This is why I’m not paying my student loans

A huge chunk of student-loan borrowers simply aren’t paying. The pandemic pause on payments may have ended in October, but roughly 40% of borrowers who had bills due that month sat on their wallets and didn’t send a dime to the government. Some experts estimate that even that figure is an undercount, because it likely doesn’t include borrowers whose loans were paused because of servicer errors.

The Federal Reserve Bank of Philadelphia recently offered an explanation for this situation. It reported that more than half of borrowers who didn’t make a payment in October — including some who were on plans allowing them to make payments as a percentage of their income — said it was because they couldn’t afford it.

Meanwhile, roughly a quarter of borrowers who skipped their October payment did so because of servicing errors. Another 21% said they chose not to make a payment even though they could afford to do so, according to the Philly Fed.

MarketWatch spoke to borrowers who missed at least one payment this fall. Here’s what they told us about why they didn’t pay their student loans.

Richelle Brooks: Protesting the student-loan system

Richelle Brooks hasn’t been paying her student loans for a while. After graduating with a doctorate in education in 2018, she enrolled in more schooling in part because the move froze her student-loan payments at a time when she struggled to afford them.

“It became, okay, if I stay in school, I can pay my bills and I don’t have to worry about paying my student loans back,” said Brooks, 36, a resident of Los Angeles. “I started striking without knowing I was striking.”

During this period, Brooks read a book called “Can’t Pay, Won’t Pay: The Case for Economic Disobedience and Debt Abolition.” The book, authored by the Debt Collective, a debtor activist group, discusses the power of debtors uniting to push for change to a system that requires so many people to go into debt for education, healthcare and other necessities.

“I was like, holy crap, these are all of the words that explain my experiences,” Brooks, who estimates she has about $260,000 in student debt, said after reading the book. “I’m figuring out a way to not pay these student loans. Now I’m going to politicize that. I’m going to talk about it.”

Brooks is now part of a broader debt strike organized by the Debt Collective. The latest version of the strike kicked into gear following the resumption of student-loan payments in October. The idea is that borrowers not pay their student-loan bills in a way that doesn’t harm them financially, and that they use that decision to call attention to the challenges facing student-loan borrowers and to push for mass debt cancellation.

“Borrowers or debtors have a lot of power in bringing awareness to the predatory system,” Brooks said. “If we publicize and politicize our inability to pay the student loan, it gets rid of that shame that a lot of people are feeling.”

The Debt Collective has already had some success using this tactic. In 2015, the group organized former students at for-profit colleges as part of a debt strike that ultimately resulted in the Obama administration streamlining a process for students who were scammed by their schools to petition the government for debt relief.

They also helped push the idea of student-debt cancellation into the mainstream. So far, the Biden administration has taken steps to cancel roughly $136.6 billion in student debt for certain borrowers, and officials are also in the process of developing a broad-based debt-forgiveness program after the Supreme Court struck down the administration’s initial plan in June.

For now, borrowers like Brooks who are participating in the debt strike have the protection of the on-ramp, a 12-month grace period following the end of the pause on student-loan payments that allows borrowers who don’t pay to avoid the harshest consequences of the student-loan system. Once that ends, Brooks said, she’ll have to figure something out. She’s considering taking on a third job, in addition to her work as an educator and occasional Uber driver. Her application for SAVE, the repayment program the Biden administration launched last year, has been mired in paperwork challenges.

Brooks is also helping her two oldest children, 16 and 14, prepare for college. “It’s terrifying,” Brooks said of the prospect of figuring out how to help them pay for a degree. Education changed Brooks’s life, she said: As a teenager, she got into trouble and was homeless for a period, but her degrees helped her change the trajectory for her family.

That experience is part of the reason she’s pursued a career in education. Still, she said, it’s frustrating that she had to rack up so much debt in order to teach.

“Biden ran on the premise that this is going to be a priority for him,” she said of student-debt relief and college affordability. Brooks said she plans to push the president during this election year to fulfill that promise.

“Making college free and accessible to the poorest people, the most vulnerable, the public servants, is the bare minimum,” Brooks said. “I’m not asking for a lot. I want my kids to be able to learn and be able to get a job.”

Michelle Rose: Waiting on approval for a new payment plan

Michelle Rose waited for months for paperwork to go through that would give her a more affordable repayment plan for her student loans. When student-loan payments resumed last fall, the approval had still not come, and Rose decided not to make payments in November or December.

A resident of Toledo, Ohio, Rose, 45, twice applied for the new SAVE repayment program. She was rejected by her servicer the first time, even though the government’s loan calculator said she was eligible, and after reapplying, she waited to hear back for months.

She was not alone in this predicament. By the end of October, more than 450,000 applications for income-driven repayment plans, including SAVE, had been pending at servicers for more than 30 days, according to the Consumer Financial Protection Bureau. A senior Education Department official told reporters in January that the backlog had receded since October.

