Meet a 52-year-old who has struggled to repay their $480,000 in student debt on income-driven plans and has pushed off retirement: 'This is an albatross around my neck for the …
Angel, a 52-year-old student-loan borrower, has $480,000 in student debt.
Their debt has surged due to payments on income-driven repayment plans and ballooning interest.
Biden announced reforms to those repayment plans, but it’s unclear how they will be implemented.
For decades, Angel’s core focus was making ends meet.
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Coming from what they said was a low socioeconomic background, Angel — who requested their last name be withheld for privacy — grew up in the 80s surrounded by the idea that going to college was the key to having a good career and a good life.
Since Angel’s parents did not have the means to fund Angel’s college education, student loans were the only option — and now, at 52 years old, Angel is looking at a $480,766 student debt load they expect to be stuck with for the rest of their life.
“I was told as a kid that you need to get a college degree, you need to get an advanced degree if you want to get ahead in this world, and now I can’t even pursue that American Dream,” Angel told Insider. “I can’t even buy a house. I’m 52 years old. So, I mean, at what point do we say, ‘No, this isn’t right?'”
The reason Angel’s debt load has surged significantly over the past decades come down to several factors. First, to get a good-paying career, Angel pursued two Master’s degrees, but they did not end up actually receiving those degrees until 2012 because they were working simultaneously to save up money. During that time, their student loans from undergraduate school were in deferment, meaning that while they were not actively making payments on their loans, interest was continuing to grow. Angel also said that a customer service representative advised them to stay in school to prolong the deferment period.
How 10 student-loan borrowers are coping with the highs and lows of Biden’s debt relief announcement
Biden announced up to $20,000 in student-debt relief at the end of August.
Since then, two lawsuits have blocked the plan, and its fate rests with the Supreme Court.
Here are 10 borrowers’ stories on what they have experienced since Biden’s August announcement.
Student-loan borrowers have had quite the year in 2022 — and millions are confused about what it means for their finances in 2023.
In August, a moment millions of federal borrowers had been waiting years for finally arrived when President Joe Biden announced $20,000 in student-debt cancellation for Pell Grant recipients making under $125,000 a year, and $10,000 in relief for other federal borrowers under the same income cap.
While the amount wasn’t as expansive as many might have been hoping for — some Democratic lawmakers were pushing the president to cancel $50,000 in student debt — it still marked a significant step toward providing long-awaited relief to millions of Americans.
“For too many people, student loan debt has hindered their ability to achieve their dreams—including buying a home, starting a business, or providing for their family,” Education Secretary Miguel Cardona said after the loan forgiveness was announced. “Getting an education should set us free; not strap us down!”
But the relief quickly ran into hurdles. Since the loan forgiveness had an income cap, the Education Department was unable to automatically cancel the debt and needed until October to make an online application available for borrowers. Conservative groups used that time to file lawsuits to block the relief, and Biden’s administration responding by further narrowing the eligibility for the relief to exclude some borrowers with privately-held loans to avoid litigation.
Still, just weeks after the application opened in early October, a ruling from the 8th Circuit Court of Appeals paused the process, barring the department from processing any new applications, and another ruling from a Texas judge later ruled the relief is illegal.
Right before Thanksgiving, Biden extended the student-loan payment pause through June 30 or whenever the lawsuits are resolved — whichever comes first — meaning the fate of the relief ultimately rests with the Supreme Court, who will begin hearing arguments on February 28. Until then, borrowers’ financial futures hang in the balance.
Here are some of their stories.
2 people whose entire student-debt loads will be wiped out due to Biden’s announcement talk about what’s next for their futures: ‘I get to not worry about losing my home’
Jamie Horak and Aidan Smith — two student-loan borrowers — were rejoicing just days after Biden made his debt relief announcement.
Prior to the relief, Horak had about $20,000 in student debt and worried about paying down their mortgage when payments resume. But as a Pell Grant recipient, when Horak learned they would get their entire student debt balance wiped out, they were ecstatic.
“When I saw the whole amount, the entire balance, I was elated, relieved, and I felt like, wow, it’s kind of the first time I’ve ever felt directly impacted by something like a political order or passing of something,” Horak said.
Smith — another Pell Grant recipient — learned his entire $7,000 remaining balance would be forgiven as well, and not only was he excited for himself, but for millions of others whose lives “are going to transform.”
Meet a professor who qualifies for Biden’s student-loan forgiveness but still has years of repayment to go and feels ‘disheartened’ the relief wasn’t bigger: ‘There’s this looming sense of hopelessness’
For Nick Garcia, 42, Biden’s student-debt relief was bittersweet.
While $10,000 in debt cancellation would certainly make a dent in his $39,000 balance, the college professor recognized that he was still looking ahead at years of repayment and was disappointment Biden didn’t seize the opportunity to go even bigger with the relief.
