Student borrowers gather outside the White House to celebrate President Biden’s cancellation of some student debt and fight to cancel the remaining debt on August 25, 2022 in Washington, DC. (Paul Morigi/Getty Images)
During my sophomore year at the University of Pittsburgh, my mother’s multiple sclerosis turned bad. My parents could no longer afford my school fees. Luckily, I guess, getting $42,207 from a mix of government and private sources at the student aid office was easier than getting into one of the good dorms.
In the 13 years that I paid student loans more or less regularly, I had a few jobs in dying newspapers, and then I went freelance. Those were years of thrift store clothes, staycations, and ignoring the “check engine” light. I still coughed up $250-$300 a month for student loans because that’s what financially responsible people did.
In total, I paid $57,347, according to my account at American Education Services (AES), the quasi-governmental state agency that handles student loans in Pennsylvania. That’s 136 percent of what I borrowed. I reduced the principal to about $22,000. At this rate, I would be out of loans by the end of my 40s and paid off about 250% of what I originally borrowed.
On August 24, Biden announced he would cancel student debt. I could feel a dark energy leaving my body, on a cellular level.
I haven’t made a payment for three years. After a particularly difficult year, I filed for reimbursement based on income, attaching an embarrassing 1040. My monthly federal loan payment was reduced to $0. When it comes to my private loans, I’ve fallen behind and defaulted, a much-dreaded legal status where a creditor says they’ve given up on your broke ass and can dump your account at a credit agency. collection and report it negatively on your credit history.
Meanwhile, Senators Bernie Sanders and Elizabeth Warren have slipped the idea of student loan forgiveness into presidential debates, encouraged by young activists. Cancellation went from one fringe from progressive fantasy to orthodoxy within the Democratic Party. From the campaign President Joe Biden promiseda minimum of $10,000 in forgiveness of debts held by the federal government.
It was incredibly close to the rest of my federal loans – or at least the loans they called “federal” whenever I called AES. Of my remaining debt of $22,000, federal loans are $10,459. On August 24, Biden announced he would cancel student debt. I could feel a dark energy leaving my body, on a cellular level.
Then last week I became one among millions of borrowers suddenly excluded themselves from loan forgiveness. My loan is part of a former federal program that was found to be unexpectedly ineligible. We are a particularly withered and frustrated segment of student lenders, which the banks have quietly sucked away for more than a decade.
Those now excluded mostly have loans under the federal Family Education Loans (FFEL) program. From 1965, the Ministry of Education provided grants to banks, which used them to partially cover student loans for higher education. This program made loans to 60 million people. The federal government guaranteed these loans, paying the bank 97% if someone defaulted.
Some called him business well-being, because the bank assumed almost no risk. This is one of the reasons why President Barack Obama sacked the program in 2010. Since then, the Department of Education directly oversees federally funded student loans, saving taxpayers an estimated $62 billion over 10 years, according to the Congressional Budget Officeby treating the banks as useless intermediaries.
The FFELs were a snag for Biden’s plan: With executive action, he could order the Department of Education to pardon his own loans, but those subsidized by federal authorities but owned by private banks were more complicated. The official word was that borrowers should apply to consolidate them into full federal ownership, and we would have until the end of 2023 to do so. Then those loans would get the $10,000 reduction, like any other federal loan.
As details were hashed out, the FFELs became a point of contention in a lawsuit brought by six Republican-led states. Some have complained that forgiving the FFELs would reduce the revenue of their own quasi-governmental student loan servicing agencies.
Thus, the Ministry of Education quickly and discreetly changed the program last Thursday. FFELs were still eligible for the discount if you had already submitted a consolidation request before that day, but not after. An administrative source told the Washington Post that the abrupt change will affect 770,000 borrowers, but 4 million people have this type of loan.
I had not submitted a consolidation request. To be honest, I hadn’t paid attention to the details of the Student Loan Forgiveness Plan, which doesn’t even have an application form yet. I never thought my loans would be excluded. I forgot they were in a special class.
“Forty-eight hours ago, I could have applied for consolidation and the loans could be canceled but not today? And there was no notice?
Even speaking to credit counselors and my loan manager, the distinction between FFEL and any other “federal” loan was never mentioned. There has always been a dichotomy. My “federal” loans were soft and spongy, open to hardship forbearances and income-based repayment plans. My “private” loans were rigid, serious and belonged to a bunch of badass in a bank.
So when I called AES on Friday and was told by a woman that my “federal” loans belonged to PNC Bank and therefore could not be discounted, I stuttered, “Are you sure to find the right loans?”
“Federal,” in this case, was shorthand for federally subsidized, which also set their kinder terms. It was easy to overlook the bank in the background that was siphoning off the interest.
Yes, I should have been more informed. Again, the deadline suddenly changed from December 2023 to yesterday.
“So,” I asked on the phone, “48 hours ago I could have filed for consolidation and the loans could be forgiven, but not today? And there was no notice ?
I already knew that was the case, but I wondered what she would say when presented with the Kafkaesque nature of what had happened.
She confirmed that was correct. The FFEL program ended in 2010. So the people now ineligible for forgiveness have all been carrying it for more than a decade, unable to fully repay it over the years.
As some have pointed out, FFEL loan holders are disproportionately people who attended community colleges, historically black colleges and universities, and for-profit schools. I can’t be the only one who has already paid over 100% of what I borrowed and is facing years of monthly payments.
As a reminder: if we had just given up on these loans years ago, they could be forgiven now. Borrowers with FFEL loans still in default to qualify for forgiveness. Their loans were absorbed by the Ministry of Education. Only those of us who kept our FFELs on life support are excluded.
At every turn, the system’s rewards and punishments seem more arbitrary, but pointing out the injustice in the societal clusterfuck of student loans would be cliché and obvious.
As for my private loans, the default was not so bad. Arguably, this is better than paying a monthly sacrifice for them. My account seems to be bouncing from collection agency to collection agency, none of which seem really interested in me.
Every six months I get a letter. Its purpose is to make me aware that this agency intends to collect the debt and asks me if I dispute it. I answer with a variant of same type letter, asking for more information. At first it was a delaying tactic. Now I legitimately want LLC to ask me for $12,000 to clarify who they are and their relationship to the latest.
I have already paid 136% of what I borrowed. Isn’t that a pretty decent return on the initial investment?
They sent me a copy of my original promissory note, signed in 2003 when I was 20 years old. Then nothing happens. Nobody calls. Nobody reported it on my credit. Nobody complains. All of this could happen. Non-payment of student loans trapped many people in financial hell. Not me yet, for reasons I don’t understand.
I’m not entirely a snit. I work with a credit counselor and am open to a payment that I can afford. They engage me so little, I don’t know where to start. But I get moral satisfaction from not paying and contributing to an operating system. I have already paid 136% of what I borrowed. Isn’t that a pretty decent return on the initial investment?
When student loan forgiveness became real White House policy, it seemed like the establishment was finally acknowledging that we had paid enough. Now some of us who paid the most are thrown under the bus.
It may be a temporary sacrifice for the greater good. Excluding FFELs can be a quick way to avoid legal loss which threatens the whole program. The administration can correct it later. For now, I guess I’ve lost $10,000. I don’t know what I’m going to do, it’s a very old feeling.
Nick Keppler is a Pittsburgh-based freelance journalist who often writes about health, science, and public policy. His work appeared in Men’s Health, The Financial Times, Slate, The Daily Beast, VICE and the Washington Post.
