Kentuckians who borrowed money to further their education are feeling more anxiety following last month’s Supreme Court ruling that struck down President Biden’s student loan forgiveness program. Opponents say Biden’s plan was unfair and would not have helped the economy, but two Kentucky borrowers say loan forgiveness would be life-changing.
Natalie Gwishiri, 36, works as a program consultant for the Kentucky Department of Education. The Frankfort resident is a married mother of two young children. She earned an undergraduate degree in Liberal Studies in 2009 from North Carolina State University and went on to graduate school at Indiana University, where she received a Master's in History in 2012.
She took out about $36,000 in loans to complete her education. Gwishiri says today’s economy isn’t what she expected it to be when she entered college.
“A lot of people went into school thinking they were going to get good-paying jobs, when the reality is, inflation is super high," Gwishiri told WKU Public Radio. "A lot of the issues with student loans is interest rates. I had a private loan I took out my freshman year just to make up the difference in tuition. It was $700 and when I finally paid it back it was $3,000. It just didn’t work out the way we thought it would.”
Under President Biden’s program declared unconstitutional by the Supreme Court, Gwishiri could’ve had $20,000 of her $36,000 in student debt canceled. The White House plan would have forgiven up to $10,000 for most borrowers with federal loans. An additional $10,000 would have been canceled for those who received a need-based Pell Grant while attending college.
Before the law was struck down, Manuel Garr, 48, of Louisville, had already begun planning what he could do with an extra few hundred dollars a month.
“It would go a long way to helping pay down other debt as far as car loans and personal loans, being able to actually have a savings again," Garr said.
Garr graduated from the University of Louisville in 2000 with an undergraduate degree in African-American Studies. In 2002, he earned a Master's in Library and Information Science from the University of Kentucky.
Established in careers, yet settled in debt
Garr is now an IT worker for Jefferson County Public Schools. By the time he finished graduate school, he had amassed about $50,000 in student loans.
Garr is married with one child out of college and a pre-teen still at home. For the past three years, his loans have been in forbearance due to the pandemic and because he’s back in school pursuing a doctorate. But when he was making payments, Garr said it seemed impossible to get ahead. His payments were mainly going toward interest on the loans and not the principal.
"The whole argument that people are looking for a handout couldn’t be further from the truth," Garr said. "I’ve been paying my students loans from the moment I got a stable job and have tried my best to pay them off, but it’s been next to impossible because it’s like they’re moving the goalpost.”
Both Gwishiri and Garr are established in their careers, but still saddled with debt they incurred to get them to where they are today. They’re among nearly 600,000 Kentuckians who owe a combined $20 billion in debt, according to estimates from the left-leaning Kentucky Center for Economic Policy. Executive Director Jason Bailey says unlike Gwishiri and Garr, other borrowers are younger, working service industry jobs, and earning lower wages.
"We looked at a sample over an eight-year-period of Kentucky undergraduates who had student loan debt, and more than half of those were making less than $30,000 a year," Bailey said. "Tens of thousands of them actually never finished a credential or degree, in part, because of the cost. Others may have a degree but they’re still struggling to get by.”
John Garen is the BB&T Professor Emeritus at the University of Kentucky and a scholar for the Bluegrass Institute for Public Policy Solutions, which describes itself as a free-market think tank. Garen said his research suggests student loan forgiveness isn’t going to a broad group of low-income earners. And he says if the goal is boosting the economy, it’s a zero-sum game.
“Forgiveness means folks paying back money to the federal government will no longer have to do so, but the federal government is going to get its money from somebody else," Garen said. "Some folks will have more money, the ones who don’t have to pay back their loans, but other folks will have less money.”
While policy analyst Jason Bailey says there are structural problems with the federal student loan system, other solutions can come at the state level.
“One of the things we need to look at is how we’ve been cutting funding for higher education and how that’s led to rising tuition, which is a direct cause of student loan debt," Bailey suggested.
Garen said reducing student debt also comes down to personal choices and more responsible borrowing.
"I think the problem is better addressed by having more realistic expectations about when college pays off and when it doesn’t, when it makes sense to take out a loan and when it doesn’t. I think that seems to have failed us in the last couple of decades," he said. "There are some cases where 18-year-olds are better suited for other career paths than what a college would lead, and there are majors that don’t lead to very high earnings."
Two Kentucky borrowers feeling down, but not giving up
For the past three years, borrowers have been excused from paying down student loans during the pandemic, but those payments resume in September. Natalie Gwirishi of Frankfort has experienced a taste of what it would be like to have little or no student debt. For one, she’s been able to contribute to her kids’ 529 college savings plan.
“I’ve also been able to save money for myself in terms of an investment portfolio," she explained. "I’ve had the chance to increase my emergency fund, save for travel. I’ve bought a house and a new car.”
Once payments resume, Gwishiri says she’s going to have to stop contributing to retirement and her kid’s educational funds, and put those dollars back toward paying off her student loans.
Gwishiri and Manuel Garr and feeling down but not out. While the Supreme Court ruled only Congress can provide large-scale student loan forgiveness, President Biden is working on other avenues to provide relief. Garr told WKU Public Radio that he remains optimistic.
“I’m hopeful whatever this new plan the Biden administration is working on, it will be helpful, as well to help me finally get this debt paid off," Garen said. "I think it’s ridiculous to be quite honest. It shouldn’t take this much, especially when you’re trying to be responsible and paying off your debt.”
The Department of Education and the White House announced last week that more than 800,000 federal student loan borrowers will have their remaining debt wiped out. The $39 billion in debt relief will come through reforming the agency’s income-driven repayment plans. It’s a much smaller step toward a collective sigh of relief.
