COVID-19 and lockdowns have a serious impact on people’s finances.
Many people have had to reprioritize their finances over the last two years.
To date, there is no clear roadmap for overcoming the pandemic.
Because of the latter, Taking Stock arranged talks with a range of individuals with first-hand experience in pay backing the student loans taken on their behalf by parents, Refinery29 reported.
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First Victim: Alyssa – Richmond, Virginia
The student loan debt of Alyssa is around $12,000 after earning a bachelor’s degree.
“That was from my first attempt at college in 2010 to 2012,” she explained.
“I went back to school starting in 2016 and worked hard and hustled my way through school so I accrued no additional debt. The $12,000 has been with me for 10 years.”
While Alyssa’s parents and grandparents had contributed to a 529 college savings plan, “it wasn’t much. I was expected to get scholarships for the remainder, but I didn’t bother applying for any, so I took out loans,” she said.
“I don’t even remember signing for my loans at age 18, and I know I was completely unaware of the amount or the debt I was signing up for. I was just thinking of how fun college would be.”
“I went to college straight out of high school and started enjoying the ‘college experience,’ aka partying hard on the weekends,” Alyssa recalled.
“However, my drinking progressed. By the time I’d completed five semesters, I started drinking every night. Within six months, I was drinking around the clock. I was an alcoholic, I knew I was an alcoholic, but I couldn’t stop drinking and didn’t really know how to stop drinking.”
In spite of her desire to complete her education, Alyssa was barely able to attend classes, much less study or complete coursework.
Despite enrolling in the spring semester of 2012 and the fall semester of 2013, she had to withdraw from both.
“My parents and I still had to pay for the tuition due to my late withdrawal date both times,” she said.
“I got sober in October of 2014, as I was dying of alcoholism — I had acute pancreatitis, alcoholic hepatitis, kidney failure, malnutrition, dehydration, multisystem organ failure, and bleeding esophageal varices,” Alyssa explained.
“I was unemployable and constantly sick, drunk, and hungover. I kept drinking, even as I was vomiting blood and unable to move from pain. When I went to the hospital, I had a BAC of .39 and I went through acute delirium tremens for five days in the ICU.”
Alyssa immediately entered in-patient treatment after eight days of hospitalization.
“I had no money, I was being evicted by my landlady, I owed $1,200 on a maxed-out credit card, my Perkins and Stafford loans were in default, and I had negative $13 in my bank account (thank you overdraft fees),” Alyssa says.
“The first time I applied for a credit card, about a year later, I was unsurprisingly denied — they informed me on the written statement that my credit score was in the 300s. I didn’t know credit scores went that low.”
“I was getting multiple calls daily from my student loan servicers and the bank asking for the thousands I owed them,” she explained.
“I was in default on those student loans from 2012 until about 2015, when I started making minimum payments based on my income. My income was tiny, so the payments were tiny. When I started community college in 2015, the loans were deferred. Money was so tight for me at the time that I was happy to not have to pay those bills any longer, small though they were.”
When asked how would she feel if her student debt disappeared?
“I would feel lighter,” she replied.
“But since I got sober seven years ago, I’ve rebuilt my life in many ways. The most important step has been my spiritual program of recovery. I have also taken intentional actions to repair my financial situation. I worked a lot of very long hours and difficult jobs, I worked hard, I’ve been saving like crazy and I continue to practice very, very frugal habits.”
Alyssa has amassed “a giant emergency fund, six figures in investments, and a quarter-million-dollar net worth” recently, she said.
“Once I went back to school — and now with the COVID deferments — my student loans were deferred, so I decided as long as I wasn’t accruing interest, I preferred to continue my extremely high saving/investing rate and once the loans come due, my plan has been to pay each off in one transfer. I paid my Perkins loan off when it came due earlier this year — around $5,000 — and I will do the same in May when the Stafford loan comes due — around $8,000.”
“If my student loan debt were magically erased, I would use that money, which is already set aside, in a few different ways — I would put some towards travel with my husband. We want to go to Australia this year!” Alyssa said.
“I would invest a good chunk in my individual brokerage account. And I would use the remainder to give back to my community.”
Second Victim: Maggie – Los Angeles, California
The cost of student loans for Maggie, who holds a bachelor’s degree in arts, is slightly over $50,000.
“My parents took out a loan for me to attend college. Absolutely there was an expectation [that I pay it off]. It was my learning and my degree, both of which do not benefit them. It was a huge favor, and there was never any doubt that I would pay them back,” she recounted.
“My parents work hard for their money and I personally don’t believe parents should be financially responsible for a child’s education. Gifting money is not wrong, necessarily, but expecting them to pay for a loan — a big one! — for a degree they didn’t receive… yeah, no. That’s not cool,” Maggie continued.
According to her, if all her student loan debt was gone tomorrow, she could save faster for a house.
“Like way more quickly. It’s so hard out here for millennials, and really everyone else,” Maggie explained.
“Also, I’d be able to start building an emergency reserve. When emergencies arise, out come the credit cards, and we know what that can lead to.”
Third Victim: Rhianna – New York, New York
With a master’s degree, Rhinna graduated with $100,000 in student loans. She still owes $87,000.
“I couldn’t afford to make both the private loan payments and the federal loan payments, so I defaulted on my private loans,” she said.
“My private loan payment was $1,000 per month, and at the time I was making $45K per year.”
