The typical image of student debt involves two concepts: the debt, and the student. When we think of students, we think of children, but the reality of a large loan is that its repayment might well extend into middle age.
Educational borrowing is up for every age group over the past three years, but it has grown far more quickly among those between 35 and 49, according to the analysis of more than 3 million credit reports provided to Reuters by the credit score tracking site CreditKarma (CreditKarma.com). That group saw its school debt burden increase by a staggering 47 percent, according to the analysis.
The average student loan debt for those aged 38 to 41 was the biggest of that group -- about $12,000, up from just under $9,000 in 2009. Young people still carry the biggest student loan burdens; those aged 26 to 29 have an average of $14,000 in student debt. But the increased levels in middle-aged student debt is a new phenomenon.
The following story was sent to Student Loan Bubble on November 27, 2011.
My name is B and this is but one story in a sea of millions who are living lives of quiet desperation, drowning in a student loan debt crisis. I think this a story that needs to be told if only to identify the tyrants at work and to let others know they are far from alone.
Like so many others of my generation I was raised to believe that college was a necessity in order to secure a good job and to have a bright future. So senior year came and I began looking at colleges and of course their expense. Both parents were living paycheck to paycheck and had no resources to help fund my education. But when all hope seemed lost I found what I thought was my salvation in student loans, which offered low interest rates, consolidation, and flexible payment options. Unsure of what to do I consulted my parents, school, and loan advisors who did not hesitate to tell me that while my college education would be expensive I would have a degree which would guarantee me a good job with a nice income and thus I would have no trouble paying my debt off. I was told it was an investment in my future. Like so may other naive students with no other options I signed on the dotted line.
My college experience was grand and before I knew it five years had come and gone and it was time for graduation. I was proud. Mom and dad were proud after all I was the first person to go to college in my family. Then it was time to look for a job. I naively assumed that finding a job even in an economic recession was going to be no problem after all I finally had that degree. I was wrong. After six months of trying to look for a job in my degree field and working two full-time jobs that paid only eight dollars and hour just to get by the student loans came due. I had accumulated over $100,000 in student loan debt from two companies, Sallie Mae and Mohela, with a combined monthly payment of around $900.
Living on my own with nowhere to turn and no parents who had the means to help, I called my lenders to let them know that I was unable to make those payments and to see about consolidation, lowering my interest rate, and all those flexible payment options I had heard so much about several years ago. I was horrified to learn that Sallie Mae and Mohela no longer offered consolidation, that there were very few payment options available to me because I had private loans, and my Sallie Mae loans had sky high interest rates. I also found out that unbeknownst to me Sallie Mae had purchased all of my federal loans from other lenders. I subsequently found Direct Loans who bought and consolidated my federal loans. Direct Loans also offer many options for repayment for struggling graduates.
But most of my debt was in private loans and there was simply no way for me to make those payments, I mean what was I supposed to do… not pay my rent and car payment so I could pay my loans? Mohela offered forbearance which I was granted due to economic hardship but there was a catch, interest would still accrue. Sallie Mae was a different story. I could attempt deferment or forbearance but their application fees for forbearance and deferment were also sky high and there was no guarantee that it would even be granted. Not wanted to throw my money down a black hole I decided to attempt to pay Sallie Mae what I could. Then the non-stop harassing phone calls began. I would receive around half a dozen phone calls a day because my account was past due always speaking to someone I could barely understand in another country. I once again naively believed that because I was doing my best all would be right with the world however I quickly was threatened with delinquency and default. After several months of paying what I could and Sallie Mae’s relentless phone calls I did the only thing I knew to do to escape the horrors of default and I went back to school part-time at a community college, which was inexpensive and that I paid for out of pocket, to put all my loans in deferment.
Here we are two year later and I am still in school. I have found a job. I work in public service and while meaningful it doesn’t pay very much. I also got married to a lovely man who unfortunately makes significantly less then even I do. But we have each other, a cute little one bedroom apartment which we love, and we were optimistic.
One day I went to check on my loans and I was once again horrified to learn that my original debt had ballooned to $149,000 due to capitalized interest and that my Sallie Mae loans have such a high interest rate that my loans are accruing over $500 every month just in interest. Again I began to panic. I’m not doing much better then I was two years ago. We are living practically paycheck to paycheck and are nowhere near close to being able to afford over $1000 payments every month. Together after taxes and health insurance we bring home around $42,000 a year. I am literally accruing more interest every month then I can afford to pay let alone anything going to the principle. Even if I could make the payments by the time it is all said and done I will have paid double or triple the original loan amount due to interest; that hardly seems fair. If I paid the lenders what they were asking for every month I would be handing over 60% of my take home pay which means I will have far less then even minimum wage to live on. So what was the point of going to school in the first place? I would gladly give it back if I could. I have contacted credit counselors, attorneys, conducted research on the internet for help and resources, I have even contacted the Attorney’s General’s Office and Congressman and found very little help other then the ominous warning not to default on my loans.
Desperate not to accrue even more debt I am left with questions…what do I do? And where are all those thing that were promised to me at the beginning? Why is there no relief for the college graduates who are in over their heads? It appears that default is inevitable. And because these debts can not be bankrupted, there is no statue of limitations to pursue these debts, and wages can be garnished there is no incentive for these lenders to work with their clients thus creating and predatory lending system that is creating indentured servants out of an entire generation. As of now our dreams of owning a home and having a family are gone which I have read in my research is the case for many people. Something has to be done. An entire generation is drowning in debt. A generation that will not be able to afford to buy houses, buy goods and services like the last generation, and will have smaller or no families because they can not afford to. Further our generation will not be able to send their kids to college and certainly with the horrifying lessons we have learned in dealing with these private lending companies we won’t want to. This will impact the economy for years to come.
If you would like to share your story with Student Loan Bubble, feel free to get in touch.
The student loan landscape is looking grim, with a record-high horizon that must seem pretty far off and not all that comforting for a lot of borrowers.
Last year, the amount of student loans borrowed crossed the $100 billion mark for the first time. This year, the total amount of outstanding debt from student loans will eclipse $1 trillion, the highest figure in history. And, according to the Federal Reserve Bank of New York, Americans now owe more on student loans than on credit cards.
As the stagnant economy continues to falter and sources of state and federal education funding continues to be cut, colleges and universities seek to make up the difference through tuition hikes. The increases, which far outpace inflation, are driving students to borrow more student loans to pay for college. In essence, higher education revenue is becoming less subsidized by taxpayer grants and more subsidized by taxpayer loans to student borrowers.
While we might be happy to dismiss the student loan bubble as a matter of personal responsibility (as with the housing bubble), we have seen that when the figures rise this high, we risk a public catastrophe whether we like it or not.