Poo-Pooing Student Loans

[McDuck]

From Dave Ramsey's website:

Student Loan Backlash

Getting a student loan can hurt you much worse than just a monthly payment.


Nowadays, many people think you can't be a student without a student loan. It's easy to get a federal student loan or even go to the local bank to pay for your education, but doing so hurts both you and the economy in the long run.
The rise in lifestyle

Unfortunately, people are borrowing more than ever before. In 2001, $4 billion in student loans were taken out. Last year, that number jumped to $17 billion. Some people may say it's because of higher tuition costs, and yes, that is part of the reason. But more than likely, a lot of it is lifestyle choices. When some people to go college, they want to live in the off-campus apartment and eat at restaurants instead of living in the dorms and eating dorm food.

At this point in your life, it's time to face some facts. You don't make any money, so you don't need to spend any money. When you get out of college, you won't still be feeling a meal in your belly from your junior year. But if it's one of the many things you bought with your student loan, then you'll be paying for it for years to come. That's stupid! Which would you rather be - a debt-free graduate or a new graduate with tens of thousands of dollars in debt?
Borrowing hurts us all

The numbers are convincing. Let's say you borrow $47,000 for a student loan. At a 5% interest rate, the payments are about $500 over 10 years.
After 10 years, you've SPENT almost $60,000. If instead, you invest that money in a good growth-stock mutual fund averaging 12%, after 10 years you will have saved $115,000! Which do you think is better?

Borrowing so much hurts the economy in multiple ways. More debt means less money invested. If money isn't invested, the economy doesn't grow as well. More debt also means less money to outright buy things, which leads to more financing to buy things.


The sad part is that after you've gotten a student loan and paid on it for a couple of years, that's when the reality hits you. That's when you realize that you have obligated yourself to pay thousands of dollars in interest over several years, instead of keeping that money for yourself and investing it, or giving it away, or even saving up and buying things with cash.


Well...THIS IS YOUR WAKE-UP CALL! Don't take out a student loan. You can apply for scholarships and grants, work part-time or go to a cheaper school. But it's not worth it to take out a loan and start behind the financial 8-ball in life when you graduate.


If you are paying on a student loan, get on a budget today and start paying it off. The sooner you pay it off, the more money you'll save in interest. Make it happen!

 

[McDuck]

Graduates faced with increasing student loan debt

More than 2,900 students received degrees at Notre Dame's 163rd University Commencement Ceremony (WSBT Photo)

By WSBT News1

Story Created: May 18, 2008 at 4:21 PM EDT

SOUTH BEND -- Anthony Iannamorelli comes from a long line of Notre Dame graduates. And that's what makes this day extra special.

"Actually my dad just gave my graduation present, which was when I was 6 years old, he had Lou Holtz sign 'Congratulations graduate of 2008.' So it's a life-long dream that I worked pretty darn hard to get to," said Iannamorelli.

But that life-long dream comes with a hefty price tag. Iannamorelli is graduating with $55,000 in college debt. And that's after finding ways to cut costs.

"And I actually had a ROTC scholarship for a year as well, my freshman year and opted out of that because I decided the Army wasn't for me. And I graduated early to save a little money and stop the mounting debt," said Iannamorelli.

Like many graduates, Iannamorelli is paying off much more than students did several years ago. Economics professor Teresa Ghilarducci points to two main reasons: creditors and universities.

"Creditors giving loans to students don't care if the students can pay them back. And the colleges don't care if the students can pay it back because in the meantime they can jack up tuition and they'll let the students borrow the money," explained Ghilarducci.

Ghilarducci also says the role of a financial aid counselor has changed. She says 20 years ago they used to counsel students on what they could afford instead of how much money they could get.

Iannamorelli says it's tough knowing he has to pay back so much money. But he says the value of his education will be well worth it.

"The way I always looked at student loans was that it's an investment for your future. That you invest that in there and later on it will pay off," Iannamorelli said.

Experts encourage students to start paying off their debt right away. And that may mean living like college student instead of a college graduate for a few years.

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Comments from people:
Monday, May 19 at 5:45 AM foolish wrote ...

