Above image: Tyrone Wallace.
To Pay or Not to Pay?
Debtors face hard choices.
“I’m thinking about the interest that’s going to be accruing, on top of each loan, and I’m like, okay, that’s going to total maybe $1,000 a month,” says Rachel Jerome of the upcoming federal student-loan payment resumption.
After Jerome earned her bachelor’s degree, she realized that her career goals were much different than when she was 18 years old. She wanted to switch gears and go back to school for a master’s in strategic communications, so she attended an online program at Syracuse University while working full-time at a nonprofit and living with her parents.
COVID-19 induced a federal moratorium on student-loan payments and interest in March 2020. Collection on Jerome’s $65,000 federal loan was frozen, a welcome relief for her and the nearly 45 million people in the United States with federal student-loan debt.
As pandemic restrictions loosened, Jerome found a decent job in her field. At 28 years old, she was finally able to move out of her parents’ home and live on her own for the first time. She found a one-bedroom apartment in the Bronx that she could afford and even decided to adopt a dog. What didn’t go toward her private loan payments, rent or other necessary costs went into her savings account. Jerome opened a retirement account, her mind on her future.
The federal government’s decision to end the moratorium is like pulling a block from the foundation of Jerome’s meticulously stacked Jenga tower. With payments slated to begin again on Oct. 1 — the COVID emergency 0% interest rate was already rolled back in the beginning of September — her financial planning is set to crumble.
Even with Jerome’s $75,000 salary, loan payments and rent combined will account for almost half of her income after taxes. She’ll have to cut down on her other regular costs, and the small amount of savings she’s worked for these last three years will likely be depleted within a few months.
Living in New York City has become increasingly difficult, even for a local who completed a graduate program at a well-regarded university: “I can’t really have a social life too much,” said Jerome. And “transportation, like commuting around the city, I have to be very strategic about that as well,” a situation made more difficult by the recent MTA subway and bus fare increase. Jerome says she will likely have to cancel her gym membership “and cut down on groceries.”
Such sacrifices to one’s personal health help explain why, according to a comprehensive 2021 report by the American Public Health Association, indebtedness is a risk factor for poor health, including high blood pressure, obesity, inflammation and even a lowered life expectancy.
“The first thing you’re told once you get out of the womb, anywhere you go, is to get an education,” Jerome said. She feels like she’d done as she was told, and is now facing the consequences.
Amy, another debtor, agrees on this point. “You’re told this is the only way to be successful,” she says. Between her undergraduate and graduate school loans, she borrowed roughly $200,000. And due to accumulating interest, Amy’s balance has only grown since she graduated with her second master’s degree in 2021. She made payments whenever she could, but still owes an estimated $238,000 in total.
After earning her bachelor’s degree in 2013, Amy began making payments on her $30,000 undergraduate loan, but was unable to find a job that paid enough to keep up. She went back to school to become more marketable to well-paying employers — and took out over $100,000 in additional loans from the federal government.
Amy completed her second advanced degree in 2021, but has been unable to find work in her field of anthropology. She bartends, does temp work, makes and sells art — anything to help pay the bills — but she still makes less than $10,000 a year. She lives with her partner of over a decade, who is luckily able to pay rent and support their combined living costs, but can’t afford to help with her debt.
Amy constantly worries about going into default. Defaulting on federal student-loan payments can result in a number of serious consequences — the loss of the debtor’s ability to borrow money anywhere or to purchase and sell assets, the garnishing of wages, and the withholding of the debtor’s college transcript.
Amy’s mother, a public-school teacher who took out a second mortgage on the family home in order to cosign on the $30,000 undergraduate loan, is also held responsible for each late or missed payment.
“[My mother] has helped me so much in a way that has debilitated her financially,” Amy said. She explained that she is hyper-aware of how loans of her size turn debtors into a burden to the people around them.
Mike McGuirk, 35, also needed his parents to cosign his $150,000 private loan for his undergraduate education. As a freelance filmmaker, he has always struggled to make consistent payments — right now, he’s completely out of work due to the actors’ and writers’ strikes taking place across the country.
“Beyond the monetary payments and financial burden, it’s put a tremendous amount of stress between myself and my parents,” McGuirk said.
Around 90% of private student loans are cosigned, most often by the student’s parent or guardian. In a LendEDU report from earlier this year, roughly a third of the cosigners surveyed indicated they did not fully understand the risks of helping secure their student’s loan. Around half of the cosigners surveyed said that their child’s debt has thrown their retirement plans into jeopardy, and 35% regretted their decision. McGuirk’s private lender has taken to frequently calling his father, who has Alzheimer’s, bullying the family into making payments that McGuirk had advised them not to.
