My Student Loans were Forgiven

[Kyle]

I got the news today that my student loans were forgiven. It's a long story and I don't talk about it much because I've gotten a lot of critical, patronizing replies from people who all say, "How can you not have paid off your student loans yet?" And then they add some reproachful comment about how I knew what I was doing when I borrowed the money and don't I feel guilty not paying them back? There's a lot shame we put on this subject, but I want to have a real discussion about it, and I've decided to just lay out the reality of the situation for everyone to see what I was faced with.

Here's the history- I graduated undergraduate without any debt. With scholarships and the help of my parents, I was able to get my International Affairs BA from UNL without owing a dime. My parents' position was that if I wanted to go on to higher education, like law school, that would have to be my responsibility. I agreed (and still agree) with my parents' position. So as I set off to a moderately prestigious public law school, William & Mary, and got scholarships that covered some of my tuition. Throughout law school, my wife worked full time and I worked two jobs (and at one point three) to make ends meet. Even still, it was tough to pay our bills. Going into law school in the mid-90s, you're fed a bunch of bull from your advisors and counselors. At that time, you were told that student loans wouldn't be a problem. You were told that many law firms offered assistance on loans as part of their initial offer. You're told that as a lawyer, you'll be making plenty of money to pay your loans back. In fact, the only caveat they offered was this financial advice: you're going to make so much money you need to make sure you don't fall into the "golden handcuffs" trap of buying the expensive house and expensive car and expensive everything. Student loans, you were told, were an afterthought.

None of the stuff they told us was true. We actually came out in a tough market and starting pay was not good. But you were told that you "had to pay your dues" before the real money came in. I graduated with $90,000 in student loans (exclusive of the interest that accumulated while I was attending). My loans were at a 7% rate, which I told was very competitive. I have no idea if it was, because I wasn't given a choice. I consolidated my loans and put them out over 20 years so the payments would be more affordable. Over the past 28 years since I graduated, I've only taken two forbearances (where you don't have to make payments, but it still accumulates interest which is added back to the principle). I took one the first year after I graduated so I could get established and figure out my finances. I also took a 6 month forbearance after my house was destroyed by a flood. The rest of those 26.5 years, I made every payment. I never missed one. There is a caveat that I've not made payments over the past three years because of the studen loan freeze. But still, I always paid what I owed on time.

But here's the thing. Even with the consolidation, especially early in my career, the payments were far more than I could afford- at times nearly forty percent of my take home pay. "Fear not!" the servicers told me. "You qualify for an income-based-repayment plan" also known as an IBR. IBRs are a formula set up by the government that figures out what your maximum payment should be based on your family size and income. As someone with a big family, I qualified for a very helpful IBR that reduced my payments. Again, I always paid what was owed. Even though you're on an IBR plan, however, your principle is still earning interest on the whole amount, and if you aren't covering the interest accumulation, that also gets added back into your principle. At 7%. The other big benefit with an IBR is that after you paid for 20 years, you're supposed to have your loan forgiven. So I dutifully followed along and made my payments.

Somewhere along the line, my loans got sold between companies and loan servicers constantly switched (I didn't have access to federal-backed direct loans in 1995). I kept paying and, around the 20 year mark I wrote to my servicer and said, "Hey. I've been paying for about 20 years. I want to know the credits I have for my payments and how many more payments I need to make." I was told at the time that because I'd taken a forbearance for a year, that year didn't count towards my payments and that I wasn't really close to reaching the end. That actually sounded legitimate to me, so around the 23 year mark, I wrote again and asked again. The response this time was that they couldn't calculate how many payments to credit me because the loan had been sold a few years before and the other loan servicer wasn't authorized to release the information. When I contacted the previous servicer, they told me that the first servicer was lying and that the payment history traveled with the loan and they didn't have it anymore. When I contacted the current servicer, they told me that wasn't true. So everyone points fingers at everyone else and no one can tell me when I'm going to reach my 20 years. I got frustrated and dropped it.

