How Covid-19 has made the student loan crisis worse

Sam Seagraves

Source: Sam Seagraves

Almost all of the money Sam Seagraves used to earn as an actor in Portland, Oregon, went to his monthly student loan bill of $ 1,083.

Then came the coronavirus pandemic.

With many production companies postponing or canceling operations, Seagraves has not been hired for a position since March. The CARES Act gave people with federal student loans a break from their payments until the end of September, but Seagraves has had to dig into their small savings to continue paying their $ 700 monthly bill.

“I have enough savings to pay off the private student loans through August; I’m not entirely sure how I’m going to repay them after that,” said Seagraves, 30. She owes around $ 75,000 almost a decade after graduating from the University of Miami with an acting degree.

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“I already assumed I was going to pay off my student loans forever,” he said. “But this is just a nightmare.”

There was a student loan crisis before the coronavirus pandemic paralyzed the economy and drove tens of millions of Americans out of their jobs. The country’s outstanding balance of student loans is projected to rise to $ 2 trillion by 2022, and nearly 1 in 4 borrowers are behind on their payments. Loans have made it difficult for many Americans to buy homes and cars, start businesses and families, and save for their future.

Now everything will get worse.

According to calculations by higher education expert Mark Kantrowitz, some 10 million student loan borrowers may be out of work in the midst of the recession.

“If you have less income, your ability to repay student loans will be affected,” said Kantrowitz. “The highest priority for student loan borrowers is to pay for food, health care, housing and public services, not to pay their student loans.”

The impact of the previous financial crisis on student loan borrowers was ugly. Between 2006 and 2011, the proportion of borrowers who did not pay within three years of leaving the university soared to 15%, from 9%.

Seth Frotman, executive director of the Borrower Student Protection Center, said the crisis will be compounded by the failure of the United States Department of Education to fully implement all relief measures extended to borrowers in the stimulus package.

“Congress stepped in to provide at least temporary help and protections, and it’s just not happening for many borrowers because of incompetence in the Department of Education,” Frotman said.

Pandemic politics

Senator Ron Wyden, D-Ore., And Senator Patty Murray, D-Wash., Wrote a letter to the Departments of the Treasury and Education this week expressing concern that some delinquent borrowers may still be able to get their federal tax refunds. There have also been reports of some borrowers getting their wages garnished. The CARES Law prohibited these practices during the pandemic.

“The customer service of the student loan industry has been terrible,” said Whitney Barkley-Denny, senior policy adviser for the Center for Responsible Loans. “The recession and the aftermath of the COVID-19 pandemic will worsen the student loan debt crisis.”

The Department of Education did not respond to a request for comment.

Catherine Botero

Source: Catherine Botero

Democrats in the House of Representatives, in their $ 3 trillion HEROES Act, called for extending the payment gap for student loan borrowers for another year, until September 30, 2021.

It is unclear whether Republicans in the Senate will want to release student loan borrowers for another year, Kantrowitz said. “But since 2020 college graduates are graduating from the worst job market in history, I think an extension is likely,” he said.

In a few months, Catherine Botero will complete her master’s in occupational therapy at New York University. She owes more than $ 130,000 in student loans.

“I am concerned that it is difficult to pay with this economic crisis,” said Botero, 23. She expects her monthly payment to exceed $ 1,000, and she doesn’t know if she will have a job to pay for it.

“I am trying to maintain a positive attitude, but it is overwhelming,” he said. “All of us definitely feel pressure and fear.”

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