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Brian Lehrer: Brian Lehrer on WNYC. There's good news and some bad news if you have student loans, it depends on who you are. Yesterday, President Biden reversed a Trump Education Department policy that will allow up to a billion dollars in student loans to now be written off for students who had been defrauded by for-profit schools. COVID relief bills have included suspending interest accrual and payment requirements for many federal student loans. That's now extended through September.

While those actions are helping many of the borrowers who are struggling to pay off the sometimes crippling debt in the sometimes financially crippling pandemic, they don't cover everyone, including at least one of our own here at WNYC.

Maybe you saw the New York Times Op-Ed last week by Molly Webster, senior correspondent at RadioLab, the title, "I’ve Spent $60,000 to Pay Back Student Loans and Owe More Than Before I Began". She shared her particular story, but it's bigger than one person. She joins us now to talk about her story and that of the millions like her ineligible for federal relief. Hi, Molly.

Molly Webster: Hi, Brian, how are you?

Brian Lehrer: Good. You called your student loan debt, "your secret shame." You want to start at the beginning with what you borrowed, and when?

Molly Webster: Yes, let's bring this shame to light. Yes, basically, I went through undergrad where I got a degree in biology. Then I went through grad school, where I got a degree in science journalism, and I came out of those two institutions with $78,000 in loans. Basically, you get into repayment, you can use economic deferment for a while before you have to start paying back, but then once all of the loans came due, the reality of those loans became very clear, which is some had interest rates on the federal loans that were as low as like 2%, and then a bulk of the loans sat at like %6.8 and %8.55.

Suddenly, having all those loans due just like kicked off a cycle of, "How am I going to pay for these things. If I can't pay for all of them, then what happens?" In that cycle, my balance went up and up and up, and up and up. At the end of the day, I've paid $60,000 into the $78,000 worth of debt, and I still owe 100,000.

Brian Lehrer: Wow. You thought, "I know, I'll go to work for RadioLab and get rich."

Molly Webster: [laughs] Yes, thank you, public radio listeners.

Brian Lehrer: You call your student loans, Goldilocks loans in your piece, because they aren't quite private and not quite public, which makes them ineligible for COVID relief, these sort of reverse Goldilocks. Explain their hybrid nature?

Molly Webster: Yes. The way the loans work is, the loans I have are actually federal loans. They're subsidized and unsubsidized, like Stafford loans. These are very familiar terminology, if you go into education, and you need a loan to get through a program. The particular program that I signed on to is something called the Federal Family Education Loan Program, or FFEL is what everybody calls it. These were federal loans that were given to borrowers, but were given by commercial banks, and were backed by the federal government. There's other federal loans that were actually given directly from the Department of Education. This batch of FFEL loans in which you have a commercial lender giving you a federal loan lasted for about 25 years.

Then in 2010, when Obama and his administration undertook things like the public loan forgiveness program, they also made moves that said, "Okay, we are no longer going to have commercial banks in the federal loan business." Moving forward from 2010 on, if you get a federal loan, it will be from the federal government, and if you get a private loan, it will be from a private bank. That left all of me and my fellow people who had these loans that were commercially given but federally owned. What the government did there was they bought some of those loans back from the commercial banks, so they became Department of Education loans, and others they did not buy.

Actually, they did not buy like 6 million of them, and so that's the Goldilocks loan. It's a loan that was promised as a federal loan, was given by a commercial bank, and then in 2010 with policy changes, was abandoned by the federal government or exists in this like weird second federal type loans space, which I call the Goldilocks loan, in that, it's like not quite private, not quite federal, and it definitely doesn't help anybody.

Brian Lehrer: Yes, but it's reverse Goldilocks because instead of being just right, it's just wrong.

Molly Webster: You don't find the good [crosstalk] [laughs] Yes.

Brian Lehrer: 6 million people in this position, you say, if we have any of those other 6 million people who happen to be listening right now, and you want to chime in, if you're in Molly's situation with loans that didn't end up owned by the education department, do you want to share your story? 646-435-7280, or ask a question. 646-435-7280. I gather it's not just the relief in the CARES Act that loans like yours aren't eligible for either. Aren't there are other options like tying payments to income with full forgiveness after 25 years?

