Oh, student loans.
In all its forms, debt is challenging.
An easy trap to fall into. We want something so badly, and once we have it, the pain of paying for it takes its toll.
The PBS NewsHour featured segments all week (Aug. 25-29) on “Rethinking College” — bringing attention to a collection of issues facing public and private post-secondary institutions right now, including the growing problem of student loan debt.
One group highlighted by the NewsHour was One Wisconsin Now, an advocacy group in Wisconsin trying to organize student loan debtors into a voting bloc. The segment featuring One Wisconsin Now is 7:28 minutes long, and you can watch the piece here.
A recent college graduate named Ann DeGarmo was interviewed in conjunction with this segment, to provide an example of the skyrocketing costs of college and the increasing debt burden faced by graduates. If you watch the video, you will see that Ms. DeGarmo spends most of her time on camera crying and helpless, as she faces the full magnitude of owing $58,000.00 for the college degree she earned in May.
It was difficult to watch Ms. DeGarmo shedding tears over her student loan debt on national television. I wanted to walk into her dorm room, sit beside her on the bed, and say, “Listen. You’re not helpless. You will get through this. You will be okay. You’re letting yourself panic over a future that has not come to pass. Assess your monthly student loan bill, and then make lifestyle choices accordingly. You’re a smart college grad, and I know you can make this work.”
Rational, head-on logic. No more tears. Let’s just get it together here, m-kay?
But. Because I couldn’t magic myself into a live interview that took place who-knows-when, I spent a lot of time thinking about Ms. DeGarmo this week. I watched the segment two more times, and then read the comments viewers posted in reaction to her.
When I read through the comments on the NewsHour webpage, I noticed two things: 1.) Most people who watch the NewsHour are Baby Boomers, meaning folks born between the years 1946 and 1964 (and I would expect many are Silents as well, the demographic of folks born between 1925 and 1945), and 2.) These Boomers and Silents have No Sympathy for Ms. DeGarmo — for her tears, her situation, or the debt she willingly signed up for to go to school.
The words “willingly signed up for” being key to understanding their scorn.
Our hatred of moneylenders is constant and timeless, and it’s not a hatred I subscribe to unless the moneylenders in question are loaning money at compound interest rates above 25.99 percent.
Because then we’re in a different category of lenders. And, more importantly, a different category of borrowers. We’re either dealing with borrowers who understand what an interest rate above 25.99% means, and have no other choice but to borrow money at that kind of rate — (I’m thinking of entrepreneurs on Wall Street here, high-risk investors gambling with large sums of equity — or folks who have wrecked their credit, and still have to finance a vehicle or something, regardless of how jacked-up high their APR is). Those are the people who at least understand what a 25.99% interest rate means. (And it simply means this: You. Are. Screwed. Pay back that loan as fast as you can or you will be sorry. For reals.)
The other group of people in this category of borrowers are flat-out clueless folks who visit places like PayDay Loans, which can charge compound interest rates of 200.99% AND UP, and these borrowers simply don’t understand that this kind of lending should be illegal. (Maybe someone will comment and tell me it IS illegal now? I hope?)
But in case it is not–
When I hear the term “predatory lending,” it is this second category of lenders I’m thinking of. These lenders loan to people who are largely high school dropouts, illegal immigrants, people living in areas with no local banks, and working-class families who have fallen on hard times — taking out loans for as little as $25.00, and then spending years paying the loan back. Maybe they were unable to find another job, or couldn’t physically work anymore, or the breadwinner of the family died. These are also often people who don’t understand how to calculate interest, and might not even understand what the word “interest” means. For any number of reasons.
But Ms. DeGarmo isn’t taking out student loans with interest rates of 200.99%. As she made clear in the interview, half of her loans were from the federal government, and the other half were private — from banks and other lending institutions. And they’re probably charging her less than 10.99% interest on any of her loans (hopefully less than 3.99%).
So she meets all the categories of responsible borrowing. She doesn’t qualify for my label of “the evils of usury.”
Her tears were hard to watch. Not because I wanted someone to wave a magic wand and make her debt disappear. But because I wanted her to own up to paying back the money she’d borrowed. To get smart. To understand she can make budget and lifestyle choices to take responsibility for spending this money.
I wondered though. If I am some kind of rigid a**hole for thinking this way.
I mean, here is this young college graduate crying on national television, and instead of wanting to demand someone eliminate her debt, the same way people who run into massive credit card debt can file for bankruptcy and have their debt written down by the court — I just want Ms. DeGarmo to woman up and get smart.
Because — the hard reality — you can’t eliminate student loan debt in bankruptcy. If you sign up for that money, you’re paying it back till you die.
That’s what troubles me so deeply about this entire debate. People with credit card debt can default on repayment and have thousands of dollars cancelled off of their principal balance (and accumulated interest) for filing the correct papers in court. But student loan debtors can’t do that. The question of whether that law should be changed makes me want to pull my hair and just fret sometimes. Because I really don’t know.
