Retired grandmother still owes $108,000 in student debt 40 years after she took out the loan
In 1986, Nancy Peter took out a student loan to finish her Psychology degree at Mundelein College.
“Ok, well, I’m hoping I’m going to get a good job and I’m going to make money and I’ll do whatever I need to pay this back,” she remembered thinking at the time.
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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,” Peter said.
She took out another loan to go to grad school at Loyola University in Chicago 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.
“It’s just about $108,000,” Peter said. “I have been in, what they allow you to do is what they call an Income-Driven Repayment Plan.”
That’s a plan that allows 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.
Peter went into forbearance on the loan 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,” Rae Kaplan, a Chicago-based student loan attorney working to help borrowers ease debt, said. “So, as soon as the loan is disbursed, it starts accruing interest. That balance starts to grow, and by the time the loan is in repayment status and if you come in and out of forbearance, all that time, that loan balance is growing,” she said.
It’s also a growing problem, 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, 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.”
But President Joe Biden has student loan forgiveness a top priority in his administration.
Last year, the U.S. Supreme Court struck down the 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” or the “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.
“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 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. I needed help, and if I needed help, there’s a lot of other people who needed help, and if even one person comes out of this getting help, then that makes it worth it to me.”
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