them – have done a bang-up job of moralizing debt while subjecting students to uncapped interest rates, aggressive repayment timelines, and no forbearance or forgiveness options – this, under the guise of making higher education more accessible. That’s pretty irresponsible, too.

President Obama recently outlined a proposal to make community college “as free and universal in America as high school”, and has made other attempts to revise the repayment process – graduates can now apply for income-based repayment, the Pay As You Earn plan, and Public Service Loan Forgiveness.

Problem is, these programs don’t apply to private loans, which constitute 20% of all student debt.

If Congress wants anyone to actually believe they’re on the side of students, they’ll need to proactively address the private sector abuses they helped create. Until then, I’m not so worried about the direction of my moral compass.