xmatter of degrees aM
DIGGING DEEPER INTO DEBT
by Elizabeth Owens-Schiele
–– Americans of nearly every socioeconomic background are burdened with student loans
A ––
O
n 80-year-old woman reached out to The Institute of Student Loan Advisors after she discovered her Social Security was being garnished for a $60,000 Parent Plus loan she had taken out 30 years prior for her child who had promised to pay it back but never did. Betsy Mayotte, founder of The Institute of Student Loan Advisors, or TISLA, and a 25-year veteran of the student loan industry, suggested she apply for total and permanent disability because she was too frail to work. The loan was eventually discharged. “The fastest growing population of people struggling with student debt are over the age of 65,” said Mayotte. “A lot of policymakers are trying to solve the student debt problem, and they’re still thinking of a 20-year-old.” A 15-year or even 20-year repayment doesn’t sound bad because people don’t start focusing on retirement savings until they’re 40, she continued. But if half of all student loan borrowers are over the age of 30, and a quarter over age 45, the loans create a barrier to retirement savings and retirement itself. Outstanding federal student loan debt stood at $1.7 trillion in the first quarter of 2022, a $14 billion increase from the fourth quarter of 2021, according to the most recent quarterly report on Household Debt and Credit from the Federal Reserve Bank of New York. Student loan debt is second only to mortgage debt in the United States. The private student loan market has grown more than 70% over the last 10 years to $130 billion. Those loans often have higher interest rates and don’t offer the same protections as Parent Plus and federal loans. President Joe Biden’s administration froze student loan repayment during the pandemic and extended that moratorium through Aug. 31—a measure that has benefitted the most
O
hearing that your loans will get
forgiven in another 25 years, it’s not a
O
30
ot egelloc tahw dna rojam a gnisoohC la“When icnanfi tnayou’re tropmi tso65, m eht era dnetta .ekam reve lliw elpoep tsom snoisiced
comfort.” –Betsy Mayotte
vulnerable federal student loan borrowers. The Public Service Loan Forgiveness Program (PSLF) is also providing a temporary waiver for those in public service jobs, such as teachers, public defenders, social workers and others in the public sector to apply for loan forgiveness before Oct. 31. Biden was expected to announce his decision on this limited waiver, the student loan payment, interest and collections pause sometime in July, but had not done so at press time. “What frustrates me from a policy perspective, is that student loans are not the problem—student loans are the symptom of the problem,” Mayotte said. “The problem is the cost of higher education.” Middle-income and high-middle-income families struggle the most with student loan debt because they don’t qualify for federal Pell Grants intended to support low-income students, Mayotte said. The average student loan debt is $39,351, with an average monthly payment of $393, according to educationdata.org. An estimated 43.2 million borrowers have student loan debt, and among them, 2.6 million owe more than $100,000. Mayotte and other experts recommend Parent Plus loans over private student loans that don’t offer the federal protections. She believes debt-to-income (DTI) should be a component of the Parent Plus loan applica-
tion and based on both the student and the parents’ income. Because very few undergraduate students can get a private loan without a cosigner, she believes students should be an equally liable cosigner. Mayotte said she founded TISLA because she firmly believes all consumers should have access to free expert and neutral student loan advice and, if needed, dispute resolution. She helped over 16,000 indi-
–– Truth or Skepticism College Costs: Is Higher Education Worth It? TOM SOSNOFF • “Canceling student debt—at least even a portion of it—is not a long-term solution. But it is a short-term solution until we work on something to at least get people fired up enough to get the system fixed.” • “If college costs were done right, there would be different costs for different degrees.”
DYLAN RATIGAN • “How can you talk about canceling student debt without talking about regulating or capping tuition? Because what’s really happening is the schools are basically taking American tax money to enrich themselves for million-dollar administrative jobs and infinite tenure, spiraling the price of tuition up because they have a price insensitive client because they’re borrowing this money and they’re told they’ve got to go to college.”
–Excerpted from the Truth or Skepticism podcast, where Tom Sosnoff and Dylan Ratigan dive into topics ranging from business and finance to technology, politics and global news.
Luckbox | August 2022
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