Too many kids today think a college education is so important. Not so. It is nothing but a means to an end. To saddle yourself with 50-100K of debt at the beginning of your working life is foolish. Knowing full well that social security will not be there, why do this? All of the money you could save for retirement is out the window to pay back the loans and you will work until you are 80. This is foolish.

Monday, May 19 at 8:35 AM Pro Education wrote ...

Don't fool yourself foolish, an education is more important today than ever. With jobs going overseas, you are competing with other employees throughout the world. However, these bigs debts are very troubling. I will say, one of the things I find most concerning is that students spend money so freely. I sound very old when I say this, but when I was in college, we bought generic food to save money. Now the kids dress better and travel more than I do. They are spending money they don't have

Monday, May 19 at 10:13 AM Education? wrote ...

Don't fool yourself. I am not against education, but out of the 23 people who work for me on the docks and driving fork lifts 12 of them have Bachelor's Degrees. The others are not saddled with a monthly student loan mortgage until they are 45 years old. They can make more money doing that than using their degrees? Figure that one out....Because in the working world those degrees don't mean much.

Monday, May 19 at 10:28 AM R. wrote ...

This is ridiculous I am 60,000 in debt from a B.A in sociology. I wish someone would have told me the most I could make with that is 12$ an hour. The only way to do anything with this degree is to further my education so maybe I can bring my debt up to 100,000. Its not even worth it I wish I never went to college, I should have invested in a trade school. Now they want 500$$ a month!! Yeah right! On top of daycare and mortgage Its impossible!

Monday, May 19 at 1:38 PM To Education? wrote ...

I understand what you are saying. The problem is that to get a good job with your education, you need to leave Indiana. The jobs are not here....thanks to our wonderful governors. Until we make this a place that college graduates want to live, it will stay that way. But, this state is sadly, backwards. The jobs available to college educated people are few and far between. My husband and I, both college educated, are considering leaving the state for opportunities else where.

Monday, May 19 at 3:11 PM To AM R. wrote ...

"I wish somebody had told me all I would make is $12/hr." This is a problem with today's students: They don't do the research ahead of time themselves, they expect answers to be given to them. Personally, I can probably find quite a few colleges and universities who offer excellent sociology programs for less than the $60,000 debt you are in. This is the type of research students must do before taking on such large debt burdens.

Monday, May 19 at 6:51 PM Bianca from SB wrote ...

I have to say that in my view, a college education is necessary, however, I think people considering college need to be realistic on what education they can afford. My bachelor's degree only cost me $16,000 in 2000 from a Michigan university (saving by staying with my parents), but I looked at the tuition at Notre Dame a year ago and could not have afforded a degree at those rates. It also makes sense to start at a community college until you know what you want to do.

 

[McDuck]

May 24
Lack of loan forgiveness hinders nursing profession

ANDREW M. SEDER

WILKES-BARRE – When Samantha Crablo started looking into a career in nursing, she was given literature about a loan forgiveness program offered by a state agency that deals with student loans.

Judy Kaczinski RN, seated, talks to nursing assistant Samantha Crablo on the Medical Surgical floor at Wilkes-Barre General Hospital Thursday. Crablo, who’s entering the nursing school at LCCC, will not be able to capitalize on a loan forgiveness program.

The incentive was enough to make her decision to switch majors from chemistry to nursing a done deal.
Crablo, countless nursing students and hundreds of nurses across the state received the news this past week: The loan forgiveness program has ended.

Established nearly six years ago to stem the state’s nursing shortage, the program ended after the agency overseeing it announced it lacks the funding to keep it going.

The revelation has been met with disappointment from area health providers, nursing schools and elected officials.

The Nursing Loan Forgiveness for Healthier Futures program’s demise “is going to greatly reduce the number of people coming into basic nursing programs over the next few years,” according to Dana Clark, the dean of nursing and health sciences at Luzerne County Community College, Nanticoke.

Clark said the program has played a major role in reviving the floundering nursing program at schools across the state. At LCCC, Clark said there’s been a 30-percent increase in enrollment in the nursing program.

