Student loans: Interest rates keep borrowers in the hole

A year ago last week, I officially started paying back my student loans. Although I finished my undergraduate degree in December 2010, a unique set of circumstances allowed me (or forced me) to put off my payback for a number of years. Upon graduation, I immediately enrolled in grad school, and with the help of a scholarship was able to pay for that tuition out of pocket. Because I was still a student, I did not have to make payments on my undergraduate debt during that two-year endeavor — not that I could have afforded to.

Immediately after grad school, I took a teaching job in Mexico, and while it paid plenty to enjoy a comfortable standard of living down there, it certainly did not leave me with enough pesos to pay back my growing debt up here. When converted into dollars, my salary qualified me for what the banks called "financial hardship," allowing me a yearlong grace period to get it together, financially speaking.

That ended last October. Between my three banks, my total student loan debt as of Oct. 17, 2014, was $82,961.02. That's how much it cost me to get a B.S. in social studies education from Minnesota State University, Mankato.

It was worth every penny. My education readied me not only for teaching but for life. I am a better person today because of the things that I learned at Mankato, and the knowledge and skills behind the paper diploma I received.

Do I wish that it had cost me less? Yes. Do I think that it should have cost me less? Absolutely. Higher education is way too expensive in this country, and even though my debt is partly the result of more than three years of untouched accumulated interest, it's still a travesty that anyone could end up $80,000 deep for a four-year degree from an in-state university. That said, if I could go back in time and see that price tag, would I still do it? You bet.

Here's the part that really makes me mad: For 12 months, I have been making student loan payments of just over $500 a month. That means that over the course of a year, I put about a $6,000 dent into my student loan debt, or so I thought. On Oct. 17, 2015, a year to the day after I began paying off my loans, my total student loan debt was …

$82,264.27

If you don't have a calculator handy, that adds up to just under $700 less than I owed a year ago— $700 out of the $6,000 I put in that actually went toward reducing my debt. That's about 11 percent of the total amount paid, just enough to reduce my total debt by almost 1 percent.

Where did the other 89 percent ($5,300) go? Interest.

That's messed up. I mean, c'mon, man, I understand interest. That's why loans exist. The lender needs to see a return on their investment. I get it. But this is more than a return. This is a rip-off.

Full disclosure: I am making minimum payments. Had I chosen a different repayment plan and paid a little more each month, that huge debt would undoubtedly be just a little bit slighter, the percentage reduction a little bit greater. But the key words are "a little bit." Either way, the lenders still win big.

And those other repayment plans sucked anyway. Could I afford a little higher payment if I cut out some social outings, canceled next summer's travel plans, and scratched my monthly subscriptions to HBO and the WWE Network? Yeah, probably. But I enjoy those things, and I don't want to sacrifice the quality of life that I enjoy today just so I can pay my loans off by the time I'm 48 as opposed to 52.

Some people say that these things are not mutually exclusive — that you can spend for today while also saving for tomorrow. That might be true if you're making bank, but it's not exactly true if you're not. Every dollar spent now is a dollar not saved for later. Every dollar saved for later is a dollar you can't spend now. And when you don't have a ton of money left over at the end of every paycheck, this does turn into an either-or scenario. Either you enjoy life now, or you enjoy life later. In other words, you're either making bank, or you're making decisions.

At the end of the day, I don't expect people to feel bad for me, a middle-class white guy who, immense student loan debt aside, has it pretty good. However, I do expect people to be angry at those financial institutions that are keeping me, and millions of others like me, from having it a little better. Those white-collar crooks who rig the game in their favor and then force us all to play. Those lenders who are preying on the vulnerable, exploiting those in need of help for their own personal gain, and exacerbating the enormous gap that already exists in this country between the haves and the have-nots.

As for me, I'm hoping our political leaders will figure something out, that they'll come up with some kind of combo-platter solution that offers forms of student loan forgiveness mixed with caps on the exorbitant interest rates our lenders currently are allowed to charge. Until then, I'll just continue being one of the millions of screwed-over young adults in this country, lucky and privileged enough to receive a college education, but not blessed enough to be born in an era where this kind of exploitation has been outlawed.

Bill Boegeman, of Minneapolis, is a social-studies teacher.