Though I DO assume that, within the next 15 years, that law will probably change, and student loans will be treated like credit card debt.
Because we’re just in a state of insanity right now. One in four college grads is currently leaving school with more than $40,000.00 in loans for a 4-year degree. With so many people taking out loans to pay for degrees, I definitely foresee a change in how student loans are classified in bankruptcy court.
My personal value system just has a hard time with all debt cancellation, with writing off credit card debt as well as student loan debt. If you are an intelligent adult, and you sign a legal document willingly borrowing money for a reasonable interest rate — then I think you should do everything you can to honor your word, and repay the money, or simply don’t borrow so much to begin with. For college students, if that means going to a cheaper school, then so be it.
I wonder how I compare to my demographic cohorts in this? Because I’m not a Boomer or a Silent, but a Gen Xer, and Gen Xers are the people born between 1965 and 1980. Many of my close friends fall into that demographic. All of my siblings, however, are millennials, born after 1981. The largest burden of the growing student loan debt problem has fallen on millennials. Ms. DeGarmo is one such example, as she is (I’m assuming) 22 this year, recently finished with a 4-year degree, and would have therefore been born in 1992.
The whole point of the organization One Wisconsin Now is to organize the 40 million student loan debtors into a voting bloc, a bloc powerful enough to change the laws concerning student loan debt, and perhaps force the federal government to forgive the money these people owe.
In comparison, there are 65 million people on Social Security right now. And no politician messes with Social Security — or they kiss their glad-handing days goodbye.
So it sounds like One Wisconsin Now has some great numbers to achieve their aims.
Here’s my sneaking suspicion though.
Younger people don’t vote in the same numbers that older folks do.
And the people most at risk for defaulting on student loan debt — students of lower-income families, and students with massive debts from attending (what I think of as evil) for-profit universities —
I think those people vote in even lower numbers than millennials as a whole.
Which means I don’t see “student loan debt forgiveness” passing anytime soon.
Besides, the people most suffering this debt burden didn’t borrow from the federal government to begin with — they have private loans — and that would mean changing the laws for bankruptcy court for them to escape their debt burden.
Entire books have been written as to why tuition rates have skyrocketed since 1990. We know it’s not due to paying professors, but largely to fund new buildings on campus, especially flashy new dorms and student centers, fitness centers, sports centers, and sports programs. Schools do this in order to attract more students, of course.
I understand the impulse to do this, as the dorms I lived in at my university left a lot to be desired. My room even flooded my freshman year, and destroyed all my belongings, including my computer, which took me months of dealing with red tape to replace. I wouldn’t wish that kind of college experience on anyone. Shitty buildings make life shitty, and I’m all for having a decent standard of living while you’re going to school.
However. Students are paying for these upgrades. For the nicer standard of living on campus. And some of them will be paying for many years to come.
I still owe $6,300.00 on the $18,000.00 I originally borrowed to receive my bachelor’s degree. I’ve paid $104.11 per month on my debt since 2003 or 2004, when I had my loans refinanced and merged two bills into one. The money is withdrawn automatically from my checking account every month, and since a hundred dollars a month is fairly painless, you can tell how unmotivated I’ve been to pay off my student loan debt as quickly as possible.
I’ve done other things with my money. Paid for a beautiful wedding in 2006. Went back to India the summer of 2008. Saved up to leave my day job in 2011, and became a full time writer. I’ve given my money away to friends, so they can travel abroad, or have downpayments for vehicles, or visit Colorado to see me, or go on vacation with their children, or pay medical bills to stay in their homes. In 2012, I paid for medical bills and end-of-life care needs for my uncle. Then paid for probate costs in the handling of his estate, since the estate couldn’t afford those costs.
So that is just life. We make of it what we will.
I don’t regret my choices. I don’t regret that I still owe $6,300.00 for this amazing, wonderful thing I received for that money — my college diploma — and I’m certain I’ll pay all of the money back (hopefully sooner than later, but if it’s later, that’s okay). I’m living the life I want to live right now, and that’s what I wish I could tell Ms. DeGarmo. Student loan debt doesn’t stop your life.
Granted, if you owe more than $80,000.00 and have high interest rates (7% or more), your monthly paments can easily be more than $500.00 or even $800.00 a month. For those people, I support the iniative to cap student loan debt repayment at no more than 10% of a borrower’s income.
Because no one making $10.00 an hour (or less) with a college degree can afford to pay $800.00 a month for student loan debt. The reality for those graduates, or college dropouts with loans, is that many become homeless (living in vehicles or tents) or permanent couch-surfers.
But if they had a debt burden like mine, of a hundred dollars a month, I have a feeling the tears and the helplessness being expressed on national television would end.
Thanks for reading! I hope you’ll weigh in with your thoughts on this matter. Especially if you take the time to watch the video, and react to Ms. DeGarmo’s assessment of her potentially dismal future with student loan debt.