"An Absurd Racket": Looming Restart of Student Loan Repayment Infuriates Borrowers

"I have basically resigned myself to the fact that I will be paying it until I die"

If you have student loans, you've almost certainly received a message from the Department of Education over the past few weeks telling you that the temporary, Covid-related pause in interest and payments is nearly over.

One of the most popular programs of the pandemic, the student loan payment freeze was meant to temporarily boost the economy and ensure people in all sectors of the US workforce would not end the once-in-a-lifetime disaster even further underwater than they were to begin with. 

To Mollie Smith, a debtor who used the freeze to get her finances back on track, the announcement that the loans were restarting was "infuriating" and made her "want to just burn it all to the ground." Still, she intends to pay because of the fear of tanking her credit—a threat that affects people around the country.

"I think student loans are keeping people in miserable jobs," Smith said.

Student loan debt represents one of the biggest bubbles in the economy. At around $1.6 trillion, with interest rates typically around 5.8%, the money owed by tens of millions of Americans is impossible to completely pay back. 

Something is eventually going to have to be done. President Joe Biden could, technically, dispose of it with the stroke of a pen. But his administration appears to be taking a different path, setting up a series of expanded opportunities for debt forgiveness and ostensibly more friendly repayment plans instead. 

The debt repayment restart, set for Feb 1, 2022, is going to cause stress and financial crisis for millions of Americans—and wipe out whatever gains they've made on a personal and professional level since the crisis began. 

Here's what some of those facing the crunch told me. 

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"What is the point of trying at all?"

Debt totals have already risen to such astronomical heights that the interest freeze is unlikely to make much of a dent. Alex Barrio, who went to Florida International University College of Law and graduated in 2012, left school $140,000 in the hole. He's paid back $40,000 of it, he told me, but because of the interest owes over $200,000 today. "It's an absurd racket," he said. 

"I don't mind paying off money I loaned but hundreds of thousands of extra money in interest payments is absolutely ridiculous," Barrio told me. "If you can never pay off a debt anyway, what is the point of trying at all?"

Drew, who went to Emory University for film studies and then NYU Stern School of Business for an MBA, hasn't touched the principal of the $150,000 he owes from the latter. His payments are over $700 a month, he told me: "I'll probably be a Walmart greeter when I'm 75."

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"I’ll be crushed"

Student loan debt presents Americans with wrenching, impossible decisions for Americans. For Karl, a Washington state-based apartment maintenance worker, what he owes from his private, four year art school is so high he and his spouse file taxes separately so as not to burden his partner with his decisions. 

"Unfortunately at that age I really didn’t understand the gravity of the financial burden I was signing up for," Karl said. "And I’m going to pay for it for the rest of my life."

The scope of the problem means that it affects far more than just borrowers. Alex Lawsonis the sole breadwinner in her household and supports her mother and daughter. There's no money left over, she told me, after taking care of her family.

"I want to refuse to pay but my credit is finally not terrible," she said. "I might just try to defer them for as long as they’ll let me. If I have to pay them back I’ll be crushed by it."

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"At this point I’d rather just go bankrupt"

The administration has made moves to reform loan programs, like the Public Service Loan Forgiveness Program (PSLF). But changing those programs, which are rife with errors and mistakes, is a big lift.

A recent 60 Minutes report detailed the problems with the program:

Student debt is a crushing burden on millions of Americans. To help, Congress passed a law in 2007, creating the Public Service Loan Forgiveness Program, promising that if you're a public servant - a cop, a teacher, a soldier - and you work for 10 years, your debt will be erased. 

But maybe it should be called the unforgiveness program: 98% of those who've applied for relief were told they're ineligible.

James, who is six years into the 10 year requirement for the PSLF, told me that "the program's been a mess since implemented" and that he's "very, very nervous about whether the Department of Education will uphold its end of the bargain." But he doesn't see an alternative, so he's starting to budget for repayment. The $1,000 a month he saved through the pandemic went into savings and home repairs done by local businesses. Now, that's over—and it's coming at the worst time possible. 

"During the pandemic we also welcomed a baby daughter; she's healthy and an absolute delight," James said. "But babies are expensive, and the loan repayment resumption hits just when I'll have to start paying for daycare."

"The $1,000 per month I wasn't paying to Fedloan Servicing made a big difference in my life," James told me. "I'll be sad to see it go."

Another federal government employee making his way through the PSLF program, Bryce, told me that before the pandemic he had hoped that he could get the debt forgiven. Now, after seeing how easily the government could dispose of the loans, he has "no intention" of restarting payments and instead intends on going on forbearance. 

"I’ll have to start shilling out almost $600 a month to keep on my PSLF if I have any chance at getting it 'forgiven' so I can buy a house and live a normal middle class life in ten years," Bryce said. "Having my first child this month which adds more chaos. At this point I’d rather just go bankrupt."

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"I will be paying it until I die"

Biden's waffling on loan forgiveness has angered many people and left them confused. For Nick DeSisto, the prospect of loan forgiveness having been "realistically floated," the idea of paying it off in bulk doesn't make much sense. Instead, he told me, he intends to wait in hopes that some—or all—of the debt is forgiven.

"If anything, it seems like the administration has actually made this issue worse by proposing an idea and then having zero followup," DeSisto said. "There should be closure before payments are restarted or everyone is going to either not make payments or just pay the minimum—like I will—which will tank credit scores and add to the debt with more interest accumulating."

Many of the people I talked to felt that Biden's promises were empty—and that he had betrayed them. Nathan Melby, a public school special education teacher, told me he felt "abandoned by Joe Biden and his garbage promises that he cared about student loan debt." With $50,000 still owed for his MA in special education, Melby said, "I have basically resigned myself to the fact that I will be paying it until I die. I only make enough to pay the minimum every month."

Disappointment in Biden is rampant in the people I talked to. 

"This isn't the first time he's talked a big game about something and then backed down when it came time to follow through," said Evan, a technical writer in Texas. 

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