Borrowers who are waiting for their applications for repayment plans to be processed are often placed in administrative forbearance, a status in which payments are paused while an application is reviewed. Rose is in forbearance but said she found the process “very confusing” because her servicer wasn’t always explicit about it.

“It just says ‘no due date’ or ‘no payment due.’ I’m like, what does that mean?” she said in early January, as she was still waiting for the paperwork to be sorted out. “I just have no idea what’s going on, and you can’t really get anyone on the phone.”

Rose recently learned her SAVE application had been approved. She plans to make her first payment in months in February.

Rose’s experience of trying to get a manageable student-loan payment plan has exacerbated her feeling that the way we finance college is “an absolutely broken system on many fronts.”

Rose went back to college at the age of 31. She had spent a year in college right after graduating from high school but had to drop out due to an injury. During her first stint in college, Rose acquired about $7,000 in student loans. That debt made her nervous about going back.

Ultimately, she returned to community college and graduated with a bachelor’s degree after transferring to a four-year school. She found a job in information technology that she’s had ever since.

Although she’s employed, she had a hard time affording her student-loan payments before the pandemic. She even went back to school for a period in part to put the payments on pause.

“That’s not a good reason to go to school,” she said. “I was paying for my school out of pocket at that point because the debt was overwhelming. It was crippling one way or the other.”

The presence of her student-loan debt has pushed Rose to make sacrifices. She’s lived with roommates, not taken vacations and put off having children in part because of her loans.

“It definitely feels like it’s designed to keep poor people poor,” Rose said of the student-loan system. “You’re doing the right thing and getting the wrong result. You’re doing what everyone told you to do, yet you’re still buried in debt.

“It’s demoralizing and it’s really rough,” she added.

Elli England and Michael Baugh: Waiting on debt cancellation

Elli England and her husband, Michael Baugh, who live in Anaheim, Calif., made a payment of $230 in October and $100 in November as they waited on debt forgiveness. But in December, they decided to stop paying. Baugh, who took out loans in 2010 to pay for his special-education certification, fits into two different categories for which the Biden administration has tried to streamline debt relief.

He worked as a special-education teacher and made payments on his student loans for more than a decade — except for a one-year pause when he was undergoing cancer treatment — up until the pandemic. That means he at least meets the spirit of the requirements to have his debt forgiven under the Public Service Loan Forgiveness program.

The couple applied for PSLF, but they were told that Baugh is 20 payments short of the 120 necessary to qualify for relief. Some temporary Biden administration fixes to the program aim to adjust borrowers’ accounts so that more payments that had previously been disqualified would count toward forgiveness.

In addition, Baugh, who is 57, had to quit his job last year due to early onset dementia. He won’t be able to work again and, as a result, is likely eligible to have his debt canceled under a law that wipes away federal student loans for people who are totally and permanently disabled.

England, who is 56, and Baugh began going through the application process last year to have his debt discharged under the law, but their healthcare provider wouldn’t fill out the forms they needed.

In 2021, the Biden administration announced a fix aimed at cutting down on the paperwork required for many borrowers to receive a disability discharge. Through a data match with the Social Security Administration, the Education Department identifies borrowers who are eligible to have their debt wiped away. Because it administers disability benefits, the Social Security Administration has the data necessary to determine whether someone meets the threshold for a disability discharge.

The problem for Baugh: His application for disability benefits with the Social Security Administration had been pending for a year.

“Are you telling me this is the best thing to do? Just to wait for disability?” England said in October. When payments resumed that month, Baugh’s application for disability benefits still hadn’t been approved.

“Obviously we got a reprieve during the pandemic and so didn’t really think about it. At that time we were dealing with my husband’s health,” she said. “We assumed that he’s not able to work — we can get it forgiven. Didn’t work. He’s worked in special education for many years —we can get it forgiven as has been promised many times. Didn’t work.”

She added: “The whole process has been so frustrating, made worse by the fact that you cannot get a straight answer out of everybody.”

In November, the couple received word that Baugh’s application for Social Security disability benefits had been approved. The couple immediately submitted his application for total and permanent disability discharge of his student loans. In December, they received a request for more information and as of January were still waiting for the application to be approved.

While they wait for debt relief, England and Baugh are taking advantage of the flexibilities provided by the government that will hold borrowers harmless during this time. Even so, they received a statement from their servicer saying they’re two payments late. Although the government has assured borrowers that if they miss payments in the year following the resumption of student-loan payments, they won’t face the harshest consequences of the student-loan system, the situation has been stressful for the couple.

They’re the kind of people who prioritize getting rid of debt. Before the pandemic, they aggressively paid off $20,000 of the $40,000 Baugh had in loans.

“We busted our butts. We don’t carry debt,” England said. “Any chance we get, we pay down debt. We’re good for it if it’s reasonable. Now is the time that we’re in a situation that we need some help and support. We didn’t expect this to happen, as nobody does.”

The Education Department didn’t respond to a request for comment.