Crablo, a 2007 graduate of GAR Memorial High School, will enter the LCCC nursing school within a year. The 18-year-old, who works as a nursing assistant at Wilkes-Barre General Hospital, said paying off the entire amount of the student loan will be rough. Clark said Crablo will be an anomaly, one of the few who won’t be turned away from the nursing field by the loss of the incentive program.

Established in October 2002 in response to a decreasing number of enrollments in nursing and health care majors across the state, the program was created to relieve the deficiency.

“It’s disappointing because it was an excellent program and it was working,” said Margaret Heffers, an associate vice president of human resources at Geisinger Health System. At least four nurses within the system took advantage of the program, Heffers said.

Goals of forgiveness program

Under the program, a student would not have to pay back up to $12,500 or 25 percent of his or her student loans as long as they met certain conditions. All local hospitals and colleges including LCCC, Misericordia and Wilkes universities participated in the program.

The program had four main goals:
• Encourage licensed practical nurses to earn registered nursing degrees.
• Increase the numbers of nurses attending graduate school to prepare to replace nursing educators who are approaching retirement.
• Increase the number of students enrolling in and graduating from approved nursing education programs.
• Increase the number of nurses working throughout the state.

Clark praised the program and said each goal was met.

The Pennsylvania Higher Education Association Agency and American Education Services agreed to fund the incentive in hopes of boosting the number of nursing students. A clause in the agreement, signed by each of the 828 participants, stated that the program could end at any time because of a lack of funding.

That time has come, according to letters to participants, hospitals and colleges that were issued last week, according to PHEAA spokesman Mike Reiber.

Clark of LCCC said many in the industry knew this was coming for months.

Reiber said PHEAA had no choice since lenders throughout the country are going through tough times because of the sub-prime mortgage crisis, a tough economy and other factors.

“In the past few months, 14 percent of all companies involved in student lending have said they would withdraw from the $85-billion student-loan business,” he said. “It’s just a bad situation right now.”

At a summit called by PHEAA in February, the federal government was urged to provide short- and long-range aid for the student loan crisis. Two student loan bills supported by U.S. Rep. Paul Kanjorski, D-Nanticoke, are on the table in Washington, but neither have been brought up for a vote.

On Wednesday, Kanjorski said he was “very concerned” by PHEAA’s announcement regarding the nursing program.

“Our nation faces a critical shortage of nurses, and PHEAA’s Nursing Loan Forgiveness program has helped many individuals to obtain a nursing education.”

Clark said the lending agencies are “in desperate straits” and as bad a situation as PHEAA and others are in, she said the nursing field is worse. Though the industry was starting to see an improvement since the program was put into place, she said its suspension could hurt the field for the next decade.

“It doesn’t look like this will turn around anytime soon,” Clark said of the lending crisis. “It could take four or five years and then to get the students back into the nursing programs and into the pipeline again could take another three or four years. Now we’re looking at 10 years out.”

That compounds what was already a poor outlook for the field.

According to the Health Resources and Services Administration, a division of the U.S. Department of Health and Human Services, Pennsylvania health care providers will experience a 41-percent vacancy rate in nursing positions by 2020.

Funds for two similar loan forgiveness programs for nurses were also stopped. One helped students studying to become nurse educators and the other was for nurses who go on to work in state veterans’ homes.

The programs were funded through PHEAA’s sale of bonds rather than taxpayer-generated revenue. Right now there aren’t enough buyers willing to purchase bonds floated by lending institutes, Reiber said.

The program is “on a hiatus,” not eliminated, he said.

“We hope the market turns around tomorrow. We hope all these programs start again real soon.”

So too does Bob Hoffman, the vice president for patient care at Wilkes-Barre General Hospital. He said his hospital and hundreds across the state are short-staffed and the loss of this program is a step backward.

“It’s frustrating news to hear and it was a short-sighted decision but we don’t really believe there was a lot they could have done. We just hope it’s a short-term problem,” Hoffman said.

© 2008. The Times Leader. All Rights Reserved.