“I feel disheartened because it shows that more can be done at the executive level,” Garcia said. “Although I’m glad to see action from Biden that will improve the lives of millions, I don’t know that it rises to the moment. It just doesn’t resolve our debt crisis.”
The student-loan payment pause, on the other hand, was instrumental for Garcia and his family, as it allowed them to save hundreds of dollars a month they put toward house repairs and paying down personal debts.
Still, with Biden framing this loan forgiveness as “one-time” relief, Garcia is concerned that “it sends a message that the fight is over.”
Meet a government worker who regrets refinancing her student debt because she didn’t know it would block her from federal loan forgiveness: ‘I never would have done that’
To qualify for Biden’s student-loan forgiveness, a borrower must have federal student loans. That shut Tanya Burnett, 57, out of the relief.
As a government worker, Burnett started her paperwork in 2016 to qualify for the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for government and nonprofit workers after ten years of qualifying payments.
But when she submitted that paperwork, she was given the option to refinance her student loans with a monthly payment $200 less than what she had previously been paying — from $800 to $600 — which meant taking her federal loans to a private lender.
That seemed like a pretty good deal to her at the time, so she made that switch, but she was never told upfront that doing so would mean losing her federal benefits, like debt relief.
“I thought that lower monthly payment was great,” Burnett said. “But if I had known this would totally have taken me out of the federal, and there’s no connection at all regarding forgiveness, I never would have done that. It wasn’t worth it.”
Hours-long hold times with their student-loan company are keeping public servants in a ‘limbo period’ wondering if they’ll get the debt relief they qualify for
Student-loan companies have struggled to adjust to Biden’s new policies, and some borrowers have experienced the consequences.
Not only was student-loan company MOHELA tasked with implementing the debt relief, but it was also responsible for overseeing all borrowers enrolled in the Public Service Loan Forgiveness (PSLF) program.
Reforms to the program, like allowing past payments to count toward forgiveness progress, expired on October 31, and Nathan — a PSLF borrower — wanted MOHELA to confirm his payments were qualifying. It ended up being a lengthy ordeal.
“The first time I tried to call was a 144 minute estimated wait time,” Nathan, 29, said. “The second time I called was a 149 minute wait. And then most recently, I tried to call and it was 50 minutes. And each of these times I didn’t have time to wait. I thought it would be a quicker call. And one time I stayed on the call for nearly three hours.”
Kate, another PSLF borrower, said it became “virtually impossible” to get ahold of MOHELA to confirm her paperwork went through. The inability to reach the company has kept her and Nathan’s finances uncertain as debt relief loomed.
Meet a borrower with $43,000 in student debt who thought he was getting Biden’s loan forgiveness, only to have it ‘yanked away’ a month later
Kristopher Cabreira was “ecstatic” when Biden announced up to $20,000 in debt relief. But a decision the Education Department made on September 29 threw him for a loop.
Cabreira’s student loans are federal loans managed by private banks within the Federal Family Education Loan (FFEL) program. While borrowers with those loans initially had the option to consolidate their debt into the direct federal loan program, the September guidance stated that past that date, FFEL borrowers cannot consolidate, and therefore, will not be eligible for Biden’s one-time student-debt relief.
Biden’s administration made this decision in an attempt to avoid a lawsuit filed by six Republican-led states who argued the debt relief would hurt the banks who would’ve stood to profit from the FFEL program.
But for Cabreira, and the 770,000 other impacted borrowers, it was a gut punch.
“All of a sudden, it got yanked away,” Cabreira said. “That could’ve been $10,000 I didn’t have to pay, and now that’s gone.”
A first-generation college student with $146,000 in student debt says blocking Biden’s relief ‘feels like a really sick game’: ‘It’s not the American dream that we were promised’
After two courts decided Biden’s student-debt relief plan would be put on pause, Guilherme Lopes, a 31-year-old first generation student, felt defeated.
As a nonprofit worker on a five-figure salary, Lopes was looking forward to $10,000 in relief to help him progress on his repayment quicker and help his family out financially — especially because he said that after immigrating from Brazil to the US, he did not have the knowledge he needed to navigate the financial student-aid system, which is partly why his debt surged.
But the lawsuits that blocked the relief didn’t reflect “the American dream that we were promised coming over,” Lopes said.
“It’s more of the unknown, the uncertainty, it just feels like a really sick game,” he continued. “Are we going to get a pause? Are our payments coming back? It’s just all unnerving.”
Lopes said he has faith the debt relief will ultimately prevail, but he’s upset millions of Americans have been put in this position.
Meet a Republican who would have all $10,000 of his student loans canceled under Biden’s plan but thinks it’s an unfair policy
Matthew, a 28-year-old Republican, would see his entire student-debt balance wiped out under Biden’s plan. That doesn’t mean he agrees with the policy.
Since Biden announced the loan forgiveness, Matthew said he was skeptical it would ever come to fruition, and he wasn’t surprised once the lawsuits started to mount.
“My generation, the millennial, Gen Z generation, are facing a significant problem with student-loan debt,” he said. “I feel as though that the administration, through their strongest intent and their sincerest desires, were trying to help that generation with this policy. However, I personally believe it’s the wrong policy and was, quite frankly, an illegal policy.”
He, along with other conservative lawmakers, share the belief that canceling student debt is unfair to high earners and people who researched how their educations would pay off, and he said he’s worried for the people who were banking on forgiveness and already spent the money as the relief remains held up in court.
Meet an adjunct professor with $230,000 in student debt who worries payments will restart without Biden’s loan forgiveness: ‘It will be an excuse to say they’d done all they can’
Timothy Babulski, a 44-year-old adjunct professor, knows $10,000 in relief would hardly make a difference to his $230,000 balance.
But he hopes millions of other federal borrowers can experience some relief before they are thrown back into repayment.
Through recently announced reforms to the Public Service Loan Forgiveness program, Babulski is hoping to get more payments counted toward his forgiveness progress once they are implemented. But his concern right now is that if Biden’s debt relief ultimately gets struck down, the White House won’t pursue any alternative routes to get promised relief to millions.
“My fear, regardless of the outcome of the case, is that the White House is so desperate to restart payments and get back to normal that they’ve forgotten that ‘normal’ is a decades-long debt sentence; either way, it will be an excuse to say they’d done all the can,” he said. “The only difference will be whether the majority of borrowers will be abandoned— or all of us will be.”
And second, once Angel’s loans were taken out of deferment, they enrolled in an income-driven repayment (IDR) plan, which is intended to give borrowers affordable monthly payments based on income with the promise of loan forgiveness after at least 20 years. However, as recent reports have revealed, the plans are flawed due to issues tracking borrowers’ payment progress, meaning actually getting relief through those plans has been difficult.
President Joe Biden’s Education Department recently announced plans to reform IDR, including cutting payments for undergraduate student loans in half and limiting interest growth, and it plans to implement those reforms this year. But it’s unclear how those changes will actually play out for borrowers like Angel, and Angel said that up until this point, it’s been a challenge.
“I’ve struggled to find employment that is sufficient enough to even just pay for a roof over my head and pay my rent, pay for food, pay for a car. I don’t live an extravagant life, but just the basic necessities of life, and so I’ve done the income repayment plan for a while,” Angel said. “But it’s been very confusing and they don’t make it easy.”
“This is an albatross around my neck”
Just recently, Angel got hired at a government job and they said they’re fortunate to finally be in a career where their degrees in communications and marketing can be used. But landing a stable career later in life doesn’t help their financial stability significantly now, or in the future.
“So, now at 52 years old, I’m thinking this is an albatross around my neck for the rest of my life because even going into retirement, Social Security, you know, I still may be paying off on these loans,” Angel said. “And I know that that’s a concern for a lot of people I know with student loans.”
“At this point, I don’t see myself retiring,” Angel added.
Due to their new government role, Angel said they are pursuing the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for government and nonprofit workers after ten years of qualifying payments. The Education Department is planning to implement reforms to that program, as well — and Education Secretary Miguel Cardona has been touting the changes and the impacts they would have on borrowers.
“Our Improvements to the Income Driven Repayment program will save teachers 17K over the first 10 years of their career – even before receiving Public Service Loan Forgiveness.,” Cardona wrote on Twitter on Tuesday. “That’s a big deal! We are working for you!”
As Angel, and many other student-loan borrowers, have told Insider, interest is a primary reason so many people have surging student loans they cannot stay on top of. For many borrowers in income-driven programs, monthly payments fall below the interest owed on the loan, and that difference gets added onto the loan’s principal. That can lead to borrowers owing far more than they originally took out in the first place. The department’s proposal would prevent unpaid monthly interest from adding onto a borrower’s principal balance as long as they’re making their monthly payments — even if that payment is $0 due to their income level.
But a lot of questions remain regarding how effective the changes will be. Congress’ recent spending bill did not allocate any additional funding to the Federal Student Aid office, and a senior administration official told reporters on a recent press call that failure to increase funding will present a challenge in carrying out the department’s policy priorities.
The task would be made even more difficult alongside Biden’s plan to cancel up to $20,000 in student debt for federal borrowers making under $125,000 a year. The plan is currently blocked and headed to the Supreme Court on February 28, and Angel said that the relief would not make a difference for them — but changes to how the student-loan system treats interest would.
“If education is really about us being better contributors to society, then why are they charging interest on the student loans?” Angel said. “At least cancel all of the interest on those student loans. Give people a break.”
