The amount of student loan debt in the United States is $1.8 trillion — and counting. Education has never been more expensive.
The student loan crisis has affected a lot of students, but statistics show that it disproportionately affects the Latino community.
Around 72 percent of Latino students take out loans to attend college, compared with 66 percent of white students, according to a 2020 study from the Student Borrower Protection Center, a nonprofit organization focused on ending student debt.
The study also found that 12 years after starting college, the median Latino borrower still owes 83 percent of their initial student loan balance, while the median white borrower owes only 65 percent of their original balance.
This disparity can be attributed to a number of factors, including less knowledge about the financial aid system, fear of accumulating more debt or a lack of support during college and beyond.
Fear of debt
UnidosUS and the University of North Carolina’s School of Law conducted a survey of Latino students who began but didn’t complete a college degree. One of their findings is that those Latino students who grew up in economically vulnerable communities see college debt as a financial burden that can affect their family’s financial security and stability.
Amanda Martinez, senior policy analyst for the education policy team at Unidos, who worked on this report, said, “A lot of respondents said, 'I saw my cousin or I saw my sister try to go to college but then racked up debt and maybe didn’t complete their degree and then still had that debt, so I’m just afraid to enter into that same journey.'”
This fear of accumulating debt and therefore having it affect their families can lead to two major outcomes, according to Vanessa Sansone, assistant professor of higher education at the University of Texas at San Antonio. Those outcomes, Sansone said, are students choosing not to go to college or changing where they go according to what is affordable.
Kaitlyn Fikaris, a recent 2021 graduate of SUNY Purchase who studied journalism with a psychology minor, experienced this firsthand. She was initially supposed to go to Penn State but then realized the summer before she was supposed to move in that it wasn’t affordable.
“We kind of realized we were in over our heads. We went to the bank to try to take out some loans, but as an 18-year-old I had no credit, my mom didn’t have good credit, and we weren’t able to take out the loan,” Fikaris said.
"I didn't know"
Sometimes the lack of knowledge about loans and how they're financed makes the topic even more complicated.
Dally Matos, a graduate student at Columbia University pursuing a master’s degree in social work, said everything she knows has been through her own research.
For Matos, her loans were always something she worried about, and although she tried to save as much as she could, it was nearly impossible to cover all of her necessities, such as groceries, gas and campus fees.
Although she was always told there were private scholarships and outside funders, she said she couldn’t apply to those because of the limiting time constraints she was facing in her everyday life.
“It assumes that I don’t have to work two jobs in my undergrad and take 18 credits and do extracurriculars,” Matos said. “It assumes that I have free time and the ability to apply to these scholarships. I had to go home every single weekend to take care of my mother. I wanted to, but I couldn’t.”
Her fear of accumulating more debt almost kept her from going to graduate school. Matos asked herself if it was worth it and if she was ever going to be able to pay back the money. Ultimately, she decided that having a master’s degree would only help her.
Between her undergraduate and graduate programs, Matos will graduate owing around $85,000 in student loans.
Jessica Jacho, currently taking a gap year, owes $30,000 under her dad’s name, and as for federal student loans, she owes around $27,000.
Jacho was in her junior year studying biology with a double minor in psychology and Spanish when she was forced to drop out. “I lost a grant by the state, and the school told me I had to pay the rest of the amount that I owed, which was close to $6,000. If I didn’t pay that by a certain date, then I couldn’t attend the spring semester, which therefore I didn’t.”
Her father, who has suffered multiple heart attacks, has been helping her pay some of her loans, but Jacho is working four jobs to help take that load off her dad.
“It’s stressing me out too much to the part where I just can’t sleep,” she said.
Sandra Ocampo, a fifth-year student at the University of California, Los Angeles, double majoring in communication and sociology, has struggled to find out what aid she qualified for. As a DACA student —— she was brought to the U.S. as a child but does not have legal status — she is only allowed to take out a loan called the Dream Loan under the Dream Act in California. And that loan is capped at $4,000 per year.
“Being an undocumented student plus a first-gen makes a recipe for not understanding what financial aid is, and I think that was definitely apparent with me not receiving financial aid even though I was eligible during community college,” Ocampo said. “It was really just myself being proactive and educating myself on these financial matters because if not, I don’t think anyone else would’ve helped me since no one in my family has previously gone to university or filled out an application.”
Yanely Espinal, director of educational outreach at Next Gen Personal Finance, a national nonprofit that offers access to personal finance education, said a lack of support on these financial issues is a big issue for many students.
