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School loans leads to crushing debt

5 min read

You don’t need me to tell you: There is a lot going on in America right now. Two mass public shootings since Thanksgiving. More ridiculous political theater from Donald Trump, in which he mocked the movements of a journalist with physical disabilities…unapologetically and in public.

I should probably craft a column arguing some aspect of one of those topics, but I just can’t. I think many of you can probably relate to that fatigue.

The state of America is important. Talking about gun violence, gun control, and the missteps of our elected officials, or potential elected officials, is important. The day we stop talking and caring about these things is the day we become nothing more than plankton caught up in humanity’s tide, rushing toward the whale’s mouth.

And yet. This week, I just can’t do it. Right now, our lives are full of arguments on these topics. Suffice it to say, I am for stricter gun control laws, for the continued existence and funding of Planned Parenthood, against racial profiling, and highly, highly against Donald Trump as both a president and a person. I’ll return to one or all of those topics in the near future, I’m sure.

For now, I’m going to make an argument that’s a bit smaller, but just as important in America: we need to allow private student loans to be discharged in bankruptcy. We also should tackle the skyrocketing college costs -driven by bloated university administrations and million-dollar campus dining halls -but for now, let’s make this one allowance.

Because right now, thousands of young people with student loan debt have no escape clause. Because of this, their lives are on hold. Forget the economy-boosting “American dream” of homes, cars, and family: a sizable chunk of their paychecks is going toward student loan debt — most of it feeding the interest beast.

Those with federal loans (i.e., from the government) are a bit better off than those with private loans. Through federal programs like Income Based Repayment (or IBR) and Pay As You Earn (PAE), borrowers pay only a percent of their income every month. Then, after 20 years of repayment (10 years for those working in the public sector), the remaining loan debt is discharged. It’s like bankruptcy, but gentler.

That’s the advantage of federal student loans, as opposed to private, and it makes a huge difference.

Importantly, federal student borrowers are not automatically enrolled in these IBR programs. They are enrolled instead in standard repayment, by default, and must apply for IBR.

If you have college-aged kids, friends, or coworkers who you suspect don’t know about the IBR plans, tell them. Today. For many, IBR can drastically reduce monthly payments. Friends have gone from paying $450 or $600 a month (half their take-home pay, in some cases), to paying $100.

Granted, loans have yet to be discharged through IBR or PAE. We haven’t reached the 10-year mark yet. Who knows what laws will be enacted between now and then, perhaps undoing the program altogether. And as someone with federal loan debt in the mid-five-figures, I’m cautious about trusting that my remaining debt will eventually disappear.

Additionally, any forgiven debt will be taxed as income once paid off. For some, that could mean owing tens of thousands of dollars in income tax. Smart (and able) borrowers should make their IBR payments and sock away a little extra to cover the tax burden 10 or 20 years down the line.

But back to private loans. Those borrowers don’t have the options federal borrowers do, and in many cases, had no idea until it was too late.

I know some say, “They made the choice to go to college and take out loans. I don’t feel bad for them.” True. But I’ve never seen a “bad” choice be so roundly encouraged-often by people that the student borrower trusts completely.

When it comes to credit card debt, young people know what they’re getting into. Or should. Plenty of reasonable adults will caution young people to be careful with credit cards. It’s bad debt.

Student loans, though, are “good” debt. Or so college students are told. Education is worth the expense! Better yourself! You’ll make plenty of money in the future to pay it off.

In the end, we should not only make loan forgiveness easier. We should tell students up front that student loans are no joke. They won’t disappear in a poof following their future success. They should know, too, that future success is not guaranteed.

If they’re like me at 18 to 22, they won’t listen (very closely). But we have to try anyway. And if they don’t listen? Decades of debt and stalled potential are not the right punishment.

Jessica Vozel is originally from Perryopolis and, after attending graduate school and teaching in Ohio, now works as a freelance journalist and copywriter in the Pittsburgh area.

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