Like the millions of American homeowners who found themselves trapped in homes they couldn't afford during the housing crisis, today's college graduate have found themselves in a bubble all their own.
College graduates carry an average of $27,000 worth of debt today. Two years after leaving school, students default on their federal loans at a rate of 9.1%, according to a recent report by the New York Federal Reserve Bank. That figure jumps to 13.4% at the three-year mark.
And debt is wearing students down. More than half of millennials (54%) said debt was their biggest concern in a recent Wells Fargo Retirement Survey. Student debt still can't be discharged in bankruptcy, and if lawmakers can't cut a deal soon, the interest rate on Federal Stafford Subsidzed student loans will double.
"A college degree has the potential to become more of a burden than a blessing for those saddled with unmanageable debt in a tough employment market," said Richard Cordray, director of the Consumer Financial Protection Bureau, in a speech in May.
"Student debt has become the defining feature of their lives — the millstone around their necks that holds them back from a full financial future."
It's not just 20-somethings who are struggling either.
We put out a call for real college graduates to share their student loan stories. We were shocked to see how many parents and students well into their 30s, 40s, and 50s, lined up to answer.
Here are their stories. Each interview has been edited for clarity.
Stephanie Snyder, 44, graduated in 2005 with a B.A. in Public Administration. She worked three jobs at one time to pay down her $38,000 student loan balance.
In the beginning, I did everything I could to stay afloat. I worked three jobs, all that would benefit and/or involve my son. I was a teacher's assistant, a diner waitress and mentored at the local Young Women's Christian Association. At age 40, in order to offer my son a better future and become financially stable, I enlisted in the U.S. Army National Guard. I was injured during training and now I'm waiting for VA benefits. I went back into public service.
At the same time, I was going through a divorce, caring for a terminally ill father, and helping my mother and older sister financially. None of these hardships stopped the creditors. They started garnishing my paychecks at my last place of employment and offset my tax refunds, which left me little to care for my son and pay the bills (auto loan, renter/auto insurance, medical benefits, etc.). I made slightly too much for any public assistance.
I had a payment plan, started my payments, went into deferment and now I am in default. I just do not see the reason or sense in trying to pay this loan off anymore.
As told by Stephanie Snyder, 44, of Fayetteville, N.C.
Carla Ruiz, 53, earned her MBA in 2006. Today, she's $120,000 in debt and lives in an attic apartment.
When I bought a home in 2006 with a plan to refinance later, I decided to include my student loans at the same time. My broker said it was a great idea and that people did it all the time.
Somehow, I was approved for an adjustable rate mortgage worth $250,000, paying $2200/month (all while raising seven children). When it came time to refinance my loan a few years later, my bank said my debt to income ratio was too high. I tried to modify my loan, but then the bank said I had to stop making mortgage payments to even qualify.
I won’t go into the horror story of what trying to modify my loan was like. I eventually did a short sale. My house sold for $55,000 cash. Why the bank couldn’t work with me, I’ll never know. It was heartbreaking.
I now live in an attic apartment, my credit is ruined and I can barely make the rent, not to mention my loan payments, which I had lowered through an Income-Based Repayment plan.
When my daughter enrolled at state college, she signed for a $10,000 loan. After her first year, I took her out and she now attends community college and works at Kmart to pay for classes. I cannot see her fall into the same trap I did.
As told by Carla Ruiz, 53, of Brooklyn, N.Y.
Kyle Laffin, 25, asked his dad to co-sign a $100,000+ private student loan for a B.A. in accounting. Now, he has $1,200 monthly payments. His dad is working two jobs and dipping into his retirement savings to help him pay it down.
I grew up in an upper-middle-class town in Massachusetts, but I hardly lived like it. I have worked my butt off my entire life. I drove a 1995 Geo Prizm. My only goal was to be as successful as my peers' parents, so I could support my family the way they had been able to.
Things didn't go as planned.
I took out $100,000 in student loans from Sallie Mae to finance my degree (graduated in 2009), and my father co-signed the loan. Now, I'm working for a technology solutions firm, earning $40,000/year and facing $1,200 monthly payments I can't afford.
Sallie Mae calls five times a day. We tried to lower my monthly payments, but they said my dad didn't qualify because his records showed a negative income.
That's because he's been taking money out of his retirement savings every month to help me. He works full-time, plus a part-time job at Dick's Sporting Goods to help. That was the most infuriating part of this entire ordeal. I can't express the guilt I feel from putting this financial burden on my dad.
As told by Kyle Laffin, 25, of Norwell, Mass.
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