This post if part of the Financial Information Month 2016: Student Loan Series. During the Month of October, I will be sharing information about Caribbean Studnet Loans, stories from borrowers and highlighting the missed opportunities to address the current issues with the Student Loan System in the Eastern Caribbean.
After completing bachelor’s and master’s degrees in civil engineering, I had amassed about $68,000 in debt, made up mostly of student loans. I had credit card debt, private and Federal student loans from the U.S. and a Caribbean student loan from the Development Bank in St. Kitts and Nevis. When you graduate with student loans in the U.S., you are required to go through exit counseling to get information about what happens next with your student loans, how to track down your lenders or servicers and what is expected from you as a borrower when it was time to repay.
Outside of the exit counseling, there was information on the Department of Education, and my University’s website and other websites providing information about how to navigate your U.S. private and Federal student loans. When it came to my Caribbean student loan, though, there was not much, actually no information to help me navigate them.
Concern About My Caribbean Student Loan Terms & Conditions
Once I graduated from undergrad, I received a letter from my lender in St. Kitts, the Development Bank of St Kitts & Nevis (aka the Development Bank) informing me of when my first payment was due, and the monthly payment amount. I thought that I had a good idea about what I signed up for. I borrowed money to fund my college education and when it was time to start paying the loan back the loan. Payments would be applied to principal and interest until it was paid off over a 10 year repayment period.
I had heard horror stories from my parents about how many borrowers with a student loan from the Development Bank, always ended up paying exorbitant interest beyond what should be expected with a loan with a reducing balance amortization. In 2007, when I started making repayments, The Development Bank had a record profit of nearly $1.6 Million (US) at the same time that commenters on the article announcing the profits complained about feeling robbed by Development Bank.
That was not going to be me! I requested by promissory note (or bond) agreement and read line by line to make sure I confirmed my understanding of the student loan terms and conditions. I wanted to especially make sure that there was not a clause that required extra interest be paid or restrictions on making extra payments towards principal balance. Once I read my promissory note I confirmed that my loan was a basic reducing balance loan. I promptly started making repayments and never gave much thought to how my payments were applied or reviewing my account statements. I was good to go!
Repaying My Caribbean Student Loan
I started graduate school in the Fall of 2007 and started making my repayments on my Development Bank Student Loan, while I put my private and Federal student loans in deferment. I made room in my $332 Graduate Teaching Assistant salary, to make my monthly payments. Development Bank did not offer online payment or credit card payment options so, I would send pre-filled out checks to my parents and they would go to the bank to make payments. My parents would receive receipts at the Bank counter and statements in the mail on a quarterly basis. I did not think of getting copies of my statements to review them and assumed my payments would be applied to with a portion going towards interest and a portion towards the principal balance.
When I completed graduate school and got my first full-time job in engineering consulting, I got serious about tackling my debt. I continued to make payments on my student loan from the Development Bank, and started repayment on my U.S. Federal and private loans. I set up my own pay-off plan for my loans and decided to prioritize making extra payments towards my Caribbean Student Loan. I also requested that my receipts and statements from the Development Bank be sent directly to me in the U.S.
My receipts from the Development Bank would come by snail mail, from 2,000+ miles away, so I would call the Bank directly to make sure my payment was received and how much was applied to principal and interest. I wanted to make sure that the projections I made on how much my remaining balance would drop by that month matched up to how my payments were applied to my account. It was like pulling teeth, though to get that information. It would get different responses as to what the procedure was to get account information over the phone. What would annoy me the most, is the first question I would get when I told the Loan Officer on the other end of the phone that I needed to get information on my most recent payment and my account balance,
Can you come into the bank?
In my mind, I would be letting out a bing, long stupes!
The second most annoying response would be,
Can anyone identify your voice?
On one occasion, I spent almost an hour going back and forth with the Loan Department manager who refused to provide my account balance information to me, after I explained to her that the HR manager confirmed that I should be able to make account requests once I would verify my identity and account information only I would know. I had to spend money on long distance calls and energy to deal with all this ray ray (confusion in other words), just to keep on top of my Caribbean student loan. I went through all of that just to stay in the know and avoid any surprises with how my student loan was handled.
Even after all that effort, 8 years after I started repaying my student loan from Development Bank, I found out that the first year of payments went to interest only.
How My Caribbean Student Loan Lender Messed Up My Loan
Last year, my friend Tasha, who has the same lender Caribbean lender complained about not seeing any movement in her principal balance, and on top of that, she had not been receiving account statements. The later complaint I had heard a few times before. Just like me, she had no access to her statements electronically.
I found it strange that Tasha was having such a hard time getting account statements, to verify how here payments were being applied to her account, as I felt I had a good handle on my student loan account and my own payments seemed to be applied appropriately, on my account. Or so I thought.
After Tasha continued to express confusion about how her student loan payments were being applied to her account after making more than a year of payments with no change in her principal balance. I decided to grab some my own old statements, that I had never scrutinized before, to confirm that my payments had been applied appropriately on my student loan account from the start of repayment period in 2007.
I got the shock of my life when I saw that of the almost $4,000 in payments I made on my Caribbean student loan, $0 to the principal balance. I also noticed that during a 3 month period of approved deferment, while I was looking for a full-time job after graduate school, I was charged multiple late fees on my account.
I really thought that I had done everything to protect myself against all the confusion so many borrowers expressed when dealing with the Development Bank, but even after review my promissory note and prioritizing repayment my student loan while in graduate school, that wasn’t enough to combat a dysfunctional system.
The next logical step was to take my displeasure to the bank’s Facebook page, with a photo of my first-year repayment statement, showing that the statement opening balance was same at the end closing statement balance even through I made the required payments.
Interest Only Payments On My Caribbean Student Loan
After being contacted by the Assistant Bank Manager to go over my request for clarification on how my payments only went to interest only. I learned from him that at some point my student loan had accumulated interest that was never capitalized on my loan, left a wall of interest, that had to be paid down before any of my payments would go towards my principal balance.
He explained, too, that my student loan was capitalized almost a year before my repayment period started. My original expected graduation was December 2006, I updated my actual graduation date in May 2007 with the Development Bank appropriately, and that was never updated on my account.
The next thing was that my student loan was flagged as entering the repayment period before I even graduated from college. I had sent back a disbursement that I no longer need while I was at Texas A&M and when that money was applied to my account it started the repayment stage on my loan and caused a late fee to be applied to my account.
Of course, this policy of not capitalizing outstanding interest was nowhere to be found in my promissory note document (that I made sure to review), nor was this information included with the correspondence that I received that notified me of when my first payment was due and the required minimum monthly repayment.
I asked the Assistant Bank Manager and asked whether there were any legal requirements with respect to the Development Bank notifying their customers of the outstanding interest on their account and how their payments would be applied in that case. Even without legal requirements, why wouldn’t the bank inform me when my loan was capitalized and the outstanding interest balance before my repayment period started.
The Development Bank could have added an additional paragraph to the same letter they sent me to inform me of my outstanding interest balance, my options for paying it off and how my monthly payments would be applied to my account. None this happened and when I posed those questions, I got a less than satisfactory response. I was not even offered the courtesy of having my account reviewed and possibly getting a credit on some of the additional interest I paid. I just resolved to pay off my remaining balance by the end of 2015 to get this lender out of my life.
Caribbean Student Loan Borrowers Need Answers
I could have left it at that. I was able to pay off my loan and forever sever my relationship with the Development Bank of St. Kitts and Nevis. But then I started advocating for Tasha because she had not received a regular account statement for years and had other issues on her account. I started to talk to other borrowers and realized that it was a problem throughout the Eastern Caribbean.
I started talking to other borrowers and realized that it was a problem throughout the Eastern Caribbean. student loan borrowers in Grenada, and Dominica, St. Lucia and even beyond the Eastern Caribbean in Jamaica all have complaints of suspect Bank practices and inadequate communication and just all around shadiness that works against their customers. That’s one of the reasons I am running this Student Loan Series to raise awareness and share our stories and I want to provide the tools I did not have to other borrowers.
What has your experience been with your Caribbean Student Loan?