Student loan relief was extended during COVID. Sacramentans brace for payments to restart

When Amanda Snow graduated in 2014 with a master’s degree in the environmental science field, she immediately signed up for an income-based repayment plan to pay off her federal loans.

It was another three years before she made even the minimum income necessary to start making payments, all while interest accrued.

So when federal loan payments were paused in March 2020 at the start of the pandemic, Snow and her husband found themselves with hundreds of dollars available to them each month. It’s an experience that revealed a kind of financial freedom and comfort that had previously seemed unattainable.

“It’s been really hard to get used to doing things like, ‘Go to the bakery and get a treat for myself,’“ she said. “We really haven’t been in a position to get friends and family birthday and Christmas gifts, and it really bothered me, so I definitely did it this last year.”

A college education meant a ticket to a better life, Sacramento residents who spoke with The Bee said. For many, forbearance opened the door to the lifestyle they expected for the first time. Some squirreled away hundreds for a home down payment or a rainy day fund. Others paid down credit card debt. Making everyday purchases became less stressful.

About one in seven people in Sacramento County have student loan debt, according to credit bureau data analyzed by the Urban Institute. The median student loan debt is roughly $18,000, and median monthly payments are around $140, according to the Urban Institute.

Forbearance had previously been set to end in February, but in a last-minute announcement in December, the Biden administration extended the freeze on loan payments until May. It was a welcome reprieve to those saddled with thousands of dollars of debt and interest. But it also delayed what many sense is the inevitable — a return of payments and interest, potentially with no student loan forgiveness.

Carl Arana went back to school after losing his job about 10 years ago. A longtime musician, he attended Pinnacle College, an audio engineering school that shuttered a few years later.

“We got our certificate and got the education you paid for,” Arana said, “but it’s not a great mark on your resume talking about getting trained at an audio school that couldn’t stay in business.”

Graduating with about $15,000 in debt in 2011, he managed to pay down the balance to roughly $10,000 before forbearance kicked in. His monthly payments haven’t been large, he said, but he had remained hopeful that some kind of forgiveness program would wipe out his balance completely.

When President Joe Biden was running for office in 2020, he had pledged to cancel at least $10,000 of student loan debt per person, with the remainder of loans forgiven after 20 years of payments. But Arana has become increasingly demoralized that a forgiveness plan has yet materialize.

“You move on with your life without thinking about those payments, but then emails started coming in about six months ago,” he said. “Now it’s something I have to factor into the budget.”

Will student loan forgiveness help?

Not everyone sees forgiveness plans as a panacea for their financial debt. Like many millennials, Cait Fournier finished her undergraduate degree in 2009 during a cratered economy, and ultimately went back to graduate school, which makes up the bulk of her six-figure debt.

Because of how large her debt is, she’s always known that the only way she could manage her loans is by getting a job that would be eligible for the federal Public Service Loan Forgiveness program.

She now works a PSLF-qualifying government job providing mental health care services to underserved residents, a career that she knows serves a vital public good. But she also knows that if she didn’t have to make monthly payments, “a good portion of that money would go right back into the economy,” Fournier said.

“We started off our adult careers already saddled with debt,” Fournier said. “It’s always this ball and chain tied to me. There’s no way to look at six-figure debt and say that doesn’t hold you back.”

Before the recession, Heith Ballin was in car sales, raising his oldest daughter with his then-wife. When the economy fell through and the industry became too competitive, he decided to get a college degree. Ballin was determined “to create opportunities where I could not be knocked down like that again,” he said.

After earning an associates degree in 2011, he later transferred and graduated from California State University, Sacramento in summer 2015 with a degree in electrical and electronic engineering, which left him with over $70,000 in debt.

Now 40 years old, Ballin has since remarried and had two more children. He’s got a well-paying job, but his anxiety remains high “all the time.” He’s been trying to buy a house, but the market has become increasingly impenetrable. The first time his family went on vacation was in December 2019, a trip to Disneyland, “and we sacrificed Christmas for it, we didn’t do gifts,” he said.

“I never thought I’d go to college and still not have enough money to afford a house so my kids can each have a room,” Ballin said. “The quality of my lifestyle does not match my expectations of college returns.”

Forbearance has eased his financial burden somewhat, he said. But when it ends, Ballin said he will likely be making even higher monthly payments than before the pandemic.

“I made all these decisions and I feel regret,” Ballin said. “I don’t feel that sense of accomplishment because of the constraints placed upon me.”

Jess Milbourn is known now largely by the popular ice cream shop Devil May Care he runs in downtown Sacramento. But when he graduated in 1999 from the University of Redlands, his initial plan was a career in law.

Ultimately realizing he didn’t have the “temperament” for law school, he set his eyes on culinary school instead. He can’t remember how much he initially borrowed, he said, but he does know how much debt he has now: About $100,000, mostly from his undergraduate education.

“My thought then was, ‘Of course I’ll be able to pay it off,’“ he said. “But you don’t understand the gravity of what you’re taking on.”

Business is better now, and federal COVID-19 relief money has helped. But Milbourn said foot traffic and spending at the shop has yet to return to pre-pandemic levels. When forbearance ends, he said he’ll likely continue not to make the $200 monthly payments, opting to prioritize utility bills, mortgage payments and food.

“It’s Maslow’s hierarchy of needs, and student loans aren’t on it,” he said. “There’s obviously interest and late fees, but when it comes down to the consequences of (not paying) electric bills and mortgage payments, those are severe and instant. I get a mark on my credit report, but it’s not an immediately felt impact.”

As for Snow, she recently took a pay cut, but her new job is with the federal government, making her loans eligible for forgiveness in about nine years. Still, she feels a sense of hopelessness about her and her husband’s financial situation. She dreads when payments restart and hundreds of dollars are no longer in hand each month.

“We’ll definitely die without our debt,” Snow said of her and her husband’s student loans. “Maybe it’s dramatic, but that’s how I feel.”

A few weeks ago, the couple picked up a pricey framing project from Michael’s that they had been putting off. It was their degrees, Snow said, a Christmas gift that her family ultimately pitched in on.

This story was originally published January 13, 2022 at 5:00 AM.