Retired grandmother still owes $108,000 in student debt 40 years after taking out loan
(WGN) — In 1986, Nancy Peter took out a student loan to finish her psychology degree at Mundelein College in Chicago. Almost four decades later, she’s still paying it back.
“The interest compounds and compounds, so every penny I don’t pay, it goes sky high,” she said.
Peter took out another loan to go to graduate school at Loyola University and has worked as a therapist for nearly 40 years. But the now 71-year-old retired grandmother of two owes six-figures, more than triple the initial amount of money she borrowed.
She said she owes about $108,000 and is enrolled in an income-driven repayment plan.
These plans allow a borrower to pay what they can based on how much money they make. Sometimes the payments are so low they don’t even cover the interest, meaning the money owed is increasing even as borrowers are making payments.
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Peter went into forbearance on the loan at one point because of health issues. She had permission to temporarily pause payments, but the interest kept building.
“That happens all the time, and it’s really important for borrowers to understand that when you take out loans, pretty much any type of private loan or federal student loan, interest usually starts to accrue immediately,” said Rae Kaplan, a Chicago-based student loan attorney working to help borrowers ease debt. “So, as soon as the loan is disbursed, it starts accruing interest.”
According to the U.S. Department of Education, 43 million Americans owe a collective $1.3 trillion in student loan debt. The average borrower owes $37,000.
“This will sound terrible,” Peter said. “But I have a paper of different ways you can have your loan forgiven, and the only one I fit into was I would have to die.”
Last year, the U.S. Supreme Court struck down the Biden administration’s plan to forgive hundreds of billions of dollars in student loan debt. But through executive orders, Biden implemented the Saving on a Valuable Education (SAVE) plan, which will drastically cut monthly payments for eligible borrowers who:
Have made at least 10 years of payments
Taken federal loans of $12,000 or less for college
Those with higher balances or consolidated loans may be eligible for forgiveness, too. So far, more than 7 million people have enrolled in the program.
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“It forgives balances sooner,” Terry Savage, a syndicated financial columnist said. “Used to be 20 or 25 years, but now, depending on the size of your loan, the balance could be forgiven in 10 years. The new plan cuts payments to zero for some people or at least in half for many others. It stops interest from growing on your unpaid balance. That’s what’s been building up this snowball of debt.”
For Peter, the SAVE plan could be a lifeline.
She reached out to Kaplan for help, a step that has been long delayed because of the shame associated with financial hardship.
“It’s humiliating,” Peter said. “It’s such a private thing. If somebody knew I owed this kind of money, they would look at me in a whole different way.”
When asked why she decided to share her story, Peter responded: “I needed help, and if I need help, there’s a lot of other people who need help. And if even one person comes out of this getting help, then that makes it worth it to me.”
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