“Every Payment I Have Made Has Done Absolutely Nothing"

Horror stories from the student loan extortion racket

With student loan repayment rules meant to ease the debt load during the Covid pandemic set to come to an end on January 31, 2022, borrowers face the reinstatement of a crushing financial burden.

Americans owe around $1.6 trillion in student loans, at an average interest rate of 5.8%. The mammoth financial burden holds people back from upward mobility and pursuing their dreams. "I think student loans are keeping people in miserable jobs,” borrower Mollie Smith told me last week

I talked to people facing staggering repayment prospects—and how their student debt affects the rest of their lives.

Here’s what they told me. 

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Downward spiral

Kay told me her life has been ruined in large part because of student loans. She went to Wake Technical Community College in Raleigh, North Carolina in the early 2000s but had to leave early after her son was diagnosed with autism. Without a degree and tens of thousands of dollars in debt, Kay found herself in a downward spiral. 

“I am six credits off of two separate degrees and currently $65,000 in student loan debt I can’t pay because it trashed my credit score,” she told me.

The problems started piling up.

“I was unable to rent a place. I lost jobs because I had nowhere to live. I lost custody of my son,” Kay said. “I’m currently homeless living in a car unable to get anything I need and all of this traces back to listening to bad financial advice and getting student loans.”

George Pearkes, a financial analyst at the Bespoke Investment Group, told me that while—on average—the cost-benefit ratio from student loans are a “good trade off,” that doesn’t tell the whole story. Things can quickly go off the rails for any number of reasons, leading to disaster.

“The problem is that higher education isn't a factory, and all sorts of things can happen to make the best-laid plans of borrowers go awry,” Pearkes said. “Poor grades, family issues, a less friendly labor market than expected, etc.—so many things can make the initial assumptions wrong, even if they're totally out of control of the borrower.”

"An absurd racket"

The college “really didn't give a shit”

Student loans are “parasitic,” according to Sam Pietrobono. He graduated from Mount Vernon, Iowa’s Cornell College in 2016 with $35,000 in debt—or so he thought. Because his student account was linked to his father’s home address, an additional outstanding $4,500 was billed to that house. Pietrobono’s father thought the past due bills were solicitations for donations, and threw them out. 

Soon that debt went to collections, and Pietrobono was forced to take out a personal loan. The $4,500 was tacked onto the principal, and, despite paying off $12,000 in the last five years, Pietrobono now has seen his principal balloon to $39,000 from $35,000, meaning that the $12,000 he paid off only impacted $500 of the principal he owed in the first place. 

“It was infuriating that this college was simultaneously calling me for donations, but sending snail mail to let me know I owed them money,” Pietrobono told me. “I got the feeling that they wanted to send this thing to collections to get their money, and really didn't give a shit about someone just out of college and trying to find a way to financially support themselves.”

Yalies and the people who serve them

“Saving is near impossible between rent and loans”

Pietrobono isn’t alone in having payments hardly make a dent in the balance. Pearkes said that’s in part because many borrowers don’t initially understand the “mechanics of the lending process,” which can add to financial stress. 

“If you borrow money freshman year to pay for tuition, but don't start repaying until a year after college, that's almost five years of accrued interest before repayment starts which is money that needs to be paid back,” Pearkes said, adding that “it’s by design.”

One borrower, Jim, told me he has paid off around $37,500 of $55,000 in private loans over the past five years—but his overall balance has only gone down $8,000. He told me that crushing debt is a factor in a number of other life decisions. 

“Definitely a cause of depression and anxiety, pushed off getting engaged and married to my significant other, I avoid all other debt because I am genuinely afraid of a deeper hole,” Jim said. “Saving is near impossible between rent and loans.”

For Matt, who attended Central Michigan University but did not graduate, the burden of the loans has left him treading water. He left the school with over $41,000 in debt. 

“After barely passing integral calculus, I decided college wasn't the best choice for me so I took a welding class at a local community college during the winter semester of 2013 and have been doing that ever since,” he told me. “At 30, almost 31 years-old now, I never got any degree or certification from the 4 years I spent in college.”

After applying, and being approved, for signed up for an income-based repayment plan, Matt’s paid back $6,000, leaving his balance at $41,300.53. 

“I try not to let it affect my life,” he said. “I just accept that I'll have a $250 a-month anchor tied around my neck for the rest of my working life and try to live as best I can despite it.”


“Every payment I have made has done absolutely nothing”

Danielle Cross went to the Art Institute of Pittsburgh—online, because she was working full time. 

“A year into it I received an email about my financial aid not covering tuition anymore and I needed to come up with it myself to continue,” Cross told me.  “At that point I was making $8.25-an-hour in retail. Paying it myself was impossible.”

Today, Cross has consolidated her loans and paid off what she can. But it feels like an uphill battle that she’ll never win. 

“My loans have gone from around $20,000 to over $40,000 because of interest,” she told me. “Every payment I have made has done absolutely nothing. It’s so unbelievably disheartening when you try to do the right thing and it ends up so so wrong.”

The most frustrating thing is that this is all avoidable. Pearkes told me that “the fact that we make this complicated, that it is a nuanced thing, is itself a policy choice.”

“If we really valued education as a society the way we value, say, basic health care for senior citizens, it wouldn't have to be complicated for students,” Pearkes said. “But we don't, so there's a complicated edifice in place from the perspective of a student loan borrower.”

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