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Retired grandmother still owes $108,000 in student debt 40 years after taking out the loan

Nancy Peter, one of 43 million Americans struggling with debt: ‘I needed help’

(WGN) – In 1986, Nancy Peter took out student loans to complete her psychology degree at Mundelein College in Chicago. Nearly four decades later, she’s still paying it back.

“Interest rates go up and up, so every penny I don’t pay goes up,” she said.

Peter took out additional loans to pursue graduate studies at Loyola University and has worked as a therapist for nearly 40 years. But the now 71-year-old retired grandmother of two children is six-figure in debt, more than three times the amount she originally borrowed.

She said she owes about $108,000 and is enrolled in health insurance income-based repayment plan.

These plans allow a borrower to pay as much as possible depending on how much money they make. Sometimes payments are so low that they don’t even cover interest, meaning the amount owed increases even though borrowers are making payments.

At some point, Peter gave up the loan for health reasons. She had permission to temporarily suspend payments, but interest continued to grow.

“This happens all the time, and it’s really important for borrowers to understand that when you take out loans, pretty much any type of private loan or federal student loan, the interest usually starts accruing right away,” said Rae Kaplan, a Chicago student loan attorney who helps borrowers helps pay off their debts. “So as soon as the loan is paid off, interest accrues.”

According to the U.S. Department of Education, 43 million Americans owe a total of $1.3 trillion in student loan debt. The average borrower owes $37,000.

“That’s going to sound terrible,” Peter said. “But I have a list of different ways you can get your loan forgiven, and the only one I fit into was for me to die.”

Last year, the U.S. Supreme Court rejected the Biden administration’s plan to cancel hundreds of billions of dollars in student loan debt. But via executive order, Biden implemented the Saving on a Valuable Education (SAVE) plan, which will dramatically reduce monthly payments for eligible borrowers who:

  • Have made payments for at least 10 years
  • Taken out federal loans of $12,000 or less for college
  • Those with larger balances or consolidated loans may also be eligible for forgiveness. To date, more than 7 million people have signed up for the program.

“It forgives balances earlier,” said Terry Savage, a syndicated finance columnist. “It used to take 20 or 25 years, but now the balance can be forgiven in 10 years, depending on the size of your loan. The new plan cuts payments to zero for some people and at least half for many others. It prevents interest on your unpaid balance from increasing. That’s what has accumulated this debt snowball.”

For Peter, the SAVE plan could be a lifeline.

She asked Kaplan for help, a step long delayed because of the shame that accompanied financial hardship.

“It’s humiliating,” Peter said. “It’s such a private thing. If someone knew I owed that much money, they would look at me in a completely different way.”

When asked why she decided to tell her story, Peter replied: “I needed help, and when I need help, there are many other people who need help.” And if even one person gets help, Then it’s worth it to me.”

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