With $895,000 in student debt, find a doctor who is subsidized on an income-based plan

• Kathleen LaRose has $895,000 in student debt that she has been struggling to pay off through income-based plans.
• During her doctoral and residency program, she defaulted on her loans, causing her debt to increase in interest.
• She became eligible for parole three years ago, but her repayment date isn’t until next year, she said.

Kathleen LaRose loves being a doctor — but she doesn’t like the nearly $1 million in student debt that comes with it.

After graduating from SUNY Stony Brook in 1987, LaRose knew she wanted to go into medicine and specialize in foot and ankle surgery. It was the only way she could take out student loans. So she borrowed $277,000 in federal loans to earn her doctor of podiatric medicine degree and enrolled in an income-fixed repayment plan, the first version of an income-based student-loan repayment plan that offered borrowers affordable monthly payments. Their income comes from the promise of loan forgiveness after 25 years.

Twenty-eight years later, LaRose has $895,512.97 in student debt. Documents viewed by an insider to confirm these amounts.

“I thought because I’m working in this country with a doctorate, so I’m going to make a lot of money and I’m going to be able to pay this off,” LaRose, now 55, told Insider. “But I didn’t end up making a lot of money, and I kept the monthly income-equal payments, and they never got paid in arrears. But now they’re out of control.”

The deferment and forbearance periods are mostly to thank for LaRose’s debt balance being more than three times the original amount she owed. While she was in her doctoral and residency program, her loans were deferred while in school, allowing the borrower to defer loan payments while in school. However, because her student loan was unsubsidized, interest continued to accrue and capitalize during that time, meaning it was added to her principal balance, causing her debt to grow.

On top of that, LaRose’s grace period on her income-equity repayment plan was pushed back after she transferred her debt to new student loan companies. President Joe Biden’s Department of Education has taken steps to help borrowers like LaRose by providing interest capitalization limits, and plans to introduce a new income-based repayment plan in the coming weeks. But that won’t solve decades of financial challenges that have brought LaRose’s massive debt burden, and the Biden report’s plan to forgive $10,000 in student debt for borrowers who owe more than $150,000 will be just a drop in the bucket for her.

“I really love education. I think it’s important to give people the opportunity to learn, but this is a very bad system,” LaRose said. Consider the economic crisis this has caused our country.

‘I would never have taken those loans.’

LaRose currently earns five figures running a North Carolina private practice, and she also works with the elderly in nursing homes. While she loves being a doctor, she says she isn’t making as much money as she thought she would because she doesn’t have many clients. She wishes she had covered her degree differently.

“In retrospect, I never would have taken out those loans,” LaRose said. “It’s a great job. It’s rewarding work, and I can’t imagine myself doing anything else. But I would have found another way. Even coming from a very modest income family, I thought about it.”

LaRose has defaulted on her student loans for the past two years because of the pandemic freeze on payments, and she said she doesn’t know what her monthly bill will be when the break ends after Aug. 31. It comes down to two separate loans — one totaling $27,491 and the other $868,021 — and if all goes to plan, her estimated payment date on the larger balance is in April 2023, according to documents Insider reviewed. Her small balance has an estimated due date of January 2043.

If LaRose succeeds in getting most of her balance through income-based payments next year, she will join a handful of others in the country who have done the same. A report from the Government Accountability Office in May showed that as of June 2021, the Department of Education had approved 157 borrowers for full forgiveness under the Income Repayment Plan, up from a total of 32 borrowers before the report. This is among the 4.4 million people who have paid for 20 years or more, according to the department.

LaRose isn’t banking on that payday next year because the payment plan she’s working on works for so few people — especially since she promised she’d be forgiven after 25 years, and that still hasn’t happened.

‘I hate to see this cycle repeat itself.’

LaRose isn’t the only student loan borrower struggling under the weight of student debt while employed in a high-paying career. Insider previously spoke to Steve Pederzani, a licensed attorney on $347,000 who is struggling to make ends meet due to a tough job market.

“We’re not doing well,” Pederzani said. “It may have been 10 or 20 years ago that lawyers told you they had fast tickets to the middle class, but that doesn’t exist anymore. It’s not the same job market anymore.”

Republican lawmakers have repeatedly criticized the idea of ​​broad student loan forgiveness because it would go to high-income earners like doctors and lawyers, but for some those high-income earners may never come, allowing interest to pile up and balances to grow. Biden’s Education Department plans to announce a new income-based repayment plan in the coming weeks that will “make student loans more affordable,” Education Secretary James Quall said.

And in July, the department released a proposal to prevent interest rate hikes on student loans, which would add to a borrower’s principal balance. But for decades, LaRose said she’s been struggling with student debt, and while the upcoming reforms won’t help her, she hopes it will provide a better system for her two children.

“I was very young when I took out these loans,” LaRose said. “But at least I was able to be a better counselor for my kids with their debt. I’d hate to see this cycle repeat itself for them.”