Before he lost his job, Alexander Cross wasn't as worried about his $180,000 in student loan debt.
Cross (not his real name), 36, had finished his undergraduate studies debt-free, but had borrowed to attend law school in New Orleans on the advice of the financial aid office at his program. Yeah, I'm taking out loans, but I have forever to repay them, he thought.
Today, he calls this decision "naive" — made by a young person who didn't understand compound interest or the arcane language of borrowing and forbearance plans. It also was a choice made well before he'd spend more than eight months looking for a job after being laid off, blowing most of the money he had saved for a house and feeling priced out of any position that doesn't pay enough for him to make his student loan payments.
"My life isn't over, but the path is set," he says. "I'm on rails, at this point. No matter what I do for the rest of my life, barring winning the lottery or discovering a rich dead uncle, you know, I'm going to have debt."
Economists, analysts and financial professionals are raising the alarm about the state of student loan debt in America.
According to the Federal Reserve Bank of New York, Americans collectively owed $1.38 trillion in student loan debt in December 2017 — up from $640 billion at the end of 2008 and more than they owe on any kind of household debt except for mortgages. Uneasy researchers have highlighted the speed at which student loan balances are growing, the way they seem to be impacting both home and car sales among younger people and a rising rate of borrower defaults. A Brookings Institution report released in February found the number of borrowers who are more than $50,000 in debt has more than tripled since the year 2000. In a separate forecast for Brookings, Columbia University economist Judith Scott-Clayton projected that as many as four in 10 borrowers may default on their loans by 2023, due in part to high default rates among people who attended for-profit colleges.
Researchers also have discovered the burden of student debt isn't distributed equally. In 2017, the Center for American Progress looked at Department of Education data and found that 12 years after college, African-Americans with student loans were more likely to owe loan balances larger than what they originally had borrowed and more likely to default. An American Association of University Women report found that women's initial student loan balances are 14 percent higher than men's, and that women pay back their loans more slowly (which the organization attributed to the gender pay gap), creating a situation in which women hold more than $800 billion, or close to two-thirds, of the outstanding student debt in America. Thus, an already troubling increase in indebtedness is made more ominous by the way it seems to exacerbate existing inequalities.
What happened? Some theories point to the global financial crisis, when many younger people returned to school to wait things out or train for better jobs. Meanwhile, as the recession unfolded, many state governments — including Louisiana's — slashed funding for higher education, triggering tuition increases and shifting costs to students.
By the numbers, one could say debtors — especially those who finished their degrees — made a good calculation. According to estimates by the Georgetown University Center on Education and the Workforce, 65 percent of the economy's jobs in 2020 will require some post-secondary education, and bachelor's degree holders will earn an average of $1 million more over the course of their careers than people without degrees.
But borrowers say those numbers don't illustrate the painful realities of living in the debt trap — or fears that the job market won't steady itself in time to make the numbers add up.
"[Our parents] said if you want to take care of yourself, take care of a family, then you have to go to college," one New Orleans borrower says. "That's the only way to get jobs that will pay you enough to take care of all the things we think we want as American adults. But it turns out that there's not as many well-paying positions as there are schools that give degrees. ... So it's not going to work for everybody.
"And yet somehow, we all believed it."
Louisiana falls toward the middle, or perhaps even the low end, of U.S. student loan distribution. According to The Institute for College Access and Success, the state is ranked 32nd in terms of debt held by borrowers. Half of Louisiana graduates in 2016 had student debt.
But in New Orleans, home to a surging millennial population (a group which, according to Pew Research Center, is significantly more likely to hold a degree than Gen Xers before it), the student debt story is more in line with other metropolitan areas and hints at the approaching national repayment crisis. In a map created by the Washington Center for Equitable Growth, loan balances in several central ZIP codes throughout the city are listed as "moderately high," "very high" or "extremely high," or in the case of the 70112 ZIP code (part of the CBD and upper French Quarter) "astronomical," and trend higher when compared to much of the rest of the state.
When Gambit asked eight New Orleanians in their 20s, 30s and 40s to talk about their student loan debt, interviews filled in the ways debt has drained color from their lives. As they tell it, debt incurred in undergraduate and graduate programs has shelved plans for homeownership, kids' college funds and even modest ambitions such as owning a car that's less than 10 years old. While many are making their payments on time, in part thanks to income-based repayment programs expanded under President Barack Obama's administration, borrowers described a sense of futility: Many are making payments on a balance that never gets any smaller, and some said they don't ever expect be able to pay off their loans.
"It is like a modern-day prison," says adjunct instructor M.E. Riley. "I will not buy a home. I could probably qualify for a car loan, maybe, but I won't do that. I'm afraid. The most dramatic thing is I got a $300 credit card line for my favorite clothing place, because I can't afford clothes most paychecks. But I'm afraid of getting more debt."
Bit by bit, borrowers have found their student loan debt is changing and even distorting their decision-making, where efforts to better themselves have to be weighed against the consequences. When Riley started a part-time job to accompany the full-time job she had last summer, she worried about how the additional income would change the payments on her loans. For people who are set to become eligible to have loans forgiven after a few decades of regular payments, the taxes associated with forgiven balances imply a future debt to the IRS.
"I feel like no matter how much money I make, that everything's just going to keep creeping up on me," says Hannah Ligon, 37.
And anxieties are heightened by the ways student loan debt can spread through families, chipping away at wealth. Some people interviewed for this story absorbed the debt their partner brought to a marriage or are watching debt ping-pong through generations: in addition to her own loans, freelance writer Erin Guidry's parents took out a PLUS loan for her to attend college at a New Orleans university. Now that they've stopped working, Guidry knows she and her husband may have to pick up the payments for her parents' loan as well.
"They can barely afford to eat, much less have to pay for student loans," she says. "I can't allow that to be what bankrupts my parents.
"The idea of saving for [my son's] college is not a reality," Ligon says. "It's like, how? And save for retirement? And pay off my student loans?"
There also are fears that the economic situation in New Orleans, where, according to one 2011 Data Center report, 65 percent of jobs pay less than $39,996 a year, is making it more difficult to earn enough money to make a meaningful dent in one's debt — undercutting a degree's return-on-investment for college graduates who choose to live in this city.
This is true for Asher Griffith, 33, who has been working service industry jobs since moving back to New Orleans after finishing graduate school. He rarely talks to his student loan servicer about his debt, which he estimates has hit $75,000. "Even if I did find a job and was making 35 or 40 grand a year with regularity, and not just during the [tourist] season, I'd be strapped with this probably gigantic bill," he says. "I kind of wish I hadn't gone to school."
"You can't tell me that I can afford to pay back 33 grand a year when I can't find a job that pays more than $12 an hour," Guidry says.
H. Jude Boudreaux, partner and senior financial planner at the New Orleans office of The Planning Center, says what's important to remember is how student loan debt is both a present- and future-tense problem. Cash flow issues in the present lead to long-term problems with savings, crippling efforts to accumulate interest and assets over time and save for retirement. Every year that graduates spend being underpaid or underemployed eat away at their chances for future financial security.
For those already struggling locally, one major thunderhead is the national economy, which is in the midst of an unusually long expansion. Its inevitable contraction, paired with associated job-market effects (slowing job growth, layoffs, contracts that aren't renewed, wage freezes) could further imperil borrowers, some of whom feel stretched thin by a cycle of payments that will last into their 50s and beyond.
A variety of bills attempting to provide student loan relief and reform the system has been circulating in Congress and around Washington D.C. Most recently, President Donald Trump's proposed 2019 budget suggests a variety of changes, including a simplification of the repayment programs that could trim the number of years some debtors are obligated to make payments.
Among Louisiana Congressmen, U.S. Reps. Mike Johnson and Cedric Richmond are listed as co-sponsors on student loan-related bills, but neither bill offers solutions for people managing current student loan debt. Johnson is a co-sponsor for H.R. 4274, which would require schools to publish information about student outcomes and would phase out forgiveness programs for new loans. Richmond supports a volunteer service program that could help participants pay for college.
In some academic circles, one provocative idea making the rounds is a one-time total student loan amnesty, in which all debt held by the federal government would be wiped from the books. It's a radical notion, but some academics say it could relieve floundering borrowers and help sustain the economic recovery. Researchers at Bard College's Levy Economics Institute who modeled widespread student debt cancellation found it could increase the GDP by $861 billion to more than a trillion dollars over 10 years, while creating between 1.2 million to 1.5 million jobs.
Not every economist agrees. Robert J. Newman, who chairs the economics department at Louisiana State University, says the economic effect of student loan amnesty would be negligible and runs the risk of creating a "moral hazard" problem — if there were some sort of debt cancellation, future borrowers might take out higher loans on the assumption that there'd be another forgiveness program, replicating the problem while leaving taxpayers on the hook for unpaid balances. "Somebody's going to have to pay," he says.
But others argue it's unfair to compel borrowers to pay into a system that increasingly appears stacked against them. Alan Collinge, who heads advocacy organization Student Loan Justice, is working on garnering support for H.R. 2366, which would restore bankruptcy protections for student loans (unlike most other debts, both federal and private student loans cannot be discharged in bankruptcy). If that bill or one like it fails to pass, Collinge thinks rising balances and default rates could someday compel an amnesty movement.
"As the numbers become just more and more insane, at what point does the entire lending system just vanish into a mist of illegitimacy?" he says. "I would argue that that time is coming sooner rather than later. It's either bankruptcy today or it's a jubilee tomorrow, you pick."
What's changed in recent years, Collinge adds, isn't the students — it's the ecosystem of lenders and universities surrounding them. It's rising tuition; it's the profitability of student loan debt for the U.S. government (which lends at interest rates as high as 7 percent); it's less-stringent consumer protections — all swirling around young people who almost always lack experience in dealing with financial products.
And as some New Orleans borrowers expressed, it's the fallout from a social imperative that stressed college at any price, just as the economy buckled and created potentially unpayable debts.
"That was always the answer from my parents — we'll find [the money] somewhere," Guidry says. "But we didn't find it."