High interest rates on student loans keep borrowers from paying off their initial debt.
Insider spoke to two borrowers dealing with “crippling” student debt, largely due to interest.
They have both paid off almost their entire original debt amount, but still owe thousands of dollars more.
- See more stories on Insider’s company page.
Alexandria Mavin learned from her high school teachers that there was a path to the American Dream. If she went to college, graduated and got an office job, she would get there. She graduated with $US1 ($AU1).7 ($AU2),000 ($AU163,902) in student debt as a down payment for that dream.
Now 32 years old and a real estate manager, she has repaid $70,000 ($AU98,061) of it, but she still owes $US98,000 ($AU137,286) from her undergraduate education, saying she ” absolutely ” regrets seeking an education.
🎬📺 Free Movies and Free TV Shows! 🎭🎬
“I’ve repaid almost all of my loans, but I still owe the full amount,” Mavin told Insider. “It’s an infinite cycle.”
Mavin talks about interest. It’s why many borrowers have problems keep track of payments or eliminate their debts. The $US1 ($AU1),7 ($AU2) trillion student debt crisis is largely due to the interest that grows every year, so even borrowers who consistently repay their debt face high interest rates who keep their debt equal to what they originally borrowed – or higher.
After President Lyndon B. Johnson passed the Higher Education Act of 1965, banks began raising interest rates on student loans, and the system favored lenders at the expense of more and more borrowers getting further into debt and defaulting. , Insider reported. It is made jail many borrowers think they will never escape.
Mavin’s student loans are owned by four trustees, and only one of them – FedLoan Services – was included in the federal break on student loans and interest during the pandemic. Even so, Mavin said she had no interest on even one of her loans, saving her $US377 ($AU528) a month, which she put into savings and helped her pay off her hospital bills from childbirth in full during labor. . pandemic.
“It just shows how I can afford a living without student loans,” Mavin said.
‘I am financially crippled by crippling debt’
Daniel Tapia, 41, graduated ten years ago with a bachelor’s degree in dental hygiene — the first in his family to do so. Since then, he told Insider, he’s driven used cars, lived in “crappy” apartments and moved back in with his mother thanks to the growing student debt he’s been trying to pay off for 10 years.
“I’m financially crippled by crippling debt and I can’t move forward in life,” Tapia said. “Killed by the student loan industry.”
To pay for his undergraduate degree, Tapia borrowed $60,000 ($AU84,053) in private student loans at a 9% interest, and his student debt currently stands at just under $US86,000 ($AU120,475), including $22,000. ($AU30,819) in government hands even after ten years of monthly payments.
“What I don’t get is that if I’ve withdrawn a certain amount and already paid that amount, and I still owe more than I originally owed, it’s just insane,” Tapia said. “I find it astonishing that this total amount is not going down. It’s not going away.”
Insider recently reported that although federal student loan payments have been interrupted during the pandemic, many borrowers who made at least one payment during the break were “underwater”, meaning they were not even $US1 ($AU1) less in debt than their original balance , keep some in an endless cycle of repayment.
For many, canceling student debt is the only way out
Although President Joe Biden campaigned on canceling $10,000 ($AU14,009) in student debt per borrower, Mavin said that wouldn’t even be “a drop in the ocean.” She said the alternative plan of Massachusetts Senate Elizabeth Warren and Senate Majority Leader Chuck Schumer cancel $US50,000 ($AU70,044) per borrower would help “hugely”.
Some colleges have used stimulus funds from Biden’s US bailout to cancel institutional debt, or student debt to schools, and Biden has even forgiven student debt for certain groups of borrowers, but large-scale cancellation of student debt has yet to take place.
Biden has asked the Departments of Education and Justice to review his executive order to cancel $50,000 dollars ($AU70,044) but months have passed and there has been still not a word about where those reviews are.
“I’ve been screwed so hard with interest that I’ve paid back most of my loan, yet it’s the banks that benefit, not me,” Mavin said. “I fear it’s an endless cycle where I can’t give my daughter the life I want to give her and I can’t give myself the life I want to give myself.”