The People Who Can’t Pay Their Student Loans 10 Years After Graduating

A student protesting tuition hikes at DePaul.

If you were to guess what the most popular piece on The Billfold is, what would you say? The story that readers from all over are looking up and reading on a daily basis isn’t about how compound interest works or the difference between traditional and Roth IRAs — it’s this piece by Anna Moreno about when she defaulted on her student loans and what she did to get back on track.

I mention this because of Sarah Green’s piece in the Harvard Business Review looking at new research examining college graduates who were no longer making student loan payments 10 years after leaving school “either because those borrowers were in default or because they had received a forbearance or deferment on their loans.”

Some of the reasons for default or forbearance are obvious: It matters how much money you earn after you graduate and also where you went to school (students who attended four-year schools were more likely to stay on top of their loan payments than those who attended two-year and for-profit institutions). How much you borrowed obviously makes a difference: “For every additional $1,000 borrowed, the likelihood of nonpayment rises by 0.4 percentage points. Put differently, to offset every additional $1,000 you borrow, you need to earn an additional $10,000 in income or your risk of nonpayment will rise.”

Those are the things we have control over. Things that we don’t have control over — whether or mother went to college, whether we are a man or woman (women tend to get paid less than men and therefore generally have a harder time paying back loans), and what race we are — can also play roles, according to the research.

There’s also this: “If your parents can help you out — with both cold, hard cash, and sound financial advice — you’re a lot less likely to end up in nonpayment.” Well, yes.

I’m also 10 years out of college and in that time I have gone to grad school, suffered through bouts of unemployment during the recession (during which I hustled to find gigs to make my minimum payments), and landed in many different jobs. Somehow, through that, I have managed to pay back half my loans. (That somehow can be attributed in part because I’m fortunate to have low interest rates, have automated payments, and have thrown extra payments at my loans when I have had the chance.) I foresee it all being paid off by the time I’m 40. Maybe you’ll see me, in 2024, announcing in a monthly check-in, that it’s all paid off.

Photo: Bartosz Brzezinski

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