Opportunities and Challenges in the Era of the Student Debt Crisis
Clinical Impact Statement: This manuscript provides detailed information about the scope and inequity of the student loan debt crisis in professional psychology. Details are provided about student loan repayment programs for which psychologists are often eligible, and limitations to these programs are also described.
Student loan debt in the United States has been approaching crisis proportions since at least the early 2000s, but it is relatively recent that we in psychology have started to recognize the scope of the crisis in our own ranks. My research (Lantz [Wilcox] & Davis, 2017; Wilcox et al., 2021a, 2021b) has demonstrated that we have a serious student loan debt problem in professional psychology: The most recent overall mean student debt at graduation was $126,205 (SD = 110,612; Wilcox et al., 2021a). As that standard deviation suggests, however, it is very difficult to make inferences from averages; that is because the student loan debt crisis (generally, and in psychology specifically) is an inequitable problem. Some students borrow much more than the mean, and other students hardly borrow at all. Students of color and lower socioeconomic status students must borrow more (Wilcox et al., 2021a); in broader national samples of graduate borrowing, women must also borrow more to complete their degrees (Lantz [Wilcox] & Davis, 2017). Psy.D. graduates borrow even more on average, but borrowing across the board is high. Further, it is not just direct educational costs driving the student debt crisis. Often, costs of living drive a substantial proportion of debt. Thus, students and early career psychologists (ECPs) are buried in student loan debt, but many would not have a pathway to and through professional psychology without borrowing. We have consistently found lower SES and first-generation students and early career professionals report having experienced greater personal and professional financial stressors during their doctoral training.
We have also found that lower SES students and first-generation students report a greater likelihood of delaying major life milestones (such as buying a home or changing jobs), specifically due to their student loan debt (Wilcox et al., 2021a, 2021b). Further, of the 200 ECPs in our sample, 46% reported that their degree of student loan debt substantially (moderately or more) limited their ability to participate in professional conferences and meetings; 30% reported working in a job they were not happy in due to their student loan debt; and 21% reported avoiding changing jobs due to the cost of relocating specifically as a result of their student loan debt. The student loan debt crisis harms those who need to borrow, and it also harms the profession.
The result of this crisis is a generation of ECPs who are entering their careers highly educated and skilled yet facing substantial financial precarity. Indeed, the Federal Reserve Board has found that the millennial generation is the most highly educated, yet also the most indebted and poorest (in income and wealth) generation to date (Kurz et al., 2018). Some ECPs may even be starting their careers already experiencing burnout, given that many students who must borrow more in student loans also may work more during their doctoral program in order to make ends meet (Lantz [Wilcox] & Davis, 2017). Even post-graduation can be a time of extraordinary economic stress as a result of repeatedly moving, licensing fees (e.g., application fee, fingerprinting, mailing documents, licensing exam fee[s], jurisprudence exam fee[s], oral exam fee[s] where applicable, background check fee[s], etc.), and for some, practice start-up costs and/or gaps between paychecks. Student loan payments ranging from hundreds to over a thousand dollars per month exacerbate this stress.
How Can We Deal with Student Debt?
Long-term, this is a systemic problem that requires systemic solutions. Graduate students need access to the financial resources (e.g., much higher stipends; good health insurance; professional development funds; access to low-cost resources) that allow them to both survive and thrive during their graduate training. Of course, stipend levels and benefits are often not within a program’s control; the low levels of average funding follow 40 years of ongoing intentional budget cuts to public postsecondary education (Goldrick-Rab, 2016). Additionally, subsidized federal student loans—meaning that interest does not accrue while one is still enrolled in school—need to be reinstated for graduate education. Student debt cancellation would improve the mental health of many students and ECPs and support their participation in the profession and the economy.
In the meantime, ECPs are still faced with their student debt burdens, and according to the APA Center for Workforce Studies, in 2015, the median salary for ECPs was only $60,000 (Lin et al., 2017). Here are some important things to know in more immediately dealing with one’s own student loan debt and helping others with theirs.
Negotiate For Your Worth
Many students and ECPs may not receive mentorship on what can and cannot be negotiated during a job offer. Each employer will have different restrictions and possibilities, but generally speaking, it is appropriate to negotiate salary, resources, and professional development funds. For example, in some settings, you may be able to negotiate for a laptop computer, professional development funds, licensure preparation fees (e.g., EPPP preparation materials), licensure fees themselves, and of course, more in salary than is originally offered. Confer with trusted mentors about what may or may not be appropriate or reasonable in a particular situation, and remember that your skills and experience are valuable. Sometimes, during negotiation, I refer to the research on the student loan debt crisis as well as the Federal Reserve Board research (Kurz et al., 2018) on the generational economic divide.
Student Debt Forgiveness Programs: What Is and Is Not Possible
There is a lot of confusion and misunderstanding about the available student debt forgiveness programs. In fact, the most widely applicable program, the Public Service Loan Forgiveness (PSLF) Program through the U.S. Department of Education, recently announced temporary rule changes because the administration of the program has, at least to date, resulted in most applications to the program being denied. These temporary program changes are great news for borrowers very close to eligibility, but most applicants will need to attend very carefully to PSLF’s rules and guidelines.
PSLF is designed to support the public service workforce pipeline. Individuals with student loan debt who work in qualified public service settings may be eligible. This includes state and federal government institutions, such as state universities; however, some private, not-for-profit settings may also qualify. Read the qualification criteria carefully, as you may be surprised to find that you are eligible—or you may wish to consider PSLF eligibility when considering job offers. If you are eligible and interested, you must then (1) formally enroll in PSLF, and (2) complete the regularly required paperwork (such as employer certification), and (3) ensure that your loans are placed on an income-contingent repayment plan. Once these steps are completed and maintained, borrowers must make 120 on-time monthly payments. These do not need to be consecutive. Once all steps are completed and 120 on-time monthly payments are received, applicants may formally apply for the forgiveness of all remaining federal student debt. Even if you think you have enrolled in PSLF, it is more important than ever to verify your enrollment periodically. Student loan servicing company Navient, which is ceasing its contract with the federal government, recently settled with the federal government regarding its lawsuit against Navient for misleading borrowers—including misleading them to believe they were enrolled in PSLF. Additionally, the sole student loan servicer that administers PSLF as of the time of this writing, FedLoan (a division of the Pennsylvania Higher Education Assistance Agency), has also announced that it will cease its servicing of federal student loans. Transferring the administration of PSLF to a new servicer may result in unanticipated hurdles. It will remain especially important to ensure that your loans are transferred to the correct PSLF servicer.
Of course, PSLF requires at least 10 years of payments. For ECP borrowers relying on PSLF, student debt will impact their entire early career. In Lantz [Wilcox] and Davis (2017), we offered an anonymous example of a Health Service Psychology ECP whose monthly payments under PSLF began at $320.98 (for a one-income household and $54,000/year; dual-income households and those with higher salaries would be expected to pay much more). To qualify for PSLF forgiveness, this example borrower would need to pay at least $38,517.60 over 10 years (again, for many, this would be much more). This is still an extraordinary amount of money.
Other Repayment Assistance Programs
The most promising loan repayment assistance program is one that is unfortunately reserved for researchers: The National Institutes of Health (NIH) Loan Repayment Program (LRP). This program is designed to foster the early career researcher workforce pipeline in support of the development of investigators who can go on to become highly NIH-funded. Official eligibility criteria include being employed in a research-intensive position at a research university; given the program mission, less officially, review criteria include the assessment that one’s institution can support an NIH-funded career long-term. Applicants apply to a specific NIH institute applicable to their research and apply as a “mentored” investigator if they have not personally received an NIH R01 as a principal investigator. As with NIH grants, it is crucial to connect with your institute of interest’s LRP Program Officer. Depending on the amount of eligible student loans you are holding, the LRP will pay up to $50,000 of your student loans per year for a maximum of four years (one two-year initial term and, if accepted, one two-year renewal). They will also pay your tax liability (of the award amount) to the IRS as this money will increase your taxable income by the amount received. In a recent webinar, NIH estimated that approximately 50% of LRP applications are funded each year. Applications are typically due in November. Review eligibility criteria carefully, start early, and again, connect with the LRP Program Officer of your program of interest.