“My grandmother paid for my airfare to study abroad and she also co-signed for my private student loans,” Rhianna says. “When I couldn’t afford to pay them back, she paid them off. This caused a huge rift in our relationship. She disinherited me and stopped talking to me. She told my mother I wasn’t her granddaughter anymore.”
“Eventually, as she got older, I would continue to send her birthday wishes and holiday greetings,” she added.
“Once I had my own child, she forgave me and we are now on speaking terms. Apparently, she put me back in her will. I saw her for the first time in five years recently.”
She could have started saving for retirement much earlier if she had not taken out the loans.
“I have absolutely no money for retirement,” she said. “I have about $5K in a Roth IRA and I’m 37.”
Third Victim: Suzy – Salt Lake City, Utah
A Master of Fine Arts degree has been earned by Suzy. Her parents helped pay for her undergraduate degree, so she had no debt initially.
However, she owes her master’s program roughly $40,000 in student loans.
“For my undergraduate schooling, my parents wanted to help pay if I went to a school where they could afford to help,” she explained.
“For graduate school, it was all loans, and I went with the rose-colored glasses view that I’d be in a position to repay those loans easily once I had completed my degree.”
In the end, that wasn’t true. “I didn’t have the extra money to pay student loan debt, so I went into default,” Suzy says. “After graduating from my master’s program I went through a divorce. Before continuing my education, I had very limited work experience because I had been the main caregiver for our five children. Post-divorce support payments helped but didn’t come close to covering living expenses, even combined with the income from my part-time job.”
According to Suzy, paying off her loans was “impossible” and “the number was intimidating.”
In a year, she stopped making payments. However, the situation changed.
“When a loan repayment officer called me at work, it scared me enough to face the problem,” she recalled.
“I went into the program to get in good standing again with my loans by paying $10 a month for nine months.”
“After that point, I was able to go into the income-driven repayment option,” she continues. “The total monthly payment ended up being $0. While I’d like to pay off my debt, right now I can only do minimal payments that wouldn’t make a dent in what I owe. My education helped me to get my current full-time job, which I’m grateful for, but not having years of experience beforehand means I’m still at the lower end of the income scale and working my way up.”
Having no student debt would give Suzy “peace of mind that I’d be able to retire someday,” she explained
“I’m in my mid-40s and I feel like I’ll have to work the rest of my life in some capacity in order to keep a roof over my head.”
Fourth Victim: Gwen – New York, New York
The degree Gwen holds is a master’s degree. After graduation, she owes $51,410 in student loans and has $39,303.80 remaining now.
“When I first moved to New York City eight years ago, I stopped paying my loan for a year, until I made enough money to start paying off my loan,” Gwen said.
“When I finished grad school, my parents graciously — or so I thought — paid my loans with the intent that I would pay them back,” she said.
“I’ve been paying them ever since, and while the interest is lower, it feels impossible to get the payment down year to year. I’ve been paying this off since 2012. Owing your family money is impossibly difficult and puts an extra strain on our already tenuous relationship. I’ve asked my parents to decrease or stop the interest payment in a plea to get me out of this debt — which they have refused. I’m unfortunately going into a marriage with this debt and feel guilty that it will become our burden.”
Fifth Victim: Blythe – Durham, Ontario
A bachelor’s degree belongs to Blythe.
“I took out a bank loan that my mother co-signed,” she said. In addition, she received loans through the Ontario Student Assistance Program (OSAP).
“I graduated with just over $60,000 in debt and almost 11 years later, I still owe around $15,000, which is devastating,” she noted.
“Monthly school loans on top of a mortgage, car payments, childcare, and daily living is just overwhelming.”
Blythe has stopped repaying the debt a few times over the past 11 years for different reasons.
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“The first time was when I graduated. They expected payments within six months of graduating, which doesn’t leave much time to find ‘that job’ that can allow those heavy payments while trying to settle into new non-student housing or moving back home with your parents,” she explained.
“They offered me six months of interest-only payments. That’s it. I still had payments, albeit not as heavy as the full amount.”
After suffering an injury at work, Blythe stopped repayments again a few years later.
“I called them to inform them that I wasn’t able to work due to a severe injury that left me immobilized,” she continued.
“My worries fell on deaf ears. Two months later, I got a call from the OSAP and the Canada Revenue Agency demanding I make payments. I remember the conversations like yesterday. They asked, ‘Can you make a one-time payment of $30,000?’ I was floored, scared, and yet found it almost comical. I replied, ‘Can anyone make a one-time payment of $30,000?’ I can assure you, good tax man if I was sitting on 30 Gs, I would have paid off the hounds at my door monthly,” she said.
“Now, they offered a six-month payment pause when the pandemic first happened but I know that I am one of many people who lost their jobs during the pandemic and still aren’t able to find adequate employment,” Blythe says. “They offer no repayment assistance for those that are married, or if your spouse has a decent job. What they don’t understand is that my husband works a lot but we’re still barely scraping by! We have a child, we have a house and cars to get us back and forth. We work — but it seems not enough.”
Blythe could have paid her bills on time if she weren’t in debt from student loans.
“I can’t afford to pay everything, so every month there’s always something that gets pushed and doubled for the following month — like missing my cell phone bill to pay my student loans, which auto withdraw now. Gotta love that when you accidentally bounce a payment for being so financially strapped, they think you should pay a non-sufficient funds fee. Are you kidding me? If I can’t pay the bill owed for the loans, where do you think I am going to get the NSF fee from? Come on!”