Let’s talk about… money
In specific, let’s talk about student loans — especially since I’m graduating, so the start of my repayment is coming up soon, woot!
So, I’ve had people ask me how I can, in good conscience, support any sort of student loan forgiveness — when my doing so is clearly really just self-aggrandizement on my part. However, and for what it’s worth, I haven’t always spoken out for student loan forgiveness. I changed my mind on the subject when Congress decided to effectively double the (supposedly) fixed interest rate on my loans.
A Bit of History
For those wondering what that means, a fixed interest rate is an interest rate which is guaranteed by the government to not change for the life of the loan. So what Congress did was effectively break their promise to students who’d planned and budgeted (as I had) for a particular fixed interest rate. While this may not sound very dramatic when it’s written out here, consider the following scenario as a metaphor for how I felt…
Imagine you’ve purchased a really nice and somewhat expensive car! You’re quite proud of it — it’s really beautiful, and drives very smoothly, and has excellent gas mileage. Because it was expensive, you also carefully worked out how much you’d have to pay each month — so that your budget remains balanced. But everything is fine — you have a good interest rate locked in on the contract you signed with the bank, and you’ll be able to pay the car off and still have money left over.
Now imagine you’ve owned the car for a year or so — long enough that you really depend on it. Then one day the bank calls you up to inform you that you owe them more money this month — you have to pay a third again as much as you’d planned for!
When, in shock, you ask them why, they inform you that they decided to double your interest rate. Doesn’t matter that you both actually signed a damn contract saying they wouldn’t ever do that. Sorry/not sorry, but they’ve changed the laws so they actually can legally do this to everyone that purchased a car in that time frame. Nothing you can do except pay up and scramble to make financial ends meet, or lose your lovely car (which you actually need now), or go to another company for another car.
So you hastily do some checking around — there’s gotta be some car company that’ll give you the old interest rate, right? Except… there’s not, anymore. Everyone has doubled their interest rates. You’re stuck. Too bad, so sad!
So… yeah, the government welched on their end of the bargain they made with me. Consequently I feel no constraint against agitating for student loan forgiveness of some sort for everyone. Heck, I’d be happy if they’d even just ‘grandfather’ back in my old interest rate, and apply the extra interest I had to pay against the principle of my current student loans.
The Current State of Affairs
That said, I feel that I’ve managed my student loans as well as can be. I’ve religiously paid off the interest each month so the total amount didn’t explode into unmanageable numbers. I pared down my budget to the metaphorical bone, and every time I had a bit of spare change or received a financial gift, it went directly to paying off a bit of the principle on the unsubsidized loan with the highest interest rate.
[An unsubsidized student loan is one where the bank will charge me interest each month on the loan. My paying off that interest each month means the total amount of my student loans won’t change — fortunately. However, if you don’t pay off your monthly interest, the bank will add it to the rest of your loans — which means your loan totals can balloon horribly, frighteningly fast — as some of my friends unfortunately discovered the hard way.
Alternatively, a subsidized student loan is one where the government pays the interest for you — and thank goodness the government didn’t decide to dump that on me along with doubling my interest rates!]
Then the pandemic hit, with all its associated fear, misery, and death. Fortunately for me, I live in California, which has good health care for all — including near-penniless students. Consequently, when interest rates were set to 0% at the onset of the pandemic, I kept paying the same amount I’d been paying each month on interest — but I paid it against the principle of the student loan with the (formerly) highest interest rate. My sweetie was kind enough to help me a bit with this as well.
As a result, I’m quite excited to have paid off five of my eight unsubsidized student loans! Barring disaster, I’ll have paid off a quarter of the sixth loan too, by the time the interest rates come back into play on May 1st, 2022.
Future Hopes
So, do I support some form of student loan forgiveness? You bet! I’ve been extraordinarily fortunate in having family and friends that can help and support me on this journey, but I’m keenly aware that I am not the norm. People of color, and women in general, have been struggling to make ends meet throughout the pandemic, and previously as well. Having their loans forgiven would be a good first step towards lessening economic inequality.
I’d love to see the $50,000 forgiveness that Sen. Chuck Schumer, Sen. Elizabeth Warren, and Rep. Ayanna Pressley are pressing for — but I’d be pleased with just the $10,000 Biden promised on the campaign trail, as well. That’d at least be one small step towards making up for the broken promises regarding guaranteed interest rates, if nothing else.
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If you’re interested in learning more about how student loans work, the Federal Student Aid website has excellent explanations.