There are other programs as well, although more limited in scope and level of assistance. The National Health Service Corps (NHSC) has a practice-oriented loan repayment program and a faculty loan repayment program. The clinical practice program will pay an initial $50,000 (taxable) of eligible student loans in exchange for a two-year employment commitment in an NHSC-approved underserved clinical site. If available, applicants may request one-year continuances until their loans are paid off; however, the amount of payment decreases year-over-year. NHSC will pay $20,000 each for years three and four and $10,000 per year after that. For those with substantial student loan debt, it may require many years of service at a lower-paying job to approach paying off their student loans completely. The NHSC faculty loan repayment program is much more difficult to access. Priority is given to applicants whose institutions will match (first priority to full match, second priority to partial match) the NHSC loan payments. Further, only applicants who can prove that they come from an economically marginalized background (per NHSC-approved evidence mechanisms) are eligible. The maximum is $40,000, 39% of which is sent directly to the IRS to cover tax liability. Thus, in addition to its restricted access, its assistance is limited. Beyond PSLF and the NIH LRP, many remaining programs share similar limitations to the NHSC programs; for example, while psychologists serving active duty in the military may be eligible for $40,000 in loan repayment (again, taxable), they may be required to forfeit other greater benefits and incentives.
The Need for Advocacy: The Problem Remains
Given the scope of the problem for many psychologists—and especially for graduates of color and those from lower socioeconomic status backgrounds—only PSLF and the NIH LRP provide substantial relief, and those programs also have their limitations. Students and graduates should begin thinking about loan repayment as early as possible while bearing in mind that their attainment is not a guarantee. Loan repayment programs are potential mitigation measures; they are not solutions. In addition to program restrictions that limit eligibility and scope of relief, they do not address the financial precarity and stress that students and ECPs experience in the interim. Research has shown not only that the debt burden itself is inequitable but that the stress experienced due to student loan debt more greatly burdens students of color (Tran et al., 2018). Additionally, international students do not even have the option of incurring federal student debt to facilitate graduate education. Thus, while it is important that we educate ourselves (and our students and colleagues) about these critical relief programs and their intricacies, it is even more important that we engage in advocacy at every level to address the systemic and structural determinants of this problem. In addition to the financial distress experienced by so many students and ECPs, increasingly, prospective students who become aware of the scope of the problem may opt-out of the psychology workforce pipeline altogether. Further, the inequitable nature of the problem is such that prospective students of color, low socioeconomic status students, and first-generation students may be more likely to decide against a career in professional psychology. If we want to protect the psychology workforce pipeline long-term, especially for those from minoritized backgrounds, we must address the affordability of graduate education with a particular emphasis on addressing costs of living and of the profession.
Cite This Article
Wilcox, M. M. (2021). Mortgaging careers: Opportunities and challenges in the era of the student debt crisis. Psychotherapy Bulletin, 56(4), 11-15.
Goldrick-Rab, S. (2016). Paying the price: College costs, financial aid, and the betrayal of the American dream. Chicago, IL: University of Chicago Press.
Kurz, C., Li, G., & Vine, D. J. (2018). “Are Millennials different?” Finance and Economics Discussion Series 2018—080. Washington, D.C.: Board of Governors of the Federal Reserve System. https://doi.org/10.17016/FEDS.2018.080
Lantz [Wilcox], M. M., & Davis, B. L. (2017). For whom the bills pile: An equity frame for an equity problem. Training and Education in Professional Psychology, 11(3), 166-173. https://dx.doi.org/0000162
Lin, L., Stamm, K., & Christidis, P. (2017). How much do psychologists earn at each career stage? News from APA’s Center for Workforce Studies. APA Monitor on Psychology, 48(11), 17. Retrieved from https://www.apa.org/monitor/2017/12/datapoint
Tran, A. G. T. T., Mintert, J. S., Llamas, J. D., & Lam, C. K. (2018). At what costs? Student loan debt, debt stress, and racially/ethnically diverse college students’ perceived health. Cultural Diversity and Ethnic Minority Psychology, 24(4), 459-469. https://dx.doi.org/10.1037/cdp0000207
Wilcox, M. M., Barbaro-Kukade, L., Pietrantonio, K. R., Franks, D. N., & Davis, B. L. (2021a). It takes money to make money: Inequity in psychology graduate student borrowing and financial stressors. Training and Education in Professional Psychology, 15(1), 2-17. https://dx.doi.org/10.1037/tep0000294
Wilcox, M. M., Pietrantonio, K. R., Farra, A., Franks, D. N., Garriott, P. O., & Burish, E. C. (2021b). Stalling at the starting line: First-generation college students’ debt, economic stressors, and delayed life milestones in professional psychology. Training and Education in Professional Psychology. Advance online publication. https://dx.doi.org/10.1037/tep0000385