 

[McDuck]

Pop Quiz! Are You Smarter Than A Credit Card?
​

Jessica Reinhardt
Friday, May 30, 2008

Sure you scored higher than everyone you know on the SAT's---Stanford sent you an early acceptance letter, and you always answer Final Jeopardy before everyone else at the dinner table---but as the school year ends, how much do you really know about fiscal responsibility? Fortunately, your answers will not go on your permanent record. For all of you liberal arts types, feel free to grade yourself...

1. True or False: The average undergraduate student today carries more than $2000 in credit card debt.
Answer: True. According to the nation's largest student loan provider, Nellie Mae, the average undergraduate student has an average of $2,748 in credit card debt. That's a lot of pizza!

2. True or False: The main three factors that push students into consumer debt are: Alcohol, Fast Living, and Gambling.
Answer: False. While spending too many hours playing online poker might contribute to overspending on cards---Four key factors are the main contributors to the increasing student debt load: Offers of unaffordable credit lines, increasing education-related expenses, peer pressure to spend, and general financial naiveté. The best thing you can do for your future is educate yourself on financial information---so that you don't end up in debt all for the love of a free Frisbee. There are many easy to understand resources online and locally. Your local Credit Union, such as Pacific Oaks is an excellent place to have all of your financial questions answered. We even offer free financial workshops and seminars throughout the year. For more information visit us at www.pacificoaksfcu.org.

3. True or False: The best way to reduce your credit card debt is to use
coupons.
Answer: False. While reducing your expenses is always a great idea, financial experts advise that you should start by consolidating your debt onto the card with the lowest interest rate and then start paying down the balance. The key (and often the most difficult thing) to do is to stop charging until you have reduced your credit card balance to a manageable level. Map out a payoff schedule and stick to it!

4. True or False: Although they think they are always broke, American college students actually have more than 10 billion dollars a year to spend.
Answer: True. That's even more pizza! America's college students actually control more money than some developing nations. Overall, they spend about $19 billion dollars a year!

5. True or False:Less than 50 percent of students say they pay their credit card balance in full and on time each month.
Answer: False. Contrary to what you might think, this is an area in which students are more responsible than the general public. According to a recent survey, 59 percent of students reported that they paid their balances in full and on time every month, in comparison to the 40 percent of the general public.

6. True or False: All credit card companies and banks offer the same products and services and pretty much charge the same fees.
Answer: False. The only think most credit cards have in common is that they are made of plastic. The only thing that most banks and credit unions have in common is that they all carry cash. Financial services are just like you---each is a unique constellation of attributes. There are very large differences in credit cards---things to look for when comparison shopping include: Interest Rate, Annual Fee (if any), terms of use such as late fees, default interest rates, and cash advance fees. All credit card offers are required to include a chart detailing basic rates and fees. This chart is called "Schumer's Box". This is the most important part of the credit card offer because it offers a summary of the terms of the card in an easy to read and easy to compare chart format.

Also---not all financial institutions are created equal. Each offers many different products and services designed for people in various life stages, with varying financial goals. What's great about a credit union is that they are not-for-profit---so they generally have lower fees and interest rates when it comes to credit cards. For a student, or someone just starting out in the world---that could mean a significant savings that makes a huge difference in getting a jump start on your financial goals. For more information on Credit Unions see my previous article, "Credit Union 101". Smart students and smart consumers should shop carefully and compare multiple offers before deciding where to borrow money from and where to keep their money.

Pacific Oaks Federal Credit Union has five locations in Ventura County, and is firmly committed to serving the financial needs of anyone who lives or works in Ventura County. To find out how we can help you achieve your financial goals, please visit us at www.pacificoaksfcu.org.






© 2008 Ventura County Star

 

[McDuck]

You've graduated: Now pay back your debts

by Beth Pinsker May 29th 2008 @ 2:00PM

Welcome to WalletPop's series "You've graduated. Now what?" Our bloggers have a wealth of suggestions to help you find you way through that time of amazing transformation, from student to working stiff.


When I graduated from college, my bank account totaled exactly $0 and my first student loan payment on $10,000 was due in less than 30 days because I had used up my grace period on a semester internship in New York. I didn't have a job lined up and was simply heading home with my parents after the ceremony to see what turned up.

