Delaware college students still worry about loan payments despite new extension

By Rachel Sawicki
Posted 1/2/22

The pause on federal student loan payments was extended once again by President Joe Biden due to the rapid spread of the omicron variant and the threat it poses to the economy. Students across …

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Delaware college students still worry about loan payments despite new extension

Posted

The pause on federal student loan payments was extended once again by President Joe Biden due to the rapid spread of the omicron variant and the threat it poses to the economy. Students across Delaware are feeling some relief, but many are still hoping for the $10,000 in forgiveness pledged during Biden’s campaign.

“If I had 60 percent of my debts forgiven, that would make the goal of repayment in the next few years much more realistic and potentially open the doors to graduate school,” said 2021 University of Delaware graduate Stephen Boyd. “The amount of money grad school costs is one of the main things holding me back from pursuing further education.”

Mr. Boyd’s federal loans amount to around $18,000, not so bad compared to some of his fellow graduates, he said. Still, he was preparing to sell his car and downgrade to something he could pay for outright in order to afford his loan payments. Now, he said the extension until May will at least give him some extra time to get an idea of the finances he’ll be working with.

“It took me a while to find something I was comfortable with so I didn’t start working until November,” he said. “In that process, I ate through most of my savings so I was definitely not ready to start paying my loans in February.”

He added that the holidays this time of year are an added layer of financial stress that puts many families “in a bind,” so starting repayment in the spring also gives him time to recover from those expenses.

Based on research from Student Loan Hero, Delaware borrowers have an average student loan balance of roughly $36,000 (in federal and private loans), which is on par with the national average. In addition, the approximately 100,000 borrowers in the state pay an average of $295 per month to service their debt.

Elizabeth Chordas also graduated from UD in 2021 with $45,000 in federal student loans. Neither of her parents could cosign on her loans, so she had to take them out in her own name every year. When configuring her repayment options, a $438 payment would result in only $10,000 extra in interest. The more affordable option, just over $300, would tack on an extra $30,000 in interest over time as she continued to make payments.

“I don’t understand why they think anyone who just got their bachelor’s degree and doesn’t have a job yet will be able to manage this kind of money situation,” Ms. Chordas said.

Financial attorney and student debt expert Leslie H. Tayne, of Tayne Law Group, said that the student loan payment pause has saved borrowers $100 billion in interest charges collectively. Additionally, 89% of students polled by the Student Debt Crisis Center indicated they felt ill-prepared to resume payments on Feb. 1, prompting the current extension to May 1.

“However, while the move should help some student loan holders, more than 20 percent of those surveyed said they would never be ready to start making payments again,” Ms. Tayne said in an email. “These survey results tell us that many borrowers will still struggle financially when payments officially resume in May.”

She added that student loan cancellation would stimulate the economy and allow borrowers to pursue life goals currently on hold due to their debt.

“The extra money in their pockets could go towards starting a family, buying a home, becoming an entrepreneur, investing, paying off other debt, and purchasing consumer goods,” Ms. Tayne said. “Canceling $10,000 per borrower would result in roughly 15 million people becoming student loan debt-free. In addition, for those borrowers owing more than $10,000, the cancellation would reduce their monthly payments, improving their cash flow.”

Ms. Chordas noted that $10,000 in loan forgiveness would make a huge difference for her.

“I will take anything, any kind of forgiveness,” she said. “Our parents got all the leeway with the credit cards and loans, they got everything easy. Now they’ve raked up everything for us and it’s impossible to pay back.”

According to a 2019 report from the College Board, the average in-state, public, four-year tuition and fee price was about three times as high in 2019-2020 as it was in 1989-90.

Ms. Chordas said she believes that basic human rights like health care and housing should be available and free to the public, and education should be considered one of those human rights.

“Make people realize that they need intelligence, knowledge, expanded world views, history, all these things to grow as a person,” she said. “I think everything would be so much better if people had that free opportunity to grow."

Nora Carle is a 2019 UD graduate. She deferred her $25,000 loans six months after graduation because she couldn’t afford the payments, and got a lucky break with the moratorium when the pandemic hit.

“Working a seasonal job, I can’t even pay my bills half the time, like four months out of the year, so student loans on top of it would make it incredibly difficult,” Ms. Carle said. “I’m looking into deferring them even longer potentially since I’m not in my field. No one warned me that the average pay in (domestic violence victim advocacy) is like $12 an hour with no benefits, so even if I was full time in my field I couldn’t afford it anyways.”

She explained that most shelter workers get paid $10 an hour, while courthouse employees get paid around $15 an hour, with benefits only for full-time employees. Ms. Carle added that she felt overworked in her previous position with unforgiving time-off for illness or emergencies.

“If I could put a warning sign on top of this career field and others that don’t pay a living wage, I would,” she said.

Ms. Carle said she feels there was a status quo imposed on today’s youth: go to college, get a job, get married, have kids. She calls it a smokescreen over 21st century reality.

“That’s the timeline we’re supposed to follow, and God forbid we don’t go on that timeline, so then we get stuck on that timeline,” she said. “My parents always told me, ‘If you go to college, you’ll get a good job,’ because that’s how it was when they were younger but that is just not the case anymore.”

Bridging America’s Gap, a workforce development organization founded in 2018 to address the skills gap dilemma, says the shortage in the skilled trades becomes more acute every day. The organization says skill gaps around the country are most prevalent in construction, manufacturing, mechanical, engineering, health care, food service, and retail jobs.

A survey of 2,023 U.S. adults conducted by the Harris Poll found that 75% of respondents blame the skills gap on schools failing to provide adequate education for the 21st century. In addition, 93% also said high schools and colleges need to develop more employable graduates.

“College was pushed and pushed on (my generation) by so many people, whereas trade schools were not,” Ms. Carle said. “People in trades are starting to retire, but there are less people available to fill those positions, and they make really good money. But now all these people with college degrees aren’t able to use them because there’s no positions in those fields.”

Ultimately, the status quo pressure that Ms. Carle felt is not a unique experience. Bridging America’s Gap says social pressure to attend college is one of several things that have compounded to worsen the gap since the turn of the century. Bridging America’s Gap notes the elimination of shop class in high schools once No Child Left Behind was implemented, putting an emphasis on college education and “disregarding experiences that might ignite a career in a trade.”

The group points to the Great Recession, as well, saying that “countless contractors went out of business and never came back, even when the economy rebounded. The trades lost a significant chunk of veteran workers and missed several years of potential worker training.”

The National Bureau of Economic Research also points to the Great Recession, finding that the unemployment rate of recent college graduates spiked at 7% post-recession and remains above 5%.

“Adjusted for inflation, look at what we paid versus what our parents or grandparents paid,” Mr. Boyd said. “People ask why there is no money in the economy. No one can spend it because they’re so in debt from going to college, but also from not having a lot of other viable options outside of college … It is very difficult to get an 18-year-old that is going into college to understand the financial burden that it’s going to cause later in life once they get out.”

Ms. Tayne noted several options that students have if they still are not ready to resume or begin repaying their debts in May. Borrowers can reach out to their servicer and apply for an income-driven repayment plan, where their payments could be as low as $0 per month. If they work in the public sector, they should check their Public Service Loan Forgiveness program eligibility.

Ms. Tayne added that the Biden administration recently passed legislation to make it easier to qualify for forgiveness.

“As a last resort, borrowers can explore deferment and forbearance options to postpone payments further,” she said. “However, with forbearance, interest will accrue on their debt.”