If he knew then what he knew now, McGuirk says he never would have taken out those loans. “I don’t necessarily regret my educational experience,” he said, “However, I’m very disheartened by Columbia College [Chicago], as I am many universities who are silent right now.”
“I felt like I was almost a little bit bamboozled, or hoodwinked in a way,” Jerome said. None of Syracuse’s supposed “alumni resources” like networking or job fairs had helped her find employment. “I was out there fending for myself,” she said.
Amy explained that The New School, where she earned her advanced degrees, told her she might be eligible for scholarships if she did well her first semester. With the hope of future financial aid, she decided to continue with the program. After she excelled that semester, she pursued the scholarships, but the school had rescinded their offer, Amy says. “You just feel like it’s all been designed to screw you.”
Amy is candid about how her debt has damaged her mental health. She and her partner have decided not to get married at this point out of fear her debt might destroy his finances as well, and they don’t foresee ever being able to afford a house.
“It’s hard to invest in myself because… it’s never felt like any of my money was mine,” said Amy, who began to cry when she confided that despite always wanting children, she worries about the life she’d be able to give them.
In addition to physical health, indebtedness has long been associated with negative effects on mental health — depression, anxiety and even suicidal thoughts. A 2021 survey from Student Loan Planner found that one in 14 borrowers felt suicidal at some point in the repayment process — including during the federal moratorium. For some, these results illustrate that simply pausing student debt payments, as opposed to debt cancellation, is not enough relief.
The Debt Collective, of which both Amy and McGuirk are members, is a loosely-connected union of debtors that fights for debt cancellation en masse, as well as educating members on individual forms of resistance. The group was born out of the Occupy Wall Street movement, and their actions are inspired by the writings of anthropologist David Graeber (see sidebar). The Debt Collective has made headlines in the past for buying up debt on secondary markets, where it’s sold for “pennies on the dollar.” Then, the group completely forgave each borrower whose debt they had purchased.
The Debt Collective is also setting a primary example for the federal government, which has long had a “borrower defense” provision in place for students who were defrauded by their universities, but no straightforward method for appeal. As a result of several court decisions which ruled in favor of borrowers, the Debt Collective created an online form for eligible borrowers to directly appeal their debts to the federal government. That form is now the basis for the Borrower Defense Loan Discharge application on the government’s financial aid site.
Lawyers and left-leaning politicians like Elizabeth Warren have theorized that another government provision, the 1965 Higher Education Act, gives the secretary of education the legal authority to “waive” student loan debt for any borrower, regardless of whether they were defrauded or not.
As a result, the Debt Collective rolled out another online tool at the end of August: the Student Debt Release Tool. Though it was designed with borrowers who have been paying off their loans for decades in mind, the format is customizable for each user. The form will generate an appeal based on your personal experience and the Higher Education Act, then send it directly to the Department of Education.
Braxton Brewington, a member of the Debt Collective, explained that the organization hopes this tool will get mainstreamed by the federal government, just like their last effort.
There are people that “have been trying to get public-service loan forgiveness for 10 years, or an income driven repayment plan for 20 years, and the plans just haven’t worked,” Brewington told The Indypendent. The Student Debt Release tool and other efforts by the Debt Collective, he says, are “really just accounting for how the program should have worked from the beginning.”
In the first week after the tool launched, the Debt Collective recorded 17,560 applications for debt release through their website. Underscoring the mental-health impacts of debt, Brewington said that 234 of those applications contain the word “suicide” and 721 contain “depression.” Other notable findings include 552 mentions of “unemployment,” and over 1,000 mentions of “eviction” or “homelessness.”
Amy will likely be unable to make any payments in the coming months. She mentioned potentially consolidating her loans, but she fears that her mother could then be held responsible for all of her debt, not just the $30,000 she cosigned on for undergrad.
McGuirk, who is also unable to pay his loans, plans to continue applying to income-driven repayment (IDR) plans, and to any new forgiveness plans the Biden administration might propose.
Rachel Jerome plans on making payments this October by strict budgeting and utilizing her savings.
Of the six debtors who were consulted for this piece, Jerome is the only that intends to pay. Five of them are unable to make full payments on their loans — to do so would result in severe financial hardship. One, who asked to remain anonymous, is also not paying for political reasons. “I could pay for the next 20 years if I wanted to, but I still won’t pay [my principal] down. What’s the point?” said the debtor, who is 49 years old. “I would much rather take my money out of the bank, put it into crypto or hold it in cash before I ever pay another dime to student-loan people.”
An August poll by Intelligent.com, a data-driven educational advice website, found that 62% of student debtors nationally intend to “boycott” loan payments this fall. Around half of the survey respondents indicated that they did not believe they could afford payments.