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Priscilla Lugo, a resident of South Texas and the first in her family to graduate from college, firmly believed that obtaining a degree was the crucial element for achieving financial stability and personal independence.
She said that her parents never attended college and she was constantly told that going to school would provide her with all the necessary resources and abilities to take care of herself.
However, despite receiving financial aid and scholarships, Lugo accumulated $30,000 in student loan debt from her undergraduate degree and two master’s degrees at The University of Texas at Austin.
Lugo expressed her strong sense of being deceived and misled as she prepares for the financial adjustments that come with the resumption of her student loan payments this month.
A pause on federal student loan interest ended Sept. 1, nearly four years after former President Donald Trump provided borrowers with relief in response to the COVID-19 pandemic. President Joe Biden extended the pause after his campaign promised to help millions of borrowers with crushing student debt if elected. But any hopes for extended relief were dashed after the U.S. Supreme Court ruled the Biden administration’s student loan forgiveness plan is unconstitutional.
Readers were invited by The Texas Tribune to share their experiences regarding the student loan repayment pause and the potential impact of resuming payments on their financial situation. Many individuals mentioned that the pause enabled them to allocate money towards their retirement and savings accounts, which they had not been able to do previously. Conversely, some expressed that restarting payments would necessitate obtaining an additional job to cover expenses such as rent, utilities, and groceries.
Lugo, who is employed at a Latino civil rights nonprofit in Austin, expresses concerns about resuming loan payments. She fears that her already modest savings will dwindle further, making it challenging to meet her financial obligations. Additionally, Lugo worries about the possibility of never being able to purchase a home or maintain sufficient funds for unforeseen emergencies.
Lugo expressed their concerns about the stressful situation they are currently facing. They acknowledged that their credit card debt is bound to increase, particularly due to the escalating rate of inflation and the rising cost of living. Moreover, they already feel anxious about not being able to contribute sufficient funds to their retirement account, which may adversely affect their future stability. The worries extend not only to their immediate future but also to the long-term prospects.
Lugo said she feels misled by the Biden administration, which promised student loan relief to the millions of borrowers across the country like her. Despite applying for an income-based repayment plan — which considers an individual’s household income to calculate their monthly loan payment amount — Lugo said making payments will still put her in a tough spot financially. In addition to a tight budget, Lugo said the burden of researching and understanding complex student loan debt repayment plans has fallen on her with no clear communication or assistance from her loan provider.
Despite being financially capable of repaying their loans, Taylor Kidd from Houston, who accumulated approximately $40,000 in student debt from both undergraduate and graduate studies, finds the process of paying off their loans exasperating and anxiety-inducing due to unanswered queries and perplexing instructions.
He stated, “While I am grateful for the loans, I believe it’s unreasonable to spend the rest of my life without owning a home or being unable to save for retirement.”
In talking with neighbors and friends who have paid off their student loans, Kidd said he has noticed a lack of compassion toward those still struggling to pay them off. Some critics of student loan forgiveness worry that providing relief to borrowers would exacerbate inflation by putting more money in their pockets for high-ticket goods, though loan experts believe that’s unlikely. Others simply say borrowers should take responsibility for their loans and not expect help from taxpayers.
The cost of higher education in Texas and across the country has increased in recent years. A report released last year by the Texas Higher Education Coordinating Board shows a “substantial amount of unmet financial need among Texas residents attending Texas institutions of higher education.”
According to the report, 73% of students in both undergraduate and graduate programs who displayed financial need were awarded aid, while 7% of those students did not receive any assistance. Moreover, the report discovered that 20% of students were granted financial aid despite not demonstrating any need for it, suggesting that it may not be reaching those who require it the most.
According to the report, despite the fact that a majority of financially struggling students receive some form of financial assistance, undergraduate students attending public universities in 2021 faced an average of $12,947 in unfulfilled financial needs. This amount accounts for over half of the average cost required to attend college.
In 2001, Linda Richards, a therapist residing in the vicinity of Houston, completed her undergraduate and graduate degrees at the University of Illinois. Consequently, she found herself burdened with a total of $38,000 in student loan debt.
Decades later, she has paid nearly double what she initially borrowed — something she blames on the high-interest rate attached to her loans. Richards applied for the income-based SAVE repayment plan announced by Biden in August, but because the plan takes into account the borrower’s entire household income and her husband’s income is higher than hers, her monthly loan payments have actually increased significantly.
After successfully clearing her credit card debt during the repayment pause, Richards, aged 59, decided to allocate the money she had saved towards her retirement fund. However, with the resumption of repayments and the subsequent increase in payment obligations, Richards expressed concern that she will no longer be able to continue saving for her retirement.
She expressed a sense of fear, acknowledging that she most likely won’t be able to retire.
According to Tanya Garcia from the Institute for College Access and Success, there has been a shift in the financing of higher education in recent years. Instead of institutions or the state bearing the burden, it has increasingly fallen on students and their families.
According to Garcia, a large majority of students enroll in educational institutions that lack sufficient resources and funding. These institutions usually cater to a greater number of students from marginalized communities and those with low incomes. Unfortunately, these students frequently face a lack of adequate financial support and resources, leading them to rely heavily on student loans.
Following the Supreme Court’s ruling, the Biden administration formulated additional propositions aimed at tackling the crisis of student loan debt.
U.S. Secretary of Education Miguel Cardona has the authority under the Higher Education Act of 1965 to “compromise, waive or release” certain federal student loans. This flexibility enables federal officials to explore alternative approaches for individuals facing financial difficulties. However, borrowers should anticipate a substantial wait before any concrete proposal is presented. The act requires undergoing a negotiated rulemaking process, encompassing public hearings and potentially lasting up to a year.
Meanwhile, Biden is providing a 12-month repayment plan called the “on-ramp” option. This plan ensures that borrowers who fail to make a payment will not be reported to credit agencies, effectively preventing loan default.
According to Garcia, these proposals represent a modest advancement in tackling the student loan debt crisis, although she emphasized that both Texas and the nation as a whole have a significant distance to cover.
She expressed that unless we find a solution to eliminate student loans as a means of financing, particularly for the economically disadvantaged students, we will hinder the development of a skilled workforce not just in Texas, but anywhere.
Disclosure: University of Texas at Austin has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