Molly Webster: What I bumped up against with the CARES Act when my loans didn't qualify for the CARES Act was a surprise, but it wasn't the first time my loans hadn't qualified for something. I first bumped into this when the loans didn't qualify for the public loan forgiveness program, which is like if you work at a nonprofit, you could clear loans after 10 years of steady payments.

The bureaucratic reasons for why one falls into some of these programs and not others are pretty complicated, but by the time I got to the CARES Act, I just thought, "Why am I never qualifying for federal relief?" Which is what made me start then doing some more thorough reporting to actually figure it out, and realizing, "Oh, my gosh," like everything changed in 2010 and I'm caught in this loophole.

Brian Lehrer: Is there a way out?

Molly Webster: Is there a way out? That is a complicated question. There's an option for some people who are in this space, where they can do something called a direct loan consolidation, which is essentially applying to have the federal government buy back your loan, which they originally owned and should still own, but don't.

Not everybody qualifies for that, though, and there are trade-offs with that direct loan consolidation. For example, with the loans that I have left, if I was eligible for a direct loan consolidation, the way that they determine the interest rate of that consolidation is a weighted average of all of the interest rates you have and the different principles you have on all those interest rates.

For me, if I did a direct loan consolidation, I would consolidate at a little over 7% on the loans. Then you think, "Okay, at that point, should I just go to a private bank and just like officially pull these out of a federal system and get a variable interest rate that's based on my credit score, and would be much lower."

Brian Lehrer: Can President Biden change a rule to fix this? I'm sure he would not. Maybe a reporter will ask him this question at his first presidential news conference tomorrow, but I'm not sure that it'll make the cut. I gather, you went public with your own story to draw attention to this situation, these particular student loans fall through the COVID relief bills cracks, can he do it?

Molly Webster: He could potentially do it. Listen, I'm not [chuckles] a politician or an economist by any stretch of the means, but I do have a call in my article, which is for the Biden administration and for Congress to fully recognize that this second type of federal loan exists. Frankly, when you talk about the student loan system, you talk about federal loans and private loans. No one's saying, "Oh, actually, there's also this third type of loan, and that borrowers need to know that."

The reason we have this third type of loan is because of previous White House policies. I think there is a real way for the White House to figure out how to fix the policy, and I also think there's probably a much larger conversation to also be heard about interest rates that are set by Congress. Like, every time I log into my student loan account, there's a bunch of red fonts that are boldface that let me know I can't negotiate my rate because it's set by Congress.

Brian Lehrer: Okay. All you White House Correspondents listening out there right now, ask Molly's question at the news conference tomorrow. Danielle in Brooklyn, you're on WNYC ready to commiserate Molly. Danielle, you're on the air. Hi.

Danielle: Hi, Brian. Yes, I'm so honored to be on. Thanks for taking my call and putting me on. I was telling your screener that we just found out on Sunday that my wife has one of those Goldilocks loans as she calls them, where she took out the loan with the federal government as an undergrad and it's since been sold to a private company and so now she has this privately held federal loan that doesn't qualify for any relief.

She works a job where she would ordinarily qualify for public service loan forgiveness, but because of the way that they sold off this loan, which is not what she agreed to when she took it out, we've just been stuck and we were really unsure with the rest of her loans, how we'll ever be able to pay them off.

Molly Webster: Yes, it's so interesting I've been hearing from a lot of people since the essay published, who are swimming, anyone from $78,000 and they've put $50,000 on and a very similar situation to mine, they can't get through it, to friends whose loans have ballooned in various ways to $200,000 or $300,000, or just think, "I'm going to be paying this loan till I'm 85, even if it's still below $100,000 at this point, I just can't figure it out."

Brian Lehrer: Bob, in Queens, you're on WNYC, hi Bob? Bob, are you there? Bob once, Bob, twice. Elizabeth, on the lower East side you are on WNYC, hi Elizabeth?

Elizabeth: Oh, hi. Thanks for taking my call. Hello? Can you hear me?

Brian Lehrer: Yes, we got you, yes.

Elizabeth: Okay, good. I'm calling because my story, as you can imagine, goes back aways, but I'll try to cut to the chase, which is that I was in grad school supporting a family of three with my student loan, which I was taking out about $8,000 a year and then it took me eight years to finish my dissertation.

When I finished, of course, it went into having to be paid so I made 48 payments at the minimum amount and ended up at that point owing more than I had borrowed and feeling like I was swimming in debt. I had a recommendation to consolidate my loan and my fed loan and apply for public service loan forgiveness, because I'm teaching at an urban private college that works with first-generation college learners and so I qualified.

