High interest rates on student loans deter borrowers from paying off their initial debt burden.
An insider spoke to two borrowers who are dealing with “harming” student debt, mostly due to interest.
They both paid off almost the full original debt, but still owe thousands of dollars more.
Alexandria Mavin heard from her school teachers that there is a path to the American dream. If she went to college, graduated and got a job in an office, she would get there. She graduated with a student debt of $ 117,000 as the down payment for this dream.
Now 32 years old and managing real estate, she has returned $ 70,000 of that, but she still owes $ 98,000 for her college education, and she says she “absolutely” regrets wanting to get an education.
“I paid off almost all of my loans but still owe in full,” Mavin told Insider. “It’s an endless cycle.”
Mavin talks about interest. This is why many borrowers have a problem stay on top of payments or eliminate your debts. V $ 1.7 Trillion Student Debt Crisis largely due to interest, which is growing every year, so even borrowers who are constantly paying off their debts are faced with high interest rates who keep their debt equal to what they originally borrowed – or higher.
After President Lyndon B. Johnson passed the Higher Education Act of 1965, banks began to raise interest rates on student loans, and the system began to generate profits for lenders as more and more borrowers fell into debt and defaulted. insider reported… He created prison many borrowers feel they will never escape.
Mavin student loans are owned by four service companies and only one of them is FedLoan Service – was included in federal hiatus to pay off student loans and interest during a pandemic. Even so, Mavin said the interest exemption even on one of her loans saved her $ 377 a month, which she put into savings and helped her pay her full hospital bills for childbirth during the pandemic.
“It just shows how I can afford life without student loans,” Mavin said.
“ I am financially paralyzed due to overwhelming debt. ”
Daniel Tapia, 41, graduated ten years ago with a BA in Oral Hygiene – the first in his family to do so. Since then, he told Insider, he drove used cars, lived in “lousy” apartments, and returned to his mom thanks to the growing student debt he had been trying to pay off for 10 years.
“I am financially paralyzed by overwhelming debt and I cannot move forward in life,” Tapia said. “Killed by the student loan industry.”
Tapia took out $ 60,000 in private student loans at 9% per annum to pursue his undergraduate degree, and his student debt currently stands at just under $ 86,000, including $ 22,000 state-owned, even after making monthly payments to decade.
“What I don’t get is that if I withdraw a certain amount, and I have already paid that amount, and I still owe more than I originally owed, it’s just nonsense,” Tapia said. “It amazes me that this total is not decreasing. She’s not going anywhere. “
Insider recently reported that even though federal student loan payments were suspended during the pandemic, many borrowers who made at least one payment during the pause ended up “under water,” meaning their debt was even $ 1 less than their original the remainder, which kept some of them at a disadvantage. endless repayment cycle.
For many, writing off student debt is the only way out
Although President Joe Biden campaigned for canceling a student debt of $ 10,000 for a borrower, Mavin said it would not even be a “drop in the bucket”. She said the alternate plan for Massachusetts Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer cancel $ 50,000 the borrower will help “extremely”.
Some colleges used stimulants from Biden’s American bailout plan to cancel institutional debt, or student debt to schools, and Biden even canceled student debt for certain groups of borrowersbut large-scale student debt forgiveness has yet to take place.
Biden asked the Department of Education and Justice to reconsider its executive powers to abolish $ 50,000, but months passed and there is still not a word from where these reviews stand.
“I screwed up the interest so badly that I paid off most of my loan, but still, it’s the banks that make the profit, not me,” Mavin said. “I am afraid that this is an endless cycle when I cannot give my daughter the life I want to give her, and I cannot give myself the life I want to give myself.”
Read the original article on Business Insider