I still had my diploma in one hand when my father handed me a bill totaling up all that I owed the family for my four years of higher education. He's the sarcastic type, so I thought he was joking, but he was actually serious. I was taking on some of the debt burden, but my parents had taken out loans as well and he figured they were my responsibility. My mom had to talk him down and let him give me a little time to get on my feet -- interest free -- before I started making payments.

They also ended up co-signing my first rental lease and fronting the broker's fee and first month's rent when I moved to New York for an internship that paid $5 an hour (just to give a sign of the declining times: A few years later, that internship paid nothing at all, and the company went out of business last year). So it wasn't just Sallie Mae that I owed.

The average college student now graduates with over $20,000 in loans and a couple of thousand more in credit card debt. Given the weak economy, recent grads are likely to get into even more trouble before climbing out of the hole. What's a young person to do to stay out of economic trouble when there's little money coming in?

1. Pay off low-interest loans steadily but slowly. Student loans typically come with low interest rates, so when I financed mine, I picked the longest term that offered the smallest possible payment and had it taken out of my checking account automatically. Even when I started making more money, I kept the same small payments. It took me until I was 30 to finish off my loans, but I never defaulted and had money for other purposes along the way. My husband was more active about his school loans, paying off extra each month and finishing early, which freed up money later on when he needed it more.

2. Work out a deal with your folks. That yogurt in the fridge comes with a cost, and don't you forget it. If your parents are helping you out, the last thing you want to do is take them for granted. Sit down with them and work out a plan for what expenses they are willing to foot and for how long. Food and shelter will likely be on the table, but $20 to go to a movie is probably not. Find out how much debt they are covering from the college tab and if they want you to tackle any of it. Then get onto the business of furthering your career and making them proud. I answered my dad's bill with a nicely worded thank you note. It brought my parents to tears and we all lived happily ever after.

3. Live within your means. Even if you are lucky enough to be employed immediately after graduation, your starting salary will likely not be enough to cover all the things you want. It might be a struggle just to afford rent and food. Now is the time to live within your means and not rack up any additional debt, especially for luxury items. Learn how to drink and entertain yourself for free. Learn how to cook. Update your wardrobe with hand-me-downs. I survived my first year in Manhattan on peanut butter sandwiches, first-date drinks and office hot chocolate. I never took cabs, invited people over to watch TV instead of going to the movies and went to any event that offered free food (I suggest getting religion -- any religion -- as a cost-cutting measure).

4. Don't forget about the future. Times might be tight now, but if you start saving now when your potential is high, you'll be happy with yourself even if your paychecks are slightly smaller right now. I contributed the maximum to my 401(k) at my first job -- in which I lasted less than a year -- and the matching funds alone were enough for a down payment on an apartment ten years later (and that was even after a disastrous merger tanked the company stock). I sold that place two years ago, and was able to sock away enough in 529 plans for my own children that they should be left with very little college debt no matter what our financial situation is 16 years from now.
I am now, by the way, back in student loan debt from my husband's master's degree. He consolidated three loans to get the lowest possible interest rate and picked an aggressive payment schedule, since we have no other debt. He pays less than $200 a month, and should be done in a couple of years, with little damage to our monthly budget.

 

[McDuck]

Fleeced
While students across Oregon celebrate graduation, many are facing a gnawing problem—they’re getting sheared by huge debt.

BY BETH SLOVIC
America’s promise has always been of upward mobility. And for generations, the most certain ride to that dream has been a .college education.

Financially, college’s advantages are clear. The average worker with a college degree earned $46,435 in 2006, the most recent year for U.S. Census Bureau estimates. The average worker with only a high-school diploma earned less than two-thirds that.

It’s no wonder then that young people have flocked to our nation’s two- and four-year colleges. In 1950, fewer than 10 percent of adults over 25 had bachelor’s degrees. By 2007, that had nearly tripled to 27 percent, according to the census.

Yet, all is not right with this picture.
Like so much else in America’s credit-crazed economy, going to college increasingly requires crushing debt.