Now if I had been a public school teacher working with the same population at about the same age of people in high school, I probably would have had the loan wiped out. However, because I work at a private college with a low salary, I still need to pay for 120 months, which is a wonderful thing, it's a lower amount than I would otherwise be paying but at this point, I went back to grad school later in life and I'm going to be at retirement age when this thing is wiped out, so I'm going to be paying monthly.

Again, I think my loan now is in different hands than the federal government, so I don't qualify for any kind of relief.

Brian Lehrer: Was any of this something you could anticipate? The pandemic aside, but the way this has gone financially for you. Is there a lesson in your experience for others before they do it?

Elizabeth: Oh, a lesson? Okay. [chuckles] I can hear the judgment in your voice, but --

Brian Lehrer: No, but it could be a policy lesson or a personal lesson.

Elizabeth: A policy lesson. Well, yes. I would say that matriculation and fees at a doctoral level should not have to be paid and I think that loan relief, there shouldn't have been interest on it and then I would probably have been able to pay back what I borrowed, but at this point, I owe a lot more than what I borrowed.

Brian Lehrer: Elizabeth, thank you and let me get Molly to comment on that. We're going to run out of time in a few minutes. I think there's at least one parallel with your story if I understood her story well, and I realized there were some moving parts there, but I think one reason you wrote that you're in the boat you're in with having paid so much and still owing so much more than you borrowed is because of deferments where you can stop paying, but interest keeps accruing.

Molly Webster: Yes, part of what happened to me and this is interesting, because they say, if you get a federal loan, you'll have more repayment options. One of those repayment options is something called forbearance, which is, you can not pay the monthly payment, you won't be put into default, but the interest that accrues that month will be added to the principle, driving your principal higher than your next monthly payment is technically going to be higher.

That system was often presented as a relief, even on the student loan website, it's like, "Do you need temporary relief? Maybe you should try forbearance." You think you don't really realize what's you're fully walking into and then it just makes me think like, is that really our best repayment option?

Even though there are income-driven repayment options, but even with those, it felt like it wasn't actually based on what my income was, it was based on, if you had to pay for no other expenses, how much could you put on student loans? It was still out of my reach even as income-based repayment and then, so I thought, okay to not default, I'll forbear and tumbled down the Hill.

Brian Lehrer: I was thinking of something like that, listening to Elizabeth's story, not judging her when I asked about how much of it was foreseeable. I understand from your story, that these hardship deferrals, which are supposed to be trying to take it easy on students in certain respects can have these consequences with interest accumulation, partly because they're not spelled out before you agree to them?

Molly Webster: Part of it is it's not spelled out, part of it is how much did I fully take on understanding the compound interest in what was really happening? Part of it was like the ease with which it was like I could forebear and then go watch a television program. [laughs] Complicated systems were presented with all the trappings of what's to come.

I think also there's just like this question and I said this in the piece is, there was a time when having a federal student loan really meant something, it meant a certain level of protection, it meant certain options on repayment programs. I think for me, philosophically, as I'm writing this piece, it's like a question of, do federal student loans still mean that?

Brian Lehrer: Yes, and in our last half minute or so, I don't know if you've read the comments section of your time's Op-Ed?

Molly Webster: I dipped in and out.

[laughter]

Brian Lehrer: Sometimes it's good to avoid, right? Like Twitter--

Molly Webster: I had friends screen.

Brian Lehrer: There are those who take issue with anyone wanting to get relief from debt that they feel that you freely took on and there are those angry that you aren't demanding canceling all student debt. Beyond this loophole that you've identified, have you given some thought to what student loan relief could do? 20 seconds.

Molly Webster: Yes, listen, I don't think any of us should be naive, like some of us borrowed money, there's probably going to be a cost attached to that. Does the cost need to be 8%? Probably not. Could there be better payment options systems? Yes. Should my federal government have changed the rules on my loan midway through my loan? No.

Also, I think colleges and the federal government can move more towards grant funding programs and less towards loan programs, also why is college so expensive? Change in the interest rates, those are my thoughts.

Brian Lehrer: Molly Webster in real-life, senior correspondent for Radiolab, and now writer of the New York Times Op-Ed on student loans. Thank you so much.

Molly Webster: Thank you so much, Brian.

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