my fed loan

As a student, my Fed loans were never supposed to be repaid. And it’s not like I expected these government-guaranteed loans, or the tax refund I got for school or clothes I wore every day during college to never expire. Yet, after years of working and saving to pay off the balance, here I am, with a $150,000 payment looming in front of me on Dec. 21. After spending more than 30 weeks paying off this check, I still don’t have the money to put an end to it — even as the days go by without any new payments.

“I didn’t think I would ever get back to where I was back then. To see how much it means to you, I wouldn’t let myself get there,” says Nicole Williams, 28, who is currently at New York University in Stony Brook studying economics. She graduated from the university in 2018 but left before earning her bachelor’s degree, instead choosing to work full time for six months at The New York Times. A few years later, she started a business selling products for children’s sweaters, which later evolved into a clothing company named Joyful Days. Today, sales are expanding and Williams recently made a $15 million donation to local charity Mabel House.

I can’t begin to imagine the stress and anxiety that went through my mind when this loan came along. It seemed like I’d be stuck holding that check until I could repay the outstanding balance. I felt like nothing would happen to me for years. But then I met another student struggling with his own debt. This one I now consider a mentor. I knew he had a better chance at having financial safety. And then we talked about our experiences and decided to help each other build better futures. We both went over past loans and he learned that the Federal Reserve has flexible repayment terms. He never lost hope, and that was kind of what I wanted. It was time to stop giving credit cards. It’s also been easier to tell him not to use them because they were causing a lot of trouble.

In addition to helping people with their finances, The Wall Street Journal ran a series on Nov. 20 looking at the many ways borrowers have used education, and their relationships with banks to navigate their debt lives. In the piece, “How Borrowers Work Out Their Debt Problems at Themselves; Here’s Why It Matters,” Sarah Tarr, director of research at The Credit Risk Institute, told the magazine how “the average borrower gets out of their current debt and into higher-priority loans within three to four years,” leaving the country about with $10 million at total debt.

Yet, despite all the obstacles, the number of Americans filing bankruptcy rose 31% between February and June 2020, according to Bank of America data. While this year, those numbers are down nearly 50%, it feels like more people are going bankrupt even though their finances have improved. People are taking longer to pay bills, and interest rates are rising due to coronavirus-related uncertainty. Those who default risk losing their home and car if they fail to make timely payment repayments. On top of everything else, they face increased stress and anxiety as many employers are furloughed and in need of workers in some cases, laid off.

“Banks are trying to lend more than $700 billion to first-time borrowers, and some states have announced restrictions requiring borrowers to wait seven to 10 years for their mortgage,” said John McAllister, senior vice president of policy at Consumer Federation of Missouri. “Some bank loans also come with non-dischargeable APR, meaning that the lender takes the amount of money the borrower owes him and divides that by five or 40, depending on the loan size. With unemployment surging across the country, this will likely add to the growing trend of borrowers relying on the mortgage to cover rent or mortgages.” (A survey released last month found that just 17% of respondents could afford to keep up their bills while only 32% of households were able to pay their electricity bill without additional savings.)

I once did a podcast called “Loan Lender Podcast” with Michael Lewis to interview fellow graduates at NYU and NYU Extension. During it, we discussed how students like us were turned away by traditional banking institutions due to high fees and often low salaries. Now that the market has shifted, however, it’s become easier for the common middle class (or black) borrower to file a federal aid application or open a credit card. Even so, there is no guarantee that the borrower will make good financial decisions. Some are going into payday loans instead of conventional bank loans.

When I talk to folks who are behind closed doors, it’s easy to see why the U.S. economy isn’t doing well when the stock market crashes in 2008 and 2009. When unemployment took hold of the labor force, the real estate market was starting to falter. One might say that we’re in recession, yet we have no clue that it’s actually happening. What seems to happen is that companies start laying off workers instead of reducing hours per worker. They hire temporary workers instead of permanent employees. There isn’t really a plan for how long the recovery will last, even with the possibility of a partial lockdown. Then, everyone starts to work from home, causing businesses to close. So, with a massive surge in Covid-19 cases around the country, more people are working from home. Many of us are sitting at home and afraid of catching the virus, but no one is necessarily sure what the future holds. Many people aren’t thinking about retirement and are simply living paycheck to paycheck. For some, health insurance is either nonexistent or in limbo.

But what’s clear to me is that even as the economic situation continues improving, there will be plenty of challenges from people who have a hard time paying their bills. That’s especially true for those who can’t pay their mortgages or rent or mortgages are coming up short. Although lenders work to help people get out with their loans, it’s not enough. Banks don’t typically lend people out if there’s a reason they shouldn’t, like housing instability or low income or disability. Having too many delinquent debt is bad for your credit score, which could lead you back to borrowing. And although there is a benefit to getting out early with smaller debts, some folks need the support of family members or friends, or simply because they are poor or otherwise undeserving of help.

There is so much more at stake than physical security. Whether you’re dealing with the pandemic itself or the recession of 2021, the effects we can see now are long-lasting. We’re seeing a national reckoning about racism in public life and we must grapple with the impact of police brutality and lack of representation at the highest levels of society. These are issues that affect all Americans, regardless of race or socioeconomic status. And it’s no secret that a lack of affordable housing is a key part of that issue.

“In this pandemic, access to financing services has been impacted not just because of the threat of infection, but because of the disproportionate effect of COVID-19 on Black and Latinx communities – which have disproportionally lower incomes,” said James Taylor, managing partner of SRA Capital Management, who researches housing finance and equity. “The racial disparity in financing has grown since 2014, with studies indicating that the percentage of African American borrowers falling behind versus white borrowers who fall behind the most with $100,000 or less is 53% of Black borrowers.”

“The fact that Black borrowers were falling behind white borrowers has caused tremendous tension in the lending community, and even among banks and credit unions, when it comes to granting loans to Black borrowers,” Taylor continued. “The question is: How do we address disparities in credit access and fairness?”

Borrowers don’t have to pay back their loans because they can always take money from their accounts later, but because they owe more money and their personal information is on their credit report, they may not have as many options. Credit card companies have historically denied loan applications based on credit quality, like driving down rates and paying off mortgages on time. If someone can prove they’re capable of making payments at the minimum monthly payments, they can apply for a loan. However, many people struggle with their finances because of low earnings or being dependent on a spouse who earned wages that were already below minimum wage.

It should have already been the default that no one would be in debt to their parents or grandparents. Our parents raised us from age 3 to 11 when it seemed like the world came crashing down. Like many generations, many young adults of color have fallen into debt due to the pandemic, creating the idea that their parents never meant for them to be slaves.

“The value of a dollar today is worth more than ever,” explained Taylor. Since the stock market crash, the price of bonds has skyrocketed, but the best way to protect yourself against the high costs is to avoid credit card debt.

Many people turn to payday loans because that’s what they believe. Instead, if they’re planning to retire, they might want to think about a retirement annuity, rather than loans. And while many people are using emergency funds to put toward a down payment on a house deposit or a car by themselves, others are applying for prequalification and other types of loans before they get their dream house. Before finding out the real benefits of a house deposit, many times, the decision to move is driven by the fear that the