Government employees facing furloughs struggle to repay student loans

WASHINGTON – Joe Hyde thought that getting a job with the Department of Defense was a safe career path. But faced with sequestration and a 20 percent pay cut, he and other federal employees are worried about how they will afford to repay their student loans.

Hyde graduated from the California University of Pennsylvania in 2010 with five student loans totaling $18,000. He moved to California and took a job at the Naval Postgraduate School in Monterey, Calif., as a travel assistant, where he makes $41,000 a year.

Hyde calculated it would take 20 years to pay off his debt, making the minimum payments of $227 per month. But with Congress and the president unable to agree on a budget, Hyde and all civilian employees at the school are being furloughed without pay for one day a week beginning in April. Hyde will lose $336 per paycheck.

The sequester, the nickname for the budget impasse, will cut $1.2 trillion in federal spending over 10 years, half from defense and half from domestic spending. The cuts will first hit federal employees, many of whom are being furloughed for at least a few days until the end of fiscal year 2013 on Sept. 30.

More than two-thirds of 2011 college graduates had student loans, which averaged $26,600, up from $25,250 the year before, according to the Project on Student Debt.

Hyde pays $1,400 plus utilities for his apartment, which he shares with a roommate.

“When it comes down to it, am I going to pay my rent? Or am I going to pay off my student loans?” he said. “It’s kind of a no-brainer. I’m going to pay my rent.”

He applied for a hardship deferment of six months and a year, but the loans will still accrue interest at 3.5 percent and 5 percent.

The Department of Education offers the Income Based Repayment Plan for those who qualify for financial hardship. The plan allows loan repayments based on earnings. If the monthly payments do not cover the loan interest, the government makes up the difference.

Chris Greene, a spokesman for Federal Student Aid, urged workers to talk to their loan service providers if they have trouble with repayment.

“Whether or not they qualify for the IBR, there are other benefits they can avail themselves of that will help them manage their student loans, like deferments and forbearance,” Greene said.

For federal employees searching for relief, the Federal Employees Education and Assistance Fund helps workers who are behind on rent or car payments. But Robyn Kehoe, the program’s director of field relations, said there may not be enough money to cover the needs of all applicants.

“For our loan program, we get a lot of single parents, lower-grade employees and people who are working hard and living paycheck to paycheck,” Kehoe said.

In a typical year, the fund provides about $600,000 in interest-free loans with money raised from federal employees. However, Kehoe said that since employees were made aware of the possibility of furloughs last year, fundraising has lagged.

“We’re very concerned that it’s going to very quickly outstretch the amount of money that we’re able to loan out on a regular basis,” Kehoe said.

That could affect employees like Sonya Atamanchuk, 35, who graduated a year ago from ECPI University, a for-profit college in Virginia Beach, Va.

Atamanchuk, who lives in Norfolk, Va., borrowed about $38,000 to earn her bachelor’s degree in business and Internet technology. She has paid off about $2,000, but she said it’s been hard because her job as a program analyst with the U.S. Army Corps of Engineers pays $30,000 a year.

She’s been living without cable, making payments on her car and saving for a house, all while paying off her loans. Now she faces a likely furlough.

“I’m just really scared. I don’t want to miss any of my payments, and I’ll only be able to pay bare minimum, and the interest is going up,” Atamanchuk said.

Atamanchuk said she is planning to apply for the Income Based Repayment Plan.

She is likely to qualify; Hyde does not.

“When you’re growing up, you’re always told that anyone can go to college,” Atamanchuk said.

“You have a dream. Well, I had a dream. … But how am I going to pay for it if I don’t have a job? Or if my hours get cut? How do I determine what to pay for? Food in my stomach or paying back my student loans?”

Reach Reporter Jess Miller at jessica.miller@shns.com or 202-326-9871. SHFWire stories are free to any news organization that gives the reporter a byline and credits the SHFWire.

Tags: student loans, government, news, updates, national, economy