2 borrowers describe the crushing interest that keeps them from paying off their debt
High interest rates on student loans prevent borrowers from repaying their original debt.
Insider spoke to two borrowers struggling with “crippling” student debt, in large part because of interest.
They have both paid off almost all of their original debts, but still owe thousands of dollars more.
Alexandria Mavin heard from her high school teachers that there was a path to the American Dream. If she went to college, graduated, and got a clerical job, she would get there. She graduated with $ 117,000 in student loan debt as a down payment for that dream.
Now 32 and a property manager, she paid back $ 70,000, but still owes $ 98,000 from her undergraduate education, and says she “absolutely” regrets seeking an education.
“I’ve paid off almost all of my loans, but I still owe the full amount,” Mavin told Insider. “It’s a never-ending cycle.”
Mavin speaks of interest. This is why many borrowers have difficulties stay on top of payments or eliminate debt. The $ 1.7 trillion student debt crisis is largely due to the interest which increases each year, so that even borrowers who regularly repay their debt face high interest rates who keep their debt equal to what they originally borrowed – or more.
After President Lyndon B. Johnson passed the Higher Education Act of 1965, banks began to raise interest rates on student loans, and the system benefited lenders at the expense of pushing more and more money. borrowers to go into debt and default, Insider reported. He created a jail many borrowers feel they will never escape it.
Mavin student loans are owned by four agents, and only one of them – FedLoan Service – was included in the federal break on student loan payments and interest during the pandemic. But even so, Mavin said being interest free on even one of her loans saved her $ 377 per month, which she spent on her savings and helped pay off. all of her hospital bills for giving birth during the pandemic.
“It just shows how without student loans I can afford a living,” 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 drives used cars, lives in “rotten” apartments, and has returned to live with his mother thanks to the growing student debt he has been trying to pay off for 10 years.
“I am financially crippled with crippling debt and cannot move on in life,” Tapia said. “Murdered by the student loan industry.
To pay for her bachelor’s degree, Tapia borrowed $ 60,000 in private student loans with an interest rate of 9%, and her student debt currently stands at just under $ 86,000, of which $ 22,000 is government owned, even after making a decade of monthly payments.
“What I don’t get is if I withdraw a certain amount, and I’ve already paid that amount, and still owe more than I originally owed, it’s just crazy, ”Tapia said. “It’s mind-boggling to me that this total amount isn’t going down. It’s not going to go away.”
Recently initiated reported that even though federal student loan payments were put on hold during the pandemic, many borrowers who made at least one payment during the break were “underwater,” meaning they didn’t even have $ 1 in. less debt than their original balances, keeping some in an endless cycle of repayment.
For many, canceling student debt is the only way out
Although President Joe Biden campaign on Canceling $ 10,000 in student debt per borrower, Mavin said it wouldn’t even be “a drop in the bucket.” She said Massachusetts Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer’s alternative plan to cancel $ 50,000 per borrower would help “enormously”.
Some colleges have used stimulus funds from Biden’s US bailout to cancel institutional debt, or student debt to schools, and Biden even forgave student debt for certain groups of borrowers, but full-scale student debt forgiveness has yet to take place.
Biden has asked the Education and Justice Departments to review his executive power to set aside $ 50,000, but months have passed and there are still no word on the position of these critics.
“I got so much interest that I paid off the majority of my loan, but yet the banks benefit, not me,” Mavin said. “I’m afraid it’s a never-ending 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.”
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