'Hopefully it works': Student loan borrowers worry about their futures while navigating loan forgiveness

The Biden administration is forgiving student loan debt for millions of Americans. But some borrowers still have a lot of questions about the process.

Secilia Marino of Bozeman, Montana says she has no idea how to proceed, but hopes the Biden plan will cut her debt in half.

“It looks complicated,” she says. “Nothing's ever easy with all the forms to fill out, so hopefully it works and I don't just have my hopes up.”

At 70, Marino never thought she'd still be making payments at this age.

“I never went to university until I was 52,” she says. “Once I raised my three kids, I came late to all this education and loans.”

Marino graduated in 2006 with roughly $20,000 in student loan debt. Her balance now? Still $20,000.

Even though she makes regular payments, the interest adds up and makes it tough to reduce her balance, she says. And this issue is affecting her adult children, too.

“My oldest son, with what he owes, he will never pay it off because he goes – I believe it's with his wife – over $200,000 and it's 6% and 8% [interest],” she says. “It just keeps accumulating. All he can pay every month is the interest.”

The way debt stresses a family out is something that worries Samantha Neugebauer, a teacher from Baltimore, Maryland.

“I'm newly married and my husband and I have been talking about starting a family and these loans are really hanging over our heads,” Neugebauer says. “And I've been feeling very guilty about that.”

Neugebauer owes $100,000. She's applied for public service loan forgiveness, a separate federal program to wipe out debt for people who've worked as public servants for years.

While she waits for final approval, she wonders how her debt will change future life decisions.

“How [should] people who have significant student loan debt think about paying off debt versus creating wealth — in terms of buying property or investing in the stock market and such?” she says. “Because if I had decided not to go into the nonprofit sector, I would probably be carrying around the student loan debt for a really good portion of my life.”

Lifelong debt is something Brian Vlasak of the Boston area sees as inevitable.

“Right now, I'm functionally homeless,” Vlasak says, “and that's not what I expected to be doing when I graduated with a PhD in 2007.”

Vlasak has about $250,000 in student debt. And because they received federal Pell Grants, they are eligible for $20,000 in relief under Biden’s plan.

But that doesn't go far enough on a loan that they can't afford to pay. This reality has led to some soul searching this year.

“For me personally, it's been the worst,” Vlasak says.

They were recently diagnosed with epilepsy and suffered a couple of major head strikes. As a result, they were completely removed from the workforce.

“And it only made me question myself more because I know the discourse in social media that surrounds the idea of not being able to pay back student loans,” they say. “Are you a freeloader? Are you someone who is taking advantage of the system? Or are you a con artist? Or … do you just have really bad luck? I mean, I certainly don't see myself as a freeloader trying to take advantage of the system. But I know a lot of other people may see that differently.”

All three borrowers’ stories and circumstances differ, but they all agree that education is priceless.

“It's the most precious thing we have,” Vlasak said. “The only thing no one can take away from you is your education.”

On where to start with forgiveness process

“There is no process yet. So it's a little early to say that it's complicated. In fact, we know for a fact that for about 8 million borrowers, they're not going have to do anything. It's just magically going to happen on their accounts, because the Department of Education already has access to their income information for everybody else. We don't know what the process is going to look like yet. I do know that the Department of Education, they said that we can expect that in October. So in just a few weeks they will be making an announcement and making available an app or a link on their website that borrowers can use to submit whatever information they're going to be required to submit. I would be surprised if there was more than one form, if there was a form at all. So I wouldn't get anxious about the process yet until we see what it looks like.”

On watching out for fraud

“It started the day of the announcement. Scammers are always ready to take advantage of that set of consumers that is feeling vulnerable. So I can tell your listeners this: Nobody is ever going to call you from a legitimate source offering to ‘help you with the Biden forgiveness.’ There also isn't going to be anybody on the planet, that includes me, that includes Secretary [of Education Miguel] Cardona, that includes President Biden, that is going to be able to rush your forgiveness through or get you to the front of the line. So don't ever, ever pay a fee — as far as I'm concerned — for anything involved with your student loans … certainly regarding this forgiveness that was announced last week.”

On whether forgiveness plan covers interest or principal

“One of the things that we're waiting for guidance on is how they're going to apply the forgiveness. I'm not sure if they're going to apply it first to principal or to principal and interest. That's going to be a wait and see. The other related question I get, if I could preempt it, is ‘will the consumer have a choice as to how the forgiveness is applied as far as which loan or two principal or interest?’ And that's something else that we're in a wait and see mode for.”

On advice for people like Brian Vlasak, who is disabled and has hundreds of thousands of dollars in debt

“When Brian started talking, the first thing I thought of was public service loan forgiveness. But then [they] mentioned [a] recent diagnosis that has made it that [they’re] unable to work, they should look into total and permanent disability discharge, which, if they qualify, would forgive their debt entirely. And I just want to add, [no one should] feel guilty about that. These programs were put in place for a reason.”

On how to build wealth while carrying a huge amount of debt

“A lot of it depends on the financial personality of the consumer, and it depends on what is most important to the consumer. There's some people that we work with that they just want to get out of debt. That's what's most important to them. So they put everything else aside for a couple of years and make some sometimes-strict budget choices with the goal of getting rid of their student loans and other debt as quickly as possible. And then they start building wealth, looking into saving for a house and so on. There's other people that have the opposite. It's more important to them to buy that first home, start saving for retirement aggressively, so they pay the minimums on their loans and they understand that that could result in them paying more interest. But they're pursuing what to them is the most important thing. And then there's other people that do [the] middle ground. They work hard in their budget to figure out what they can do to minimize the interest they pay on their loans, but still be able to pursue their other financial goals. And that's the ideal solution, is to be able to do both.”

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