Around the 25 year mark I tried again and got the same runaround. At that point, the feds had a student loan freeze because of the pandemic. But that didn't apply to me because my consolidated loans were privately held. So I reconsolidated my loans as direct federal loans and took advantage of the freeze. I haven't had to make a payment since the end of 2021. Earlier this year, I received notice that the feds were re-examining everyone's payments to see who had qualified for relief under their IBR plans, acknowledging that servicers were miscounting (sometimes intentionally) people's payments. This morning I received notice that my loans were forgiven and I don't ever have to make a payment again.

A couple of years ago, just before I consolidated under the direct federal loans, I asked my previous servicer for a summary of my payments and interest. Even though they claimed they couldn't calculate the payments I was credited with, they confirmed that I'd borrowed $90,000 and that I'd paid around $140,000. The balance of loans forgiven this morning was $113,000. I still feel like something is wonky with the math, because I feel like my balance should have been higher with the interest, but that's the information I have.

The criticism I hear from people that really irks me is, "Why do I have to be the sucker that has to pay their loans, but you get the windfall?" I'm not getting a windfall. I'm getting relief from a debt that I've paid over 150% back over the years. Should I have been smarter when I was 22 and looking at loans before going to law school? Yes. Absolutely. The choice for me was: go to law school and take on this debt; or don't go to law school and do something else. I love being a lawyer and litigator and I love my job. But if I had to do it all over again, I wouldn't have done it. But at 22 I didn't have the wisdom that I have at 50. At 22 I had many 50 year-olds telling me it wouldn't be a problem.

It's a broken system and I'm glad I've finally gotten out from under these loans. But we're doing nothing to prevent this from happening to millennials, Gen Z and beyond. We've set up an elite system that rewards only those that can afford it. Student loan relief is a good band aid, but it's not solving the problem.

Thanks for coming to my TED Talk.

[Tahlvin]

Congrats on getting them forgiven!

[Mike]

Well that's not fair. I mean, I know I COULD divert this trolley to keep you from getting run over, but then how would that be fair to all the people it's ALREADY run over?

[Phoebe]

Wow, it's wild that students were being given, like in your case, tens of thousands in loans that started accumulating interest even before the student finished school and became employed. That strikes me as fundamentally predatory because the whole point is that it's a student loan. And then repayment terms were structured such that you could keep paying essentially forever even while making all the required payments. It's like buying a car you would never, ever be able to pay off unless you somehow produced a lump sum worth five times what the car initially cost. This was a common practice, I gather.

But I do think it's unfair in this way - not that the government is forgiving loans, which is nothing compared to the payouts it gives to whole industries that get into trouble - but that nothing is done for people who struggle financially because they paid to be rid of the same kinds of loans (i.e. paid for double or triple the car so they wouldn't be paying their whole lives). I.e. the solution should not be a lack of payoffs in such cases, but something more like the lenders taking responsibility and all those affected getting some sort of relief.

[Kyle]

But I do think it's unfair in this way - not that the government is forgiving loans, which is nothing compared to the payouts it gives to whole industries that get into trouble - but that nothing is done for people who struggle financially because they paid to be rid of the same kinds of loans (i.e. paid for double or triple the car so they wouldn't be paying their whole lives). I.e. the solution should not be a lack of payoffs in such cases, but something more like the lenders taking responsibility and all those affected getting some sort of relief.

I think there's a logistical issue in identifying those people and the amounts to recover. In my case, it's easy. I paid for more than the period of time before my loans were legally supposed to be forgiven. I'm guessing by five years or so. I'm not asking for those five years of payments back, but it's easy for the government to identify people such as myself and say, "Hey, you should have been forgiven five years ago. You're forgiven now." I don't know how you address that for people who paid their loans back and suffered hardship because of that, and differentiate it from people that paid their loans back and didn't have any hardship with it.