Your Money in the News – November 2018
Your Money in the News: Student loan everything is in the news. As more and more uncomfortable facts about rising student loan debt are surfacing, lawsuits are flying. But perhaps a new breed of politicians brings hope.
I know. It’s depressing. But we have to face what the explosion in student loan debt is doing to our country and its people. Here are some figures taken from 7,095 borrowers who participated in a 50-state survey for the new report “Buried in Debt,” a national research study on the state of student loan borrowers in 2018.
- Most borrowers reported they have less than $1,000 in their bank account
- 80% cannot save for retirement
- 19% reported a delay getting married
- 26% put off having children
- Nearly 90% are struggling to make payments
- 6% have had their Social Security payments or wages seized
- 18% report being in default on at least one student loan
- Over 30% report their student loan bill is higher than their rent or mortgage bill
- Nearly 40% report they have been unable to achieve their career goals
- 28% said their student debt prevented them from starting a business
- 60% reported that their loan servicer has given them “confusing” or “unhelpful” advice about their loans
- 57% had experienced unexpected demands after a sudden change in the loan servicer
- 42% had trouble negotiating a change to the repayment plan when they had financial hardships
- Every 28 seconds a borrower defaults on a student loan
- Some borrowers are struggling with the idea of suicide
Beyond what student loan debt is doing in borrowers’ lives on a personal level, a broader national level view is equally disturbing and, quite frankly, unsustainable over the long term.
Since 2006, student loan debt has almost doubled as a share of the economy.
- Only 50% of students who went to college in 1995-6 were able to pay off their student loans within 20 years. At a rate like this, think about what the future could look like.
- Increased student loan debt has had particularly negative impacts on black and brown Americans. (Credentialization is compounded for people of color, who already have to pursue more education than their peers for the same or similar positions.)
- Student lending is responsible for contributing to the rise in college tuition, (which has outpaced overall inflation by a lot.)
The percentage of student debt held by the federal government has risen from about 30 percent to almost 80 percent since 2010. (In 2010 the Student Aid and Fiscal Responsibility Act nationalized the student-lending industry, eliminated guaranteed loans and replaced them with direct government lending to students.)
Student loans now represent the largest percentage of the federal government’s total financial assets.
This is particularly sinister because not only are student loans hurting the people they’re supposed to help, the government obviously has a strong incentive not to change the system.
It’s up to us to give them one.
Navient is one of the largest student loans servicers in the country. The Consumer Financial Protection Bureau filed a lawsuit against the Navient in January 2017 for systematically and illegally failing borrowers at every stage of repayment. After the suit was filed, the Department of Education conducted an audit that confirmed there were compliance issues.
The results of the audit appear to support federal and state lawsuits that accuse Navient of boosting its profits by steering some borrowers into the high interest incurring forbearance without discussing less expensive income based repayment plans. But the DoE failed to release the results of the audit which until now have been kept from the public.
Even while knowing of its conclusions, the DoE repeatedly argued that state and other federal authorities do not have jurisdiction over Navient’s business practices.
Presently, 5 states are also suing Navient — California, Illinois, Mississippi, Pennsylvania and Washington — for breaking consumer protection laws.
This finding is both tragic and infuriating, and the findings appear to validate the allegations that Navient boosted its profits by unfairly steering student borrowers into forbearance when that was often the worst financial option for them. – Senator Elizabeth Warren
In August, Seth Frotman, Student Loan Ombudsman with the Consumer Financial Protection Bureau, resigned. In his resignation letter, he accused the DoE and Consumer Financial Protection Bureau of using the Bureau “to serve the wishes of the most powerful financial companies in America” and hurting American families as a result.
The Department of Education is being sued again. This time by the Housing and Economic Rights Advocates, a California-based legal service nonprofit group, that claims that the Department of Education is continuing to collect on loans that it should be discharging with the Borrower Defense rule.
A Federal Judge ruled last month that Education Secretary Betsy DeVos’ delay of the student Borrower Defense rule was improper and unlawful.
The Borrower Defense Rule made loan discharge automatic for students who could not complete their education because their schools shut down while they were enrolled. DeVos was first sued last year for delaying the Borrower Defense rule by 18 states and Washington DC.
Under current leadership, the Department of Education seems determined to deny student borrowers the financial relief to which they are entitled. – Aaron Ament, president of the National Student Legal Defense Network
But perhaps there is hope on the horizon. The first generation of students who have experienced our debt-financed higher education system is coming of age politically. As a result, ideas like tuition-free college, a push for scrutinizing student loan companies, and even student debt cancellation are common themes this year. Meet 5 candidates who are pushing for reform:
Natalie Higgins, running for re-election to Massachusetts’ House of Representatives
- Took out $130,000 in student debt to attend law school.
- Says her $500 student loan payment is keeping her from saving more for retirement.
- Was kicked off her repayment plan because she missed an email reminding her to re-enroll in the plan.
- Introduced a bill that would require student loan servicers operating in the state to abide by certain consumer protections
We just want the same shot our parents had to get access to higher education, to be able to do better. – Natalie Higgins
Sarah Smith, running to represent the state of Washington in Congress
- Has about $40,000 in student loans ($100,000 when combined with her husband’s.)
- Pays roughly $800 a month in student loan payments.
- Expects to be repaying her debt until she’s well past middle age.
- Is pushing for a complete bail-out on student loan debt which could, in fact, stimulate the economy.
I just got tired of waiting for someone else to help people like me. – Sarah Smith.
Matt Lesser, running for a state senate seat in Connecticut
- Lesser and his wife are managing the roughly $60,000 she took out in student loans.
- Sponsored legislation in 2015 to create a student loan bill of rights in Connecticut that require student loan companies to abide by certain consumer protection rules.
Andrew Janz, running to represent California in Congress
- Estimates that he owes about $300,000 in student loans from undergraduate and graduate degrees.
- Wants to advocate for proposals that create incentives from the federal government for states to invest more in their higher education institutions.
I don’t think that the vast majority of current members of Congress get what us (sic) millennials are going through.- Andrew Janz
Liuba Grechen Shirley, running to represent New York in Congress
- Acquired $60,000 on her way to a degree in politics and Russian.
- Took on another $45,000 in debt to complete her graduate degree.
- Would push for allowing borrowers to refinance their federal student loans at lower interest rates and making it easier for borrowers to discharge student debt in bankruptcy.
If more members of congress know what it’s like to balance the obligations of a working parent with expenses like student loans, their policymaking will reflect that. – Liuba Grechen Shirley
We can only hope that the generation most impacted by the student loan crisis will be the one to come up with a solution. As a country, we can do better. We have to .