The United States of America vs. Tresa Lasley was just one lawsuit that crowded the docket of New Mexico’s federal courts last year. But unlike many of the defendants against whom the US Attorney Kenneth Gonzales’ office proudly touts its victories, Lasley is no murderer, child abuser or drug trafficker. She’s a disabled grandmother who failed to keep up on her payments of $67,782 in student loans—and one of 13 New Mexicans Gonzales’ office has quietly prosecuted for defaulting on their student loan debt since 2011.
Lasley, who lives near Farmington in the small town of Bloomfield (pop. 7,968), says she believes in “honoring my debt”—even when the money she borrowed didn’t benefit her directly. In 1990, according to court documents, Lasley took out a $4,000 loan for her daughter to attend the Phoenix Institute of Technology. In 1996 and 1997, she took out another $9,655 in loans, this time for herself to attend Fort Lewis College in Durango, Colo.
Lasley defaulted on both loans in 1999, documents show. Eventually, in 2004, she entered into a repayment program offered by the federal government, consolidating a total of $29,104 in student loans. In her program application, Lasley, then 55, listed $564 in monthly Social Security disability payments as her sole source of income. She defaulted on the plan the next year.
Lasley used the student loans to finance her education in psychology at Fort Lewis College. She eventually got a bachelor’s degree and had a promising internship at Napa State Hospital in California, she says, until major surgery on a bowel obstruction interrupted her career. Then, she says, “congestive heart failure kicked in.” Now 64, she’s unable to work.
“I still have days where I’m not OK,” Lasley says. “I’m just not OK. And those days find me in my bed, resting.”
Lasley’s story offers perhaps a worst-case scenario for a generation of college students financing degrees with tens of thousands of dollars in student loans.
Lately, Congress hasn’t been helping the situation. On Monday, after Congress failed to reach an agreement, interest rates doubled to 6.8 percent for undergraduate subsidized Stafford loans—need-based federal loans offered to millions of low-income students. House Republicans wanted to tie student-loan interest rates to the US Treasury’s shifting interest rates. While they also proposed capping student-loan rates at 8.5 percent, Democrats in the Senate didn’t like tying them to the whims of the financial markets, and instead sought to temporarily extend the previous 3.4 percent interest rate. President Barack Obama has espoused a plan somewhere in the middle.
If Congress acts, it could push student-loan interest rates back down to previous levels—but so far, that hasn’t happened.
And it’s no comfort to New Mexico students caught up in what some experts are calling the student loan bubble. Nationally, in 2012, student loan debt—now more than $1 trillion—surpassed credit card and auto debt. It’s the only form of consumer debt that’s increased since the financial collapse in 2008, according to a recent New York Federal Reserve study, and the largest form of consumer debt in the US besides mortgages.
While data on student debt was not available for all New Mexico campuses, the Project on Student Debt offers a glimpse at the challenges many graduates face. In 2011, for instance, students at Western New Mexico University graduated with an average debt of nearly $27,000. That’s slightly higher than Santa Fe’s St. John’s College. There—also in 2011—the total cost of attendance was $53,586, according to the college, and graduates averaged $23,973 in debt. That’s generally on par with the national average for 2011 graduates: $26,600 per student, a 5 percent increase over 2010.
“The accessibility of this kind of education is becoming more difficult,” says Gabe Gomez, spokesman for St. John’s. Gomez notes that in counseling students on financing their education, student loans are viewed as “a tool” in a larger package of scholarships and grants offered by St. John’s and the state. “Loans are obviously part of the conversation,” he says, “but it’s not a solution.”
Officials at Santa Fe Community College also cast student loans as a last resort. Scott Whitaker, the director of financial aid for SFCC, says about 1,200 of the college’s 6,000 total students take out loans to finance their education. Most of those students graduate with about $7,000-$8,000 in debt.
Whitaker says his office is taking a new approach to teaching students about the intricacies of student loans. Previously, SFCC allowed students to take an online course about student loans before they borrowed. But Whitaker found that students typically rushed through answers, so SFCC is shifting to in-person counseling. Whitaker says they made the shift in an attempt to lower the college’s default rate—the rate at which graduates default on their loans—which recently jumped to 12 percent from around 5 percent.
“I think that a lot of the students I see, when they’re taking out student loans, they’re really not thinking about the future,” he says. “They’re thinking about right now.”
And as Congress squabbles about interest rates, lawmakers might be missing a wider point: students are taking out tens of thousands of dollars in principal—the amount of money actually being borrowed—each year. Even paying back $26,600 without interest can leave students on the hook for $2,660 annually, or about $222 a month, in a 10-year repayment plan.
Just ask Lasley: Even without any interest at all, she would still have to find a way to pay back a whopping $46,785.
To make matters worse, student loan debt—unlike other types of debt—is extremely difficult to discharge in bankruptcy proceedings.
Reflecting, Lasley says she “could have done things differently.” But she’s certain about one thing: Students, paradoxically, are being told they have to “borrow more money so that you can make more money.”
“It almost feels like a scam,” she says.