A GLIMPSE OF LIFE AFTER DEBT — WHAT PAUSING FEDERAL STUDENT LOAN PAYMENTS MEANS TO ME (AND MILLIONS OF BORROWERS)
The last fourteen months have been a wild ride for us all. Everyone has their own pandemic story, but whether big or small, the ripple effects of our collective response to the COVID-19 virus can be felt in most major aspects of our lives. There has been a lot about the last fourteen months that has been really hard, really scary, and previously unimaginable. However, one light of hope in an otherwise dark sky has been the temporary reprieve on federal student loan payments. This pause, afforded to student loan borrowers by the federal government as part of last spring’s pandemic relief efforts, allowed borrowers to stop making payments on their federal loans and set loan interest rates to zero.
I am an old millennial and, like tens of millions of others in this country, I carry lots of student loan debt. How did this happen? Most of us have to borrow money to pay for our higher education, and many of us begin planning for and dreaming about college early in life. I was lucky that I had the space to have such goals, and even luckier still that I was able to further my education by attending college and graduate school. Planning and reaching for my aspirations didn’t change the fact that when the time for college came, there was no trust fund or pot of money earmarked for my studies. If I wanted it, the only way to finance my education was principally through student loans. Sure, I obtained some scholarships, chose my institution carefully, attended a public school, and lived with my parents all to cut down on major expenses. While those efforts kept the total cost of my education lower than had I made less cost-conscious choices, I still finished undergraduate and graduate school with six figures worth of student loan debt.
I finished my studies a long time ago, and I am still paying $500 a month towards an amount of debt that totals more than the price of a house in some parts of the United States. I’ve been receiving a bill and written a check every month since finishing school. As many know firsthand, the problem is that, because of the size of my principal balance and accruing interest, instead of going down, my total outstanding balance is now larger than when I graduated, which has only put me further and further into a punishing debt abyss.
But let me tell you about the last fourteen months!
Since last March I have been excused from paying my monthly $500 student loan bill. Those of us with federal student loan debt have gotten a taste of what our pocketbooks and what our lives would feel like if we no longer carried the burden of paying our federal student loan debt each month. We’ve gotten a sense for life after debt and how liberating it has been! I discuss this topic with friends who are similarly situated and who tell me they, too, have found more financial freedom by being able to put the few hundred dollars that normally must be used to pay a student loan bill towards other critical expenses.
It’s important to dispel assumptions that people who have been excused from making federal student loan payments over the last fourteen months have been somehow living high on the hog. Many of these people have used this money to pay other debt, fund deferred needs like medical and dental care, help family members financially, modestly grow (or start) a savings account, and did I say pay down other debt? In other words, we have been able to do just as the economists predicted we’d do: we’ve stimulated the economy by putting that money to use in other crucial ways. Aren’t these all activities we, as society, want people to do? Don’t we want people to be able to afford housing, afford medical care, afford childcare, and — god forbid — maybe even have a rainy day fund set aside for unexpected yet inevitable urgent expenses?
It’s irrefutable that a mutual connection exists between student loan debt and socioeconomic class, between access to resources preventing the need for loans and privilege. This pause on payments has given us borrowers a glimpse at what life might feel like without crushing student loan debt, a glimpse into a roomier financial well-being that our non-indebted and more well-off peers have enjoyed from the start, a glimpse at parity.
On any given day, a quick browse of Twitter shows that student loan assistance and relief are hot policy topics. These problems aren’t new, the soaring cost of higher education and the student debt crisis have been swelling for years; all it took was a pandemic to strike for leadership and action to occur at a national level. We’ve seen the executive and legislative branches of our government move very quickly and show a new kind of benevolence as they’ve worked to rapidly respond to the pandemic. Pausing federal student loan payments was something that did not seem plausible before March 2020, but then we did it, just as we offered other massive relief measures that have already proved to help industries, help the economy, and help people.
It’s unclear what happens now. We borrowers are at the mercy and will of a group of lawmakers navigating a pandemic, an economic recovery, immigration challenges, deferred maintenance on aging infrastructure, developing foreign affairs questions, and the list goes on of high priority items our government is working to address. And of course, like everything today, the questions of how to address the high cost of higher education and the student debt crisis have grown political. Borrowers are reduced to yet another bargaining chip in a larger political game. However, we cannot return to the reality that existed before March 2020 because too much has changed. A massive problem like student loan debt was immovable or insurmountable, until it wasn’t, which means that real, long-term change created with the goal of actually helping people is possible. While the answers may still be uncertain to us, the pause in payments should remain in effect and only lift when Washington can concoct and put forward a long-term plan to address stratospheric student loan debt and too high college costs. In fact, the pause should not lift unless Congress and the President have a long-term solution ready for implementation. Mr. President, Secretary Cardona, there’s your political leverage right there! Until then, let us borrowers live in this ‘life after debt’ world a little longer.
