JUDY WOODRUFF: Student debt has been a big talking point on the 2016 campaign trail. Hillary Clinton proposes making tuition free for many students at public colleges. Donald Trump would expand limits on how much borrowers have to pay back each month.
But what about those already holding debt?
We take a look as part of our series How the Deck Is Stacked, funded by the Corporation for Public Broadcasting, in partnership with “Frontline” and Marketplace.
Marketplace’s Lizzie O’Leary has the first of two stories.
LIZZIE O’LEARY: If everything had gone according to plan, Chris Savelle would be on Wall Street right now, not biking through downtown Detroit in a free weekly community ride.
Savelle, who is 31, graduated into the teeth of the recession. He’s got $100,000 in student loan debt on his mind.
What does $100,000 feel like?
CHRIS SAVELLE, Student Borrower: It sucks.
LIZZIE O’LEARY: Jessica Love Jordan is in a similar situation. She started college late and is now working on finishing her master’s in addiction counseling. She juggles school, work and being a single parent. Sometimes, the debt feels too much.
JESSICA LOVE JORDAN, Student Borrower: Now and again, when I look at the statement, and see how much I actually have to pay back, it’s almost suffocating. I have those fleeing thoughts, you know what, let me just stop now, and go work, so I can be able to live later on in life.
LIZZIE O’LEARY: When she graduates, she can expect to make about $33,000 annually as an addiction counselor. Her debt will be about $90,000.
The median student debt is much lower than Savelle or Love Jordan’s, about $27,000. But their experiences are similar to those of many students who attended state universities at a time when their budgets were being cut, and as the great recession hit. The money for school had to come from somewhere, in most cases, students.
Where did you think you would be in your life at 31?
CHRIS SAVELLE: Go work for an investment firm or hedge fund, Chicago, New York, something like that.
LIZZIE O’LEARY: But when Savelle graduated in 2008, the best job he could find was at a local Wal-Mart. He’s recovered somewhat now. He works as a supply chain engineer, and supports his mother and sister.
Temple University Professor Sara Goldrick-Rab has been researching the rising price of college for years.
How has the aid picture changed as median incomes have stagnated, really, for the last 20 years?
SARA GOLDRICK-RAB, Temple University: The sticker price on a per student basis has gone up a lot, while the amount of financial aid on a per student basis has gone down. So, the result is that the net price, the amount that the families actually pay out of their pocket, is rising, and it’s rising fairly rapidly.
LIZZIE O’LEARY: More than 40 million Americans have student loan debt. The total amount is around $1.3 trillion. Even so, there are experts like Sandy Baum, who studies student debt at the Urban Institute, and says only certain people are being hurt.
SANDY BAUM, Urban Institute: Student debt is a crisis for some people, but student debt is not the generalized crisis that the common discourse would make it appear. Yes, people are paying more of their incomes for a college education, but still it’s worth it for most people. It’s still a very good investment for most people, but not for everyone.
LIZZIE O’LEARY: Sara Goldrick-Rab says far too many people are being saddled with substantial debt.
You wrote that debt is a symptom, not the disease. It sounds like you think the disease is the high price.
SARA GOLDRICK-RAB: The disease is the price. And we have a problem, where people are being priced out of college, and in their effort to not be priced out, they’re taking on debt that, frankly, they’re going to have real trouble repaying.
LIZZIE O’LEARY: People like Jordan Hoeft. He’s been trying to get a more manageable payment plan. He studied film, but couldn’t get a job in the industry. He now owes $100,000 in private student loans, but was paying interest only until recently.
He lives at home in the Chicago suburbs with his parents. They already were tapped out after helping his siblings with loans. So Jordan’s parents asked his grandparents to co-sign. And when his debt piled up, the loan servicer came calling.
MELODI HOEFT, Jordan’s Mother: My father co-signed for some of the kids’ loans after Patrick and I were tapped out on signing, co-signing for them. My father passed away, and within 60 days of my dad passing away, the private student loan venders were calling my mom, harassing her, wanting her to pay the balance in full.
LIZZIE O’LEARY: The whole thing?
MELODI HOEFT: The whole balance, and that he — they were not in arrears at all. My mom called me crying, saying, “I don’t have that money and they want me to pay this loan.” And I said, oh, no.
LIZZIE O’LEARY: She must have been terrified?
MELODI HOEFT: She was hysterical.
LIZZIE O’LEARY: Jordan Hoeft’s loans are serviced by Navient, which spun off from Sallie Mae, and now owns its student debt business. It is one of the nation’s largest student debt servicers. The company handles both private and federal loans.
