Student Loan Repayments Would Be ‘Catastrophic’ for These Struggling Families
On Wednesday, the Biden Administration has announced a four-month extension on student loan repayments, expanding the two-year suspension on federal student loan payments and accruing interest that have been paused since March 2020 as a pandemic relief measure. An Aug. 31 student loan repayment deadline has been looming over millions of Americans for months, with many families are coming to grips with the possibility of having to restart payments in a matter of days.
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The most recent extension has been framed as the last of its kind, with payments set to start in 2023. For many families, the temporary reprieve has been more than a COVID-era benefit; it’s taken some of the pressure off paying a bill that has become unmanageable.
According to a survey by U.S. News & World Report, four in 10 people have stated they cannot afford their student loan payments, with 22% of respondents noting they carry balances between $30,000-40,000, and 10% noting their balance is more than $50,000. At the same time, 86% said they “resented” their loans, while 21.2% shared they had been paying off the debt for between 11-15 years.
With many noting their payments have skyrocketed past what they pay for rent or a mortgage — and with inflation currently affecting many families’ budgets — the Biden Administration has been called on to take action to help the situation.
Biden has ridden on a platform of being “for the working family,” and advocacy groups are hoping he will take the student loan crisis seriously as it affects millions of Americans. CNN has reported that the Administration is not only considering extending the pause, but also wiping $10,000 worth of debt for those that make under $125,000 a year.
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If Biden Administration ideals come to fruition, it would come as welcome news to the members of ParentsTogether Action. The national parent-led nonprofit organization is represented by all 50 states (with more than 3 million members) and “helps parents stay up to date on the issues affecting their families” while working toward a better future. One of the big issues they’ve been rallying behind recently is student loan debt.
ParentsTogether Action recently published the results of a national survey that polled parents on the impact of student loan debt and the relief a two-year pause has provided. Remarkably, 50% noted that if payments were to restart, they’d be unable to meet basic needs for their household. And if Biden was to go as far as to offer loan forgiveness, many noted they’d also “reward” the president and Democrats in the heated November midterm elections.
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With many parents carrying their own student loan debt and taking on parent loans for their children, the situation has become dire for many. Findings of the survey include the following key pieces of information that shed light on just how much the intergenerational debt is affecting families, including:
Among the 50% who said they would be unable to meet basic needs for their house if student loans restarted again, 30% would be unable to afford rent or mortgage payments and 34% would have difficulties buying necessary food
41% would have to take on more work hours or get another job to help with loan repayments
33% said mounting student loan debt has prevented them from buying a home, while 60% have been unable to save for the future
87% worried about their child’s ability to achieve higher education based on financial ramifications
73% said the pause on repayments was “helpful” or “made a huge difference”
84% said if $50,000 of the loan was forgiven, it would “make a huge difference”
“Parents are breaking their backs to make ends meet even without the added stress of paying back tens of thousands of dollars of student loans,” Ailen Arreaza, Director of ParentsTogether Action said in a supplied statement. “The last thing parents struggling to provide for their kids need right now is yet another bill. Doing away with the student loan pause would be catastrophic to millions of American families, and it’s long past time for President Biden to extend it — and make good on his promise to cancel student debt. Parents have told us loud and clear this is a winning issue for Democrats — he shouldn’t wait any longer to act.”
Several families that took part in the ParentsTogether Action survey spoke with GOBankingRates about the very real ways student loans have impacted their families and what will happen if the repayment pause isn’t extended.
Scenario 1: Parents and Children Paying Multiple Student Loans
The Hollis family in Ohio has multiple members paying down student loan debt. The mother, Brandy, first graduated from college in the 1990s and paid for her initial higher education courses out of pocket from some money her parents saved up and by working three jobs at the time.
But when she recently went back to school to get a degree in psychology in applied behavior analysis, she was “floored” at the price education costs today. Because she just graduated in July 2022, Brandy won’t have to start paying back her loans for another five months. However, even then she’ll still have to work for about a year to have enough clinical credits in her line of work to start making the additional salary needed to carve away at the debt. “I don’t understand how they’re doing these cost-of-living calculations for loan repayment,” she said.
Brandy’s three sons also face a harsh situation when it comes to the student loans each pay. The eldest skipped college altogether to save on the costs and works as a restaurant manager, which allows him to have his own house. The middle son is a “fifth-year college student” who is trying to get his associates degree, but can only take one to two classes a semester due to not being able to afford a heavier course load.
“He wishes he could quit, but he feels he’s already invested so much time and money he at least wants to get his associates out of it,” said Brandy, adding that the cycle also holds him back from getting a full-time job because his class schedule is inconsistent.
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As for the youngest, he had to take off last semester because of a technical glitch in which he forgot to submit the paperwork to renew his loan — he has had to pay his school $6,000 before even being able to register for classes again. Adding to the situation is the fact that if he takes another semester off (in order to pay off the balance), he’ll have to start making installments on loans from his freshman and sophomore year as he will not be registered as a current student.
Brandy also noted she’d like to be able to go back to school to receive her PhD, but it all “depends on where [her] family finances are at.” If the student loan repayment pause is not extended, she will be forced to take on additional full-time work to bring additional income in for the family, which includes her two youngest sons who had to move back home due to the increased costs of living while still going to school.
“We could probably all advance in our careers if loans were forgiven, but we can’t add on to the debt,” said Brandy, joking that even her husband (who graduated in 2000 with a degree in business management) just paid off his student loans 22 years later “for a job that didn’t need him to have a degree … it’s maddening.”
Scenario 2: First Generation College Student Navigating Loan Repayment
Bobbie Vergo from Illinois took part in the ParentsTogether Action survey because she’s very passionate about loan debt reform. “It impacts my family in very big ways,” she shared. For example, the 36-year-old occupational therapist and her husband would like to grow their family, but as Vergo noted, “It’s not reasonable to pursue when I’m not sure if I’ll be able to pay my bills next month.”
Vergo admitted she often questions if she’s done something wrong. As the first in her family to go to college, she did what she thought she was supposed to do: Go to school, get a degree, get a good job and start a family. But it’s become complicated by amassing the “significant” amount of deft she now has.
“As if getting the education wasn’t hard enough from all the work it takes, now paying for it is the hard part. It ends up consuming a lot of my thoughts and life,” she shared, wanting to change the conversation about student loan debt and the shame surrounding it. “I’ve been in a career for 12 years and have spent most of it making decisions based on how to pay for my education but having a family, too.”
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As Vergo has researched all components of student loan debt, she’s firm that she did what she thought was right at the time and wonders “if there’s maybe something wrong at an institutional level.” Vergo recalled she was told by financial aid advisors who she met with every year of her schooling that her education was an investment in her future and, in that way, educational debt was “good debt.”
But what wasn’t fully explained to her is the detrimental component of compounded interest.
“When I look at the website that shows all the details of my loans, there’s the number I expect — what I actually look out in loans to fund my education. And then there’s the interest that plays out over the years because I can’t possibly pay off the debt all at once … if I could I wouldn’t have taken it out in the first place. And now I’m paying interest on my interest,” she said. “I’ve been working for 12 years and paying religiously, I’ve never missed a single payment except for two deferments (for a consolidation process and a job transition), and there hasn’t been a dent made in the number. I can’t see the progress.”
After a very hard summer of higher gas prices and groceries, Vergo has been wondering what her family will do if the student loan pause isn’t extended past August 31 — just thinking about it makes her emotional. “We’ve been trying to pad ourselves if student loans will kick back on. As the economy has shifted, it’s taken away our savings safety net in ways we did not anticipate. My husband works two jobs — he’s a psychologist with a 40-hour-a-week job and ten additional hours in a private practice. I have my full-time job and I do some contracting, too. We are trying to do our part but the game keeps changing,” she said. “I try not to panic about it but I don’t know what we’d do. We can’t possibly work more.”
Scenario 3: A Caretaker Unable To Work To Pay Off Student Debt
Jackie from New York initially enrolled in a university a bit later in life at the age of 30. She received a degree in music performance from Carnegie Mellon University, which added to her career as a professional flutist — and, with the income from her gigs, she was able to pay off the $20,000 she accumulated in student loan debt.
Several years later, she decided to go back to school to become a social worker, but a series of events quickly changed her financial situation. The day she received her degree from NYU in 2008, the stock market crashed.
Then, in 2012, a family member was involved in a severe accident and, as a result of the injuries, needed a full-time caretaker. Jackie has fulfilled that role, but in the process hasn’t been able to work except for a part-time weekend position. She and her family member mostly live off of those wages and early Social Security that she’s entitled to of her disability. It’s enough to pay the basic bills for their simple lifestyle, but not enough for Jackie’s mounting student loan debt.
“My degree apparently cost $60,000, but typically social workers make $35,000 a year starting out. How is that possible? To me that is a scam, they should’ve told us we will not be making the kind of money to pay this back,” Jackie shared. She’s also been the victim of alleged student loan relief companies that have promised to help her situation but have taken thousands of dollars from her in the process.
She was one of the millions that were part of the Navient settlement (reached earlier this year) after attorney generals from 38 states brought action against the company for unfair lending practices and loan mismanagement. Jackie received $56 as part of the settlement. Over a 10-year period where she was mistakenly put in a forbearance by Navient rather than an income-driven repayment plan (IDR), her $60,000 in student loans ballooned to $145,000 due to the compounded interest. “It’s more than my mortgage at this point,” she said.
Desperate like millions of other families to find resources to bring down her debt, she’s also been affected by scam companies offering relief, to the point where today she’s not even sure what institution holds her loans. “For me I didn’t see scams coming. Everyone is in this situation,” Jackie shared, not wanting to provide her last name for this story due to the ongoing fear and anxiety that comes from being hounded by collectors for repayment. At 64-years-old, she’s wondering how she will get ahead or even have a retirement fund in the future and has fears of how she will start to repay the loans if the payment pause isn’t extended.
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“How many of us are in this situation where we don’t know what’s going to happen and don’t know how we are ever going to pay these things back or ever have credit again in our life. It makes you lose sleep at night. It’s a very hard place to be in, especially when you’re older.” She added, “People are scared, they don’t know who they can trust and reach out to for help because they’ve been so hurt by it. And for as unique as my situation is, I’m just one voice in millions that are grappling with this.”
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This article originally appeared on GOBankingRates.com: Student Loan Repayments Would Be ‘Catastrophic’ for These Struggling Families
