Simple: A Humble Idea for the Student Loan Crisis
Back in 2003, I was offered a teaching job at the arts high school that I attended as a teenager. I had graduated from there eleven years earlier and was working in book publishing when the Creative Writing job came open. Not only was I stoked about working at my alma mater, the salary was solid, and the health insurance was affordable. But there was a hitch: though I had an English degree, writing credits, and publishing experience, I didn’t have a teaching certificate. So, I took the classes to get one and paid for them with student loans.
It made sense, as I approached 30, to invest in my future. I was newly married, we wanted children, and a job as a public school teacher would be steady employment. And there still was one other hitch: the No Child Left Behind law had just taken effect, and I would have take some extra classes to become “highly qualified.” Going part-time in the evenings, I completed those classes during my first two years of teaching. Then, feeling good about it, I decided to hang in there and get a master’s, which would enable me to teach college classes as an adjunct, too. I started that degree in 2005 and finished in 2008, during which time we had two children.
Over the course of several years, I took five separate loans, all FFELP, four of them unsubsidized, to pay for this investment in myself. The total was more than I’d anticipated — $37,285 — but I was optimistic. Teaching was going well, and I had gotten tenure. Yet, it was still a struggle, since we had two children in diapers by the time I had earned these new credentials.
I began paying back my loans in early 2009. As of this writing, I’ve made $29,954 in payments, which is 80.34% of the amount I borrowed. I’ve only been late twice, and those happened within the first year. However, because I’ve made smaller payments, well below the $800-per-month they initially set, the student loan company has applied this sum as almost $17,000 to interest and just over $13,000 to principal. They regularly keep 50–60% of my payments, applying only 40–50% to my balance. Some accountant or lawyer might explain this math to me, but I still won’t agree that two interest rates of 6.8% and three of 4.21% should end up as 55–60% of my payment.
The other bad news is: I still owe over $23,000. I’ve sent monies totaling 80% of the amount I borrowed, yet still owe 62% of that amount. I know that loan providers are in business to make a profit. I concede that, and I respect it. They’ve got to pay for employees, office space, electricity, and internet, like any other company. Moreover, I want these institutions stay in business, because I want them to be there so others can borrow later on, if they need to.
However, they’re doing more than staying in business. In my research on student loans and what I could do about my situation, I learned about the immensity of the entity I made a deal with. From 1972 until 1988, my student loan company’s “assets grew from $1.6 billion to $28.6 billion.” From 2010 through 2013, as I plugged away with my monthly payment, their net income rose from hundreds of millions to over a billion dollars annually. To ensure continuity of these trends, they spent $22 million on lobbying efforts from 2007 through 2013.
Meanwhile, I haven’t been eligible for any forgiveness or reduction plans. I either make too much money (as a public school teacher in Alabama!) or the school where I teach doesn’t meet the poverty requirements. I looked into consolidation once, but those projections had me paying back more, not less. My only hope for this investment in myself to be worthwhile appears to lie with politicians’ promises to deal with the “student loan crisis.”
Back in October 2016, I had a little bit of hope when then-candidate Donald Trump said that his student loan plan would cap repayment at 12.5% of the borrower’s income. Had he kept his word, I would be done paying. Trump’s other proposal was to have borrowers make payments for no more than fifteen years. If that standard were applied, I would be done in 2024 and would pay back roughly the amount I borrowed. However, President Trump didn’t do what he proposed. (His administration actually made it harder on borrowers.) So, I’ve continued paying with no end in sight.
Then, the pandemic hit, and the first relief bill allowed some people hold off making payments. I contacted my loan company about it but was told that those programs didn’t apply to my loans. So, I’ve continued paying with no end in sight.
Now, Joe Biden says he has a plan to “forgive a minimum of $10,000 per person of federal student loan.” However, I can’t find any details on how that would work. Who knows, I might be ineligible again for the same reasons. And if that’s the case, I’ll have to continue paying with no end in sight.
To me, the “student loan crisis” is rooted in the fact that the companies can make payments meaningless. Though I can’t prove this, I feel pretty strongly that a lot people stop paying because they see it as futile. It is utterly disheartening to pay so much and see so little progress. That’s what needs to change.
What I want is a solution to my student loan conundrum that puts a clear end in plain view. It also shouldn’t take $60,000 to $80,000 (or more) to pay off $37,285 in student loans. My humble idea is this: recalculate the original loan total with a one-time application of simple interest at the rates I agreed to, then apply the whole amount I’ve sent in payments, and once you’ve got that solid number of what’s left, let me pay that off. If I calculate simple interest on the amount I borrowed with the rates for each loan, the total interest would be $1,979. If the loan company handled it that way, I would pay back $39,264 on $37,285 in loans. Two-thousand dollars seems like plenty of interest to me, considering that the company already has billions of dollars in assets, and considering that student loan programs were created in the 1960s to make higher education affordable.
To be candid, student loan companies did nothing for me between the loan paperwork and the repayment, and they’ve done nothing for me since. Nobody from a student loan company calls to ask how I’m doing. I don’t get a Christmas card or a birthday wish from them. In fact, during the time period when I was trying to improve my situation, their people were distinctly un-friendly and un-helpful. The answer I got was: Make bigger payments. At my wit’s end, I cussed one cubicle-dweller who said that to me and asked him rhetorically, “If I had the money, don’t you think I would?”
Sometimes, when I mention student loan forgiveness to people, they immediately think, “He wants a handout.” I’m not talking about a handout. I’m talking about fairness. I’m talking about paying back my loans with interest. It’s not a handout if it goes like this: here are the amounts I borrowed, here are the rates I agreed to, so here’s how much I’ll pay back. Simple.
I also wish politicians would stop calling it “forgiveness” and stop arguing about whether to cancel people’s debt. Those are two reasons that nothing has been done yet. When people who don’t have loans hear the word “forgiveness,” they imagine a Get Out of Jail Free card, and when student loan companies hear “forgiveness,” they spend millions of dollars on lobbying to fight against any reforms. Politically, we’re at a stalemate between two extremes — a predatory system continuing unabated and debt cancellation as a far-off fantasy — when there are solutions in the middle.
Recalculating existing loans with one-time simple interest is one of them. If we did that, I think we’d find a couple of things. First, that some people would be done paying and even get refunds for an overpayment amount. Second, that people like me would see a clear path to resolving our loans. Third, that people who are struggling could make small payments that were meaningful, instead of having the money absorbed by interest so they get nowhere. The question is: why send any money when the balance won’t go down? One-time simple interest would resolve that.
I’d like to see the conversations about student loan reforms focused on fairness, rather than forgiveness. We’re in a “crisis” because the system works against the people that it was designed to help. To remedy that, some people, like those defrauded by for-profit colleges, should get partial or complete loan forgiveness. But for people like me, who are working and making regular payments, I believe that companies should carve a clear path to repayment, where even a single dollar makes a dollar’s worth of headway. Me, I’d be OK with paying my loans back, if they’d just make the process simple so I can.