“We’re really relying on essentially saying, please help me, give me some of your time, help me fill out my FAFSA, explain to me what are the ways to funding college," Espinal said, "and that’s a very difficult thing to continue to do over and over again.”
Worries about repaying student loans
For many students, finding a way to pay for these loans after graduation is what causes worry and stress.
“I’m constantly going to be living in the shadow of my debt,” Matos said. “My parents are getting older and they’ve sacrificed so much for me, and I’m worried that my payments are going to be so large that I won’t be able to give them back even one-tenth of what they’ve given me.”
Jacho has a plan set in motion as to how she's going to tackle her debt, making $25 to $100 payments to start paying off the interest, so she can begin lowering her principal. If everything goes well, Jacho believes she’ll be debt-free in about five to 10 years. She hopes she will be accepted again to Monmouth University for the spring semester — her application is currently under review.
Ocampo hasn’t put a lot of thought into the repayment of her loans and is hoping to get a full-time job that would pay her enough to make those payments.
“That hasn’t happened yet and it’s kind of stressing me out,” Ocampo said. “I just left it all for the future, and future me is going to have to deal with it.”
Hope for student loan forgiveness
When the Covid-19 pandemic first hit in March 2020, the government put a pause on student loan payments and waived interest charges, with the most recent extension being until Jan. 31, 2022. For many students this has been a relief as it has provided them with a couple of extra months to save up and plan.
Student debt forgiveness has been a big topic of discussion under President Joe Biden’s term. While Biden has canceled billions in student loan debt, including for those with permanent disabilities or those defrauded by for-profit colleges, his campaign pledge for wide-scale student loan cancellation of up to $10,000 has not happened. Biden has urged Congress to take action, but the exclusion of student loan forgiveness from the Democrats’ $2 trillion spending bill was a disappointment for many.
“That would mean everything,” Fikaris said. “I’m not expecting all of my loans to get forgiven, but at least with $10K that the president campaigned on would be a great help.”
Jacho agreed that loan forgiveness would help take a “huge load off [her] chest.”
Martinez and Espinal both said that forgiving $10,000 would be very beneficial, though something else needs to happen.
“We need to have a comprehensive plan that looks at both affordability together with some debt cancellation and improving the current repayment plans of the federal government,” Martinez said. She added that a solution for the affordability portion would be to double the Pell grant, which would allow for those nontuition costs to be covered.
Espinal added that cancellation needs to happen for outstanding debt, but something needs to change in the legislation so that this cycle of debt doesn’t repeat itself in years to come.
Better financial guidance
A lot of the issues around debt and student loans is the lack of education and support surrounding this topic.
Sansone said universities should have financial aid offices that are “empathetic, understanding, caring and patient while also having the capacity to support families, particularly Latino families, which also includes having individuals who speak Spanish.”
If a college or university lends a student money, Espinal said, there should be a required course attached to it in order to receive that loan.
“If they are lending you money, they benefit from the interest that you will pay them, but they also have to be responsible for educating you about borrowing money from them,” Espinal said.
Matos proposes that there should be a class or session during freshman orientation for students to hear from those who have student loans and are paying it off as well as financial aid counselors.
“I think there needs to be more education around student loan policy and repayment plans, and not just dismiss it as something that you have to do to go to college,” Matos said.
Advice on navigating loans
Managing student loans for Latino families and students can be extremely difficult, but experts offer these few tips to make the process easier.
Talk to family and the school. Sansone suggests having conversations with family and asking the school's financial aid office ample questions to make an informed decision.
Don’t wait until after graduation to start paying. Espinal suggests starting to make monthly payments — even if it’s just $10 or $15 a month — to start getting rid of the accrued interest in the student loan account.
Start investing and saving money at an early age. “Opening a 529 savings plan or even just a brokerage account where every single month or every few ones you’re consistently adding money to that account and allowing it to grow, it has a very high chance of growing over 10, 15 or 20 years,” Espinal said.
Evaluate the terms of the loan. If the monthly minimum payment required is very high, one should change the student loan plan and go with the longest term available.
Pay extra on your loans. After covering necessities, put extra money toward your loan payment.
Set up automatic payments by linking the checking account to the federal student loan portal — that can help save money on interest.
CNBC’s ”College Voices″ is a series written by CNBC interns from universities across the country about getting their college education, managing their own money and launching their careers during these extraordinary times.