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Friday, February 23, 2024
Feb. 23, 2024

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Many grapple with the added financial burden as student loan payments resume


DENVER — When Tracy Cunningham was 9, she’d walk down the street to pick up food for her family. Her mother was close with the owner of a deli in their hometown of West Milford, New Jersey, and he would leave leftovers from the day on top of a garbage can for them to eat.

Years later, as Cunningham was preparing to graduate from high school, she was offered an opportunity she’d never before thought of in her years working to help support her mother and three sisters: college.

“I was just always like, ‘How do I make it out?’” Cunningham said. “And then a recruiter comes in and sees me. For the first time, someone sees me and sees my potential. And then I’m in $30,000 of debt by the age of 19.”

The debt Cunningham, now 33, accumulated attending Berkeley College in New York has followed her ever since — though like millions of Americans, her federal student loan payments were paused for nearly three-and-a-half years during the pandemic. That came to an end when the federal government lifted that repayment freeze, with interest accruing again beginning Sept. 1 and payments resuming last month.

In preparation for the restart, President Joe Biden announced an expanded federal income-driven payment plan in August that was aimed at helping low-income Americans with their monthly payments based on federal poverty guidelines.

But for Cunningham and other Coloradans, the new plan has not stymied the financial hardship brought on by the resumption of student loan payments. Residents across the state are once again struggling to maintain financial stability while once again facing that long-paused monthly expense.

Nearly 800,000 borrowers in Colorado were saddled with a combined $29.4 billion in federal student loan debt as of June 30, according to government data.

“On average, almost 70% of students (in Colorado) typically owe $10,000 or more in student loans, while 25% will typically owe $40,000 or more in student loans,” said Kerline Eglaus, the executive director of financial aid at Metropolitan State University of Denver.

Moreover, the average outstanding balance, or the amount still owed to the lender, on loans in Colorado is $600 higher than the national average, according to The Center Square, a nonprofit media corporation that reports on state and local governments.

“It’s basically a car payment, it’s $250 a month now,” said Karli Alfson, who graduated from Oklahoma State University with a degree in fashion design and production in 2007. Alfson has technically paid off 40% of her $25,000 student loan, but the accrued interest leaves her still owing $23,000.

Due to the 2008 economic recession, the 41-year-old had to work multiple minimum-wage jobs immediately after graduation to stay afloat, and deferred the payments on the loan for as long as she could. She now works as a full-time interior designer in Denver.

“I am completely overwhelmed, and when I think about it I just feel like I’m frozen in time trying to figure out what to do,” Alfson said. “I didn’t pay September’s (bill) and I’m trying to figure out how to defer it, but my credit got knocked down 40 points.”

Alfson said that she tried to apply for deferment due to financial hardship, but she earns more than the maximum eligibility threshold and does not qualify for any other deferment category.

“A $30,000 loan hanging over my head”

“It was amazing,” said Katherine Borchert, a nanny in Boulder, of the loan repayment freeze. “You don’t really know how well you have it until it comes back.”

The 29-year-old, who graduated from Texas State University with a bachelor’s degree in family and child development in 2016, does not qualify for Biden’s new federal income-driven repayment plan. With her and her husband each earning around $55,000 per year in Boulder, their household makes well above the national median income.

But with a monthly rent payment of $2,500, their living costs also far exceed the national average.

“They calculate that I can afford (to pay) $300 a month, but I really can’t just based on our cost of living,” Borchert said. “In the Boulder area, making this much really doesn’t go that far.”

And Borchert is not alone in Boulder. Colorado’s Front Range is home to the four most expensive non-coastal housing markets in the nation, according to a study from the real estate research firm Zonda.

Moreover, the state’s $67,870 average annual salary is considerably higher than the $59,428 national average, according to Forbes, making it more difficult for residents to meet the federal threshold for loan relief. The exemption for federal relief in Biden’s plan — up to 225% of the federal poverty guideline — amounts to $44,370 for a two-person household, far below the combined salaries of Borchert and her husband.

Borchert said she would not have gone to school if she had known what she knows about her career now.

“I could basically be making the exact same amount as I’m making right now in my field if I didn’t go to school,” Borchert said. “And I wouldn’t have a $30,000 loan hanging over my head.”

“Never missed a payment in my life”

Suffering from undiagnosed anxiety from being unprepared to take the leap from high school to college, Cunningham flunked out of Berkeley after just her first year. She later earned her bachelor’s degree in accounting from Ramapo College of New Jersey, but the loan for Berkeley still hangs over her head.

The for-profit school was sued by New York City in 2018 over allegations of deceptive and predatory recruiting practices. And while a 2022 settlement delivered $20 million in debt relief to former Berkeley students, Cunningham still has not been able to reach the city for help with her debt.

She recently began working a part-time consulting job in addition to her full-time accounting job to pay off her loans. She projects to be debt-free in about two years, and is taking strides to share what she’s learned with others.

“I’m not saying that I’m not going to pay Berkeley, because I’ve just never missed a payment in my life,” Cunningham said. “But there’s no dent made in the Berkeley loans.”

Based on her own experience, Cunningham has created a program for BIPOC young adults called “Money Moves & Melanin” to assist with financial literacy, mental health and more. She hopes to steer members of marginalized communities away from the same mistakes she made at their age.

“I don’t want to say, ‘Don’t go to college.’ That doesn’t make sense, college can be great,” Cunningham said. “But you don’t have to go to a four-year college straight out of the gate if you didn’t get good (enough) grades in school to get a scholarship.”