Degree of debt: Woman struggles to pay $200k in student loan debt

Degree of debt: Woman struggles to pay $200k in student loan debt
Updated: Nov. 8, 2017 at 4:41 PM EST
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WILMINGTON, NC (FOX WILMINGTON) - It's a problem facing a growing number of people who went to college: staggering student loan debt. A Wilmington woman has reached her wits' end trying to pay off nearly $200,000 in student loan debt with a $38,000 salary.

Dianne Phillips started college later in life after going through a divorce. She took out a student loan in 1999 to begin a 2-year medical assistant program at Miller-Motte Technical College. After finishing her training, she struggled to find a job in that field locally that paid much more than minimum wage so she turned back to school to improve her prospects.

Phillips says Cape Fear Community College told her even though she'd passed her national board exams, none of her credits from Miller-Motte would transfer to the CFCC nursing program. She wasn't even allowed to test into the program so she found another school.

"This is where the system gets you, with student loans," Phillips said. "Mount Olive said they would take my degree from Miller-Motte. At the time, Miller-Motte was accredited, but it wasn't accredited through the same system, Southern Association of Colleges and Schools, as Mount Olive, so I got into the program, and probably was about two or three quarters in and found that none of my classes from Miller-Motte were going to transfer, which meant that I had to redo a whole two-year program at Mount Olive."

Phillips got good grades while completing her four-year degree from the University of Mount Olive, this time with a Bachelor of Science in business administration. The extra degree contributed significantly to her debt, and Phillips says her job prospects upon graduation were still underwhelming.

"That didn't open the job market the way I that I expected it to open for myself, so at that point, I thought, 'Hey, I've gone this far, might as well go and get a master's degree,'" she explained.

In 2007, Phillips began working toward a master's degree in applied gerontology at UNCW, but when she tried to get a job as a social worker, Phillips says she was told she didn't have the right credentials and needed a different master's degree.

Phillips ended up taking a job at a call center. She said she's never been happier, is excelling at her job, and feels valued by her new employer. But she can't help but see the irony that she's working in a field unrelated to any of the degrees she took on so much debt to get.

"It's definitely something that I sometimes wonder, 'Wow, did I really waste all this money, when sometimes, just off the street, hands-on working experience might have prepared me?'" she said.

Phillips says the training she received at Miller-Motte cost $15,000, but she borrowed more money than the cost of tuition alone: $32,878 over the course of four years going to night school to get her certificate.

When Phillips decided to continue with school after finishing at Miller-Motte, she was allowed to defer repaying her student loan debt until she reentered the workforce.

Phillips borrowed an additional $51,920 while attending school at Mount Olive, and another $54,339 to get her master's degree at UNCW.

When the student loan bills started coming due around 2013, she quickly became overwhelmed trying to repay them, and meet other living expenses, with her $38,000 salary. Within two and half years, the student loan debt escalated to default and garnishment.

With interest and fees, Phillips' debt on the $139,137 she borrowed has now ballooned to $194,774.

"Sometimes it's really hard, because you look at your paycheck and see that they're pretty much taking $400-$500 out (in garnishments), and you're like, 'Why am I even bothering to come to work?'" Phillips lamented.

She initially took on overtime to try to make up for what was being taken out of her paycheck until she realized the creditors garnish most of that too.

While the amount Phillips owes is much higher than average, she is not alone under the crushing weight of student loan debt. Student loan experts say of the 44 million Americans with student loan debt, about 10 million are in default.

"This is not a bad borrower problem," Alan Collinge, an advocate with Student Loan, said of the root of the problem. "The students are the same today as they have ever been. They're hopeful, they're optimistic, they're good faith. They trust their university and they trust the government, and so they will sign whatever is put in front of them in terms of lending papers."

"What has changed is the Orwellian, and I would say even maybe oppressive structure of the lending system," Collinge added. "Student loans are the only type of loan in our nation's history to be stripped of the bankruptcy protection."

In addition to the lack of relief for students who get in too much debt without sufficiently gainful employment to pay it off is the skyrocketing cost of college.

"I think their mission is to make money. They see students as a sort of ATM card for them or a piñata, if you will, by which they can extract vast sums of federal loan money into their coffers," Collinge said, adding that he saw this as a "predatory lending environment" that the government has failed to rein in.

Ben Miller, senior director for post-secondary education at the Center for American Progress, notes that even if students default on their loans down the road, the colleges have already been paid.

