First-generation college graduates navigate mountain of student loan debt

In Minnesota, borrowers owe a collective $29.1 billion, and many are hoping Biden will help ease the burden

A woman in a striped shirt
Kari Boudreau, the first in her family to go to college, said she still owes about $600,000 in federal student loans. She stands inside of her chiropractic clinic, Ambiente Gallerie, in Minneapolis on Feb. 8.
Evan Frost | MPR News

Kari Boudreau did everything by the book when it came to her student loans. She still couldn’t stay ahead of her debt.

A self-proclaimed rule follower, Boudreau was the first in her working-class Northfield, Minn., family to go to college, earning a degree from Iowa State University that led to her building a successful chiropractic business.

Getting there, though, meant taking on loans. What started out as $139,000 in federal student loans became $600,000. This happened because of a combination of loan consolidation, forbearance, having her loan sold from one servicer to another, interest capitalization — when a loan’s unpaid interest is added to the loan total, or principal — and moving to an income based repayment plan.

Boudreau, 53, is among a growing legion of people in Minnesota and across the nation now hoping President Joe Biden will take steps to ease what’s become a massive student debt problem. Supporters say that debt, more than $1.6 trillion currently, is holding back the American economy, keeping people from buying homes, getting married and otherwise taking their next steps in life — and affecting Black and brown borrowers in unequal ways.

Nationally, about 42 million Americans have some student loans, according to the federal Department of Education. In Minnesota, more than 750,000 people are carrying student loan debt averaging $37,492, according to the Student Borrower Protection Center. 

Boudreau points to unlimited interest accrual as part of the problem. “I think there's many, many people that are in the same situation. They were lent $25,000 or $30,000. But they now owe $60,000.”

The effort, though, comes with some pushback, with critics saying why should taxpayers bail out borrowers who knew what they were doing when they signed for the loans.

Opponents say student loan forgiveness would amount to taxpayers funding a massive giveaway to people with college degrees who ought to be paying their own bills. Boudreau says she would happily and probably could pay off her student loan — just not the interest.

‘I’m ready to fight this system’

Student loans were once talked about as “good debt” because it would lead to a college degree, better job prospects and higher earnings. But it was never a guarantee.

When Boudreau graduated college in 1991, she started in a low-paying entry-level job in her field, carrying about $25,000 in student loans. To move up in her field, she returned to school, first to community college and then chiropractic school. 

When she graduated from chiropractic school in 1997 and consolidated her loans, her debt totaled about $139,000 with a 9 percent interest rate. Her monthly payments grew to $1,100 a month. In 2005 she said her loans were sold from the student loan company Sallie Mae to the Department of Education. The interest capitalized, and the total grew to about $250,000. 

Given her successful career as a chiropractor, she’s made the payments using an income based repayment plan. But her student loan bill is now $600,000 because of the loan capitalization that happens every time her repayment plan certification paperwork is delayed — by her or her lender. She knows she will never be able to pay the entire loan back. 

Debt relief backers say canceling student loans wouldn’t just help individuals but entire communities and so should be seen as a public benefit. 

According to a 2018 report by the Urban Institute, the more educated a person is, the more taxes they contribute to state and local governments and the less likely they are to need social aid. A person with a college degree contributes an estimated $28,000 in median annual taxes and saves local and state governments about $34,000 by not relying on social assistance.

“I think that public education should be a public good, I think it is a public good,” said Kristin Collier, 35, a St. Paul high school English teacher who paid for college with scholarships, work and about $20,000 in federal loans. She graduated in 2008, during the Great Recession.

Collier believes all student loan debt should be canceled, and that there needs to be a “free college for all” program so that people without intergenerational wealth have opportunities to go without being trapped in debt payments.

She also holds a mix of federal student loans and private student loans now, with an extra burden: She said a family member with a gambling addiction took out private loans in her name while she was an undergraduate. She didn’t find out until her senior year.  

Her total debt amount was almost $150,000. She said it ballooned over time to $386,000. This happened because of the variable interest rates on her private loans.

Collier said she’s talked to several lawyers about her circumstance who’ve told her it’d be nearly impossible to get rid of the debt. She kept paying it partly out of fear of what might happen to her family member and partly out of shame about her debt.

In the process, she’s become active in the national movement to abolish student debt and make education free for all. 

She’s now refusing to pay her student loans because she feels that all student loan debt is immoral. “I thought, I'm ready to fight this system,” she said. “I've been living within it for a really long time. And here's an opportunity to really bring relief to lots of people.”

When considering if canceling student debt is ethically fair, Collier says, “I think it is fair to cancel student debt. I know people have worked really hard to pay off their debt, but we can't go back and give those people their payments back. So continuing to allow this unjust system to happen, just because other people have already been through it, I don't think is a good plan.” 

‘A huge lift’

Student debt has long been a concern for students and families, but that burden exploded during the Great Recession. 

The economic collapse sent school enrollments skyrocketing as people tried to retrain for new work at a time when state governments reduced funding for public colleges and universities. Collectively, it triggered a huge jump in debt. A Federal Reserve Bank of St. Louis study found student loan debt more than tripled since 2006. 

Biden now faces increasing pressure from top Democrats to cancel out swaths of student debt held by the federal government. Congressional Democrats on Thursday formally introduced legislation that would allow Biden to forgive up to $50,000 per borrower.

“I think we're all kind of just hoping that this happens, because that would be a huge lift off of our shoulders,” Alma Lora said of debt relief. 

The Roseville resident said her parents took out federal loans to help her and her brother go to college. 

Lora, 23, said when she was in school, she felt extra pressure to graduate as fast as possible because she knew her parents were footing part of the bill. She finished her studies at Augsburg University in Minneapolis in three years instead of four. 

Lora borrowed about $20,000 in federal student loans to help pay for tuition at the private university. Her parents borrowed around the same amount. Lora also worked at Costco during her final year at Augsburg and when she graduated was able to stay on and eventually work full time in their marketing and membership office.

She said her decision to go to college was about her, her family and future generations. Mentors shaped her success growing up. She said she hopes to be able to do the same, helping Latino students understand different ways to finance college.

Lora's main job is a Latino communications and family engagement coordinator at St. Paul’s Community of Peace Academy charter school. She has been able to manage her loan payments since graduating in 2019, although the initial $300 monthly payments were tough. She’s since consolidated seven individual loans into one and lowered her monthly payments to about $80.

When the federal government paused federal student loan payments in March 2020, she started contributing to the Parent PLUS federal loans her parents took out on her behalf.

She’s looking now into whether loan forgiveness is available now that she works in a school system. But if Lora had her way, she would want to cancel the loans her parents took out for her and her brother, who did not graduate from college.

She still feels guilty about her parents taking on school debt. “I always think about my parents, just wanting their loans to be forgiven. That's basically more important to me than getting my own loan forgiven at this point.”

Lora’s parent’s didn’t go to college and only one graduated from high school. But they supported her educational goals because that’s part of why they settled in the United States, so their children could have the best shot at life’s opportunity. 

“They're sacrificing so much for us, as their family,” Lora said. “I know, my parents aren't the only parents taking out student loans. I think we owe it to our parents who have been able to help us financially go through that school process.”

One thing all three women agree on: canceling student loans is a solution to a larger systemic issue — the extreme cost of higher education.

“Like, what steps are we taking to ensure that ... loan cancellation is no longer needed in the future, right?” Lora asks, “Like where just students can start going to school for free.”

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