Hoeft’s loans are private, not federal, and had a high interest rate.
JORDAN HOEFT, Student Borrower: So, I told them, almost as a joke, I said, I can either have you guys lower my payments, so I can make rent, and then pay you, or I can live in my truck and make the full payments to you every month. And the woman on the phone, dead serious, told me, “I don’t want to tell you to have to live in your truck, but you might have to live in your truck.”
LIZZIE O’LEARY: We asked Navient about that phone call, and they told us — quote — “Our representative sympathizes with Mr. Hoeft, and the two establish a rapport in which she dismisses his facetious comment that he may need to live in his car. Our representative didn’t urge him to live in his car. Rather, she encourages him to consider a practical option, such as finding a roommate to split expenses.”
Jordan and his mother decided to do something about how they were being treated by their servicer and reached out to their state’s top law enforcement officer.
LISA MADIGAN, Attorney General, Illinois: I have seen an increasing number of fraud complaints from current and former higher education students.
LIZZIE O’LEARY: Lisa Madigan is the attorney general for Illinois. After noticing a rise in complaints against companies involved in higher education, Madigan filed lawsuits against several for-profit schools. Now she is leading a multistate investigation into Navient.
Why did you decide to look at Navient?
LISA MADIGAN: It was the volume of complaints that we received and the serious nature of them. We have looked at over 5,000 complaints, we have listened to over 800 phone calls, and we have been able to determine that, time and time again, the servicers are not providing borrowers with their repayment options.
LIZZIE O’LEARY: The majority of student loans are federal and originate with the Department of Education, but they’re contracted out to a handful of companies who manage the payments. It’s a $140 billion industry annually, and servicers, like Navient, make about $2 billion in commission per year.
LISA MADIGAN: Most of the time, what they do if someone is struggling is, they will put them into a forbearance, which is not necessarily going to be the best thing for that borrower in the long run, certainly not going to make that debt any more manageable. In fact, it will often tend to grow that debt.
LIZZIE O’LEARY: There are several ways to reduce monthly payments. Deferment or forbearance temporarily postpones payments, but interest may continue to accrue while payments are on hold.
For federal loans, there are several income-based repayment options, where a borrower pays a portion of their discretionary income, from 10 percent down to zero if they’re unemployed. Madigan thinks servicers are pushing borrowers into forbearance.
LISA MADIGAN: Unfortunately, the way it ends up working out is, it’s good for the servicer, because they’re incentivized through their compensation to get people through the process, but it is bad for the borrower, which is ultimately bad for that person’s family and bad for our overall economy.
LIZZIE O’LEARY: Navient declined to comment directly on Madigan’s investigation and instead sent this statement: “Navient is a leader in enrolling eligible borrowers into income-driven repayment programs. We have been strong advocates for streamlining the enrollment process to make it easier for borrowers.”
“PBS NewsHour” requested an interview with the Department of Education. It declined.
The department pointed us to this policy memo suggesting servicers provide better information to borrowers, but any changes, if approved, wouldn’t take effect until 2019.
Borrowers like Jordan Hoeft may never see any changes.
Seth Frotman of the Consumer Finance Protection Bureau says his agency is tracking complaints. The agency has started monitoring many key financial players, including loan service companies.
SETH FROTMAN, Consumer Finance Protection Bureau: And there’s an amazing government audit that found that 70 percent of federal student loan borrowers in default, so have defaulted on their loans, were actually eligible for an income-generated payment plan as low as zero dollars.
I think that’s an abysmal failure. And I think that’s a direct implication of student loan servicers and the oversight over student loan servicers.
LIZZIE O’LEARY: The borrowers most likely to default? Those with $10,000 or less in student loans. They have lower debt, but are less likely to have completed their degrees and may have lower earnings.
Chris Savelle’s debt has affected his little sister’s future as well.
If it weren’t for Chris’ debt, do you think Katie would be in a four-year school now?
JAN SAVELLE, Chris Savell’s Mother: I think she would. I think if she could see that she could get an education without having a lifetime of crushing debt, I think she would.
LIZZIE O’LEARY: The legacy of Chris Savelle’s debt will be with him, his sister and his whole generation long after it’s paid.
For the “PBS NewsHour,” this is Lizzie O’Leary in Detroit
JUDY WOODRUFF: In our next piece, the impact of debt on some students at for-profit schools.
And, online, we look at which student loan companies accrue the most complaints by borrowers.