While some elite liberal arts schools such as Harvard and Amherst have committed in the past two years to providing free tuition for all low-income students who qualify, that’s not the case at any of Oregon’s more than two dozen colleges and universities.

Today, the average debt load for a student who borrows money and finishes four years of college in Oregon is $19,667, slightly more than the national average of $19,646, according to the Oregon Student Association, a lobbying group, and the Project on Student Debt, a national organization.

But that’s also a startling increase over previous years, according to a new report from the nonprofit advocacy group Demos, “Economic State of Young America.”

Between 1993 and 2004, the median student loan debt for Americans with bachelor’s degrees from four-year public colleges grew 78 percent, from $8,226 to $14,671, the report states. For students with associate’s degrees, that figure jumped 72 percent, to $5,879 in the same time period.

There’s a reason for this. As public investment has diminished, tuition and fees at four-year public colleges and universities in the United States have increased each year to make up the difference. Since 2002, those increases have ranged between 6 and 13 percent in current dollars—far above the overall inflation rate, according to the College Board, which publishes annual reports on the costs of a degree. Between 2006 and 2007 alone, average tuition and fees at Oregon’s public and private four-year colleges and universities rose 7 percent.

Per-student state subsidies for higher education have been on the decline since the 1980s. And federal aid hasn’t kept pace with rising tuitions.

Someone must pay the price. Guess who that is.
Undergraduates have turned to private loans to fill the void, according to the College Board. By 2007, private loans accounted for 24 percent of all education lending, making the private student loan sector a $14.5 billion annual enterprise—the equivalent of the annual tax breaks given to the oil, gas and utilities industries under the Bush administration beginning in 2005. Two out of three students take out loans, government or private, today. In 1993, less than half did.

The dirty secret of today’s economy is that the odds are stacked against the under-35 set. College graduates are hitting the books just to stay even with their parents’ economic performance. They’re paying more for less.

A high-school diploma is necessary, but not enough to propel a student into the middle class, census figures reveal. A college degree is the new high-school diploma; a master’s is the new bachelor’s, says Tamara Draut, author of the 2005 book Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead.

Draut sees higher education as the ladder for most young adults to their own middle-class existence. But policymakers are sawing off the rungs of the ladder, she says, by underfunding the educational aid programs that helped baby boomers and their parents get ahead. Anybody heard of any big GI Bill lately?

“This is the irony,” Draut says. “As it’s become more important to get a four-year degree in terms of the earnings—as the gap between earnings of the college haves and the college have-nots has widened—it’s actually become a lot more expensive to go to college. And the public policies, both federal financial aid and state policy in terms of supporting higher education, have completely fossilized.”

The inescapable conclusion: There are tough times ahead for the happy students graduating from high school and college across Portland and Oregon this month and next.

 

[McDuck]

Below are five people at different stages of experiencing the risks and rewards of the student loan juggernaut. None of them could have gone to college—or, in some cases, earned their advance degrees—without student loans. They all say they would do it again. But the financial burden of repaying those debts has affected everything about their lives, from where they live to what they eat. Here’s how:

THE INCOMING COLLEGE FRESHMAN

Alex Knapp, 18
Education: Graduates June 1 from Wilson High School, plans to enroll at Drexel University in Philadelphia in the fall
Salary: $0
Expected debt when he graduates in 2012: $105,000
No one’s going to shed a tear for Knapp, a bright Southwest Portland high-school senior who has chosen an expensive private college on the East Coast instead of a public university here in Oregon.

“It would be really cheap and really easy to go to PSU or the University of Oregon,” Knapp says, sitting on an olive-green couch in his parents’ 2,000-square-foot 1960s ranch-style home in the Hillsdale neighborhood. “But I think it’s an important thing to go out and discover new parts of the country.”

Knapp’s decision to attend a school where annual tuition plus room and board is about $50,000 is neither unusual nor discouraged in today’s hypercompetitive college admissions racket. Taking out huge loans is both easy and normal.

At least one member of Knapp’s family thinks Knapp might want to reconsider his impending move. That would be Knapp’s older brother, Clayton, the 21-year-old bass player for the Portland band Eskimo and Sons. Clayