The holiday season can be a time for reflection, so I am thinking back on the student loan borrower clients I have worked with this year. On the positive side, we have helped many borrowers manage their overwhelming student loan debt loads. I will write more about these successes in future posts. For now, I am thinking about the many clients who are stuck, unable to move forward because of debt loads that will haunt them forever.
The policy debate all too often breaks down over who is to blame… an exercise that is rarely constructive. When will the finger pointing end so that we can focus on finding solutions for borrowers and hopefully help prevent future problems?
Here is one example: I met a young Latina woman in her early 30’s a few weeks ago. This is through a new program where we are representing mostly homeless women or recently homeless women who are trying to get back on their feet. The key to success is often more education, but many cannot go back to school because of past student loan defaults.
This client recently fled a horrifying domestic violence situation in New Jersey and is living in subsidized housing in Massachusetts with her young daughter. She receives less than $500/month in public assistance benefits plus food stamps.
This is not where she wants to be for long. She is educated. Educated to the tune of about $68,000 in private Sallie Mae loans and about $50,000 in federal loans. She has an undergraduate degree, but has worked only sporadically. She wants to be a teacher, but needs a state certification. She attended a wide variety of schools over the years starting in the mid-90’s– city university, community college, private four year school, proprietary school and most recently the University of Phoenix (she dropped out of there).
For those who think that everyone is trying to game the system, I suggest that you come and meet some of my clients. Believe me when I say that this woman is committed to education and learning. But I agree and she agrees that her education has been a failure on many levels. She certainly acknowledges that she should not have taken out so many loans. She came from a large family of eight children where education was emphasized. Her low-income recently retired father even co-signed for the private loans. She thought when she was young that the best thing to do was to keep going to school because it would certainly lead somewhere. Isn’t that what usually happens, she asks?
She should have asked for more guidance, she should have looked for less expensive options, she should have figured out a better career trajectory. But shouldn’t the schools also have played a greater role in guiding her education? What about the lenders? Why keep lending to someone who is not completing her degrees? And why give her loans with variable interest rates starting at 10% and higher??
These are the finger pointing questions that have little relevance to her life today. She truly wants to be a teacher and I believe she can. Most important, she believes she can, but her private loans are about to go into default. She can get a deferment for the federal loans, but this is a stop gap measure. They will come back to bite her.
As for the private loans, here is what Sallie Mae says when I spoke with them just before Christmas eve. If she can pay us $150 before the end of this year ($50 charge for forbearance for each loan) , we will bring the loan current, but she will have to start making payments in January. Minimum payment? Almost $600. And even that unaffordable amount makes no dent in the principal.
To avoid this, they say, she can go back to school and get an in-school deferment. She likes this idea because she wants to be a teacher. I caution her about taking out more loans and ask her—Can you go to school somewhere that will not require more loans? She isn’t sure, she says. The program that she is looking at requires her to take out more loans and more Pell grants too. She is going to ask for help to search for less expensive options, but she feels pressured to make a decision to avoid the private loan payments and she really wants to find a specific program that will quickly lead to a teacher certification.
When will the cycle end? Don’t you realize, I say to the Sallie Mae representative, that this borrower will never be able to pay back almost $70,000 in high rate loans? Her co-signer father has no money either. There is nothing we can do, they say, except of course, she can go back to school…maybe get more loans.
When will the cycle end?