"They sort of don't really have to care," Miller said. "I mean, they get the money, they get the revenue, and that's it. We probably need to move to a system where schools have a little bit more skin in the game about what's happening with the debt."

Miller says state governments aren't chipping in to subsidize the cost of college like they used to, and in recent decades, colleges have been passing more of the expenses onto students.

"I think the big problem we have is that student loans were originally intended to help sort of middle-income families finance college, and as the cost of college has kept growing and growing well past family income, we've turned student loans into an access tool as well as a financing tool," Miller said. "We're forcing people to borrow for their education that in the past we would have given them sufficient grant payments or charged them a low enough price (so) they wouldn't have had to."

Miller says the growth of private, for-profit colleges is also a factor.

"They're your University of Phoenixes, your ITT technical institutes, etc., where essentially (students) borrow a lot of money for credentials that don't necessarily have the value that the cost asks of them," Miller said. "If they're asking you to pay $40,000 and a local community college is asking you to pay $10,000, just that price difference is really hard to make up with a good job. You're not going to get a job that pays you four times better."

Miller says colleges also used to be more selective in their admissions process, and relaxed standards have brought people into the college system that are not as likely to find lucrative employment once they obtain their degree.

"A lot of (colleges) changed to sort of a take all comers approach, where anyone with a pulse they would aggressively recruit them and bring them in the door. That really led to a lot of problems, people taking out debt and attending programs they probably shouldn't have been," Miller said.

UNC Wilmington is quite selective in which students it accepts, but its is familiar with the struggle many of its graduates face when it comes to paying off their student loans.

The average student loan debt for graduates at UNCW is $25,000, which is slightly below the national average of $28,000.

Dr. Rich Ogle, an associate provost at UNCW, says the school has many programs in place to help students be smart about how much they borrow.

"In the context of an undergrad decision, it is often the first time that an individual is really out on their own and making their own adult decisions," he said of why they provide counseling to students who are new to the world of borrowing money. "Making sure they understand that one, (the loans) will have to be repaid, and two, it's kind of like a credit card in that the balance can keep building and building and building."

Because today's graduates will often change career paths at least once over the course of their lifetime, Ogle says they try to make sure their undergrads in particular learn soft skills that will be marketable in any field. Writing, verbal communication, data analysis, and interview skills are taught to increase students' chances of landing a job and succeeding in that job, even if it isn't directly related to their major.

But when it comes to more specialized graduate programs, Ogle says students have to be more careful that a degree is worth their time and money, and specifically aligns with the career they are pursuing.

"This is a great investment. At the same time, you can't invest it in a risky way. You have to invest smartly," Ogle said. "In the long run, what you'll earn will still be more (than the cost of your degree). That's the goal. That's what we counsel them to so that that remains the truth."

UNCW, Mount Olive, and Miller-Motte College all say they offer financial aid counseling to students. Mount OIive and UNCW added that they encourage students not to borrow more than they need to cover the cost of attending school. While it can be tempting to take extra financial aid money that is offered over the cost of tuition, it can also add a significant burden to the debt that later must be repaid.

There are also federally mandated caps on how much students can borrow. For undergraduates under the age of 24, the limit is $31,000. Once independent, this changes to $57,500.  For graduate students, the cap is $138,500, including the amount borrowed for undergraduate studies.

Phillips is trying to find a way out of her debt disaster, but it isn't an easy path. She's attempting to enter a student debt rehabilitation program but says the fees she's being charged to participate are unrealistic on top of her existing garnishments.

In addition to the $250 garnishment per paycheck for her Miller-Motte degree, the NC Education Assistance Authority, which took over the loan when she defaulted with The College Foundation of North Carolina, is asking her to pay $255 a month for a period of time before they will stop garnishing her paycheck. She's also garnished $150 a month for the debt on her Mount Olive and UNCW degrees.

"It almost seemed like (the NC Education Assistance Authority) wanted me and encouraged me in their letters to just let them garnish me for 15 years at the rate they are doing, and then it would be paid off," Phillips said, wondering if they were making it intentionally difficult for her to rehabilitate her loan so they could continue to collect garnishments.

Phillips has legally separated from her husband in part because of the stress this debt put on their marriage, and so the creditors wouldn't go after his income too. She fears this will be an issue that plagues her for the rest of her life.

"I just turned 50, and they can garnish my social security. I mean, I don't have a life, I can't do extra stuff for fun and you can only eat so many Ramen noodles," Phillips said. "You'll see me at Walmart when I'm 90 being the greeter. I mean, this is how I feel. I am in a trap."

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