Noelle Turner is 34 years old and has a freshly minted PhD, and is carrying a $213,000 millstone around her neck. As a professor of psychology at a small New York State university, she earns $50,000 a year. At an interest rate of just under 6 percent a year, she expects that she will have to repay $750,000 or about three times what she originally borrowed.
“I usually try not to cry when I talk about this,” says Dr. Turner in a Skype interview with LAS. “Many of my friends have the same problem. They owe six figures. I think we all assumed that we’d have lucrative careers and be able to pay this off early. We are all just ‘dying.’ We can’t buy homes, we can’t buy cars, and we can’t have children. We are the educated people in their 30’s that are supposed to be settling down and having babies, and we can’t, we just can’t.”
Turner came out of the Marine Corps at 21 years old and began working on her undergraduate degree. The tuition was covered, but not the cost of the books. “So the university said here, take financial aid, and I thought great, this is free money,” says Dr. Turner from her office in Brockport, New York.
By the time Dr. Turner finished her undergrad degree, she was already $45,000 in debt and still had seven more years to go before she would complete her PhD. With heavy course loads and countless hours of practicums and volunteer hours required, there was no time for a part-time job and the loans increased.
“The only time I did cry was when I consolidated my loans and I got the letter that said I owed $213,000 and told me what my payments would be,” says Turner.
The Consumer Financial Protection Bureau reports that the student loan debt in the US now tops $1.2 trillion or about 6 percent of the overall national debt. Much of that money is backed by the federal government through banks like Sallie Mae. If students default or if the government offered an amnesty, taxpayers would likely be on the hook for the loans.
On June 29, 2013, US Senator Elizabeth Warren put some tough questions forward at a Senate Banking Committee hearing:
“Sally Mae gets a line of credit at 1/3 of one percent interest and then turns around and lends money to students at a rate 20 times higher than that,” said Senator Warren. “Does it make any sense for a Fortune 500 Company that makes high-profit student loans to be able to borrow money from the Federal government at 1/3 of one percent from a federal program that has government backing for home ownership?”
Connecticut attorney Joshua Cohen has focused his law practice on finding solutions for students with loan issues. Cohen likens the student loan debt debacle to the subprime mortgage crisis where banks qualified people by the thousands for mortgages they couldn’t really afford.
“The lenders have screwed up and so have the debt collectors,” says Cohen. Neither one gives students the whole picture when it comes to borrowing and repaying the loans.
“Yes, it is like the subprime crisis,” agrees Noelle Turner. The difference is she doesn’t have a house to walk away from and the law doesn’t allow her to declare bankruptcy to avoid student loan debt repayment.
Turner is in the Income Based Repayment (IBR) program but she still can’t afford the payments. Her loans are in “forbearance,” which means the payments are temporarily on hold. Meanwhile, the interest accrues and the situation gets worse, not better.
Cohen says students with loan troubles should see a lawyer. If the debt collectors get too aggressive or fail to give borrowers all the options, there might be a way to relieve some of the weight. The IBR program is often a way to manage the situation according to Cohen and the law says the payments have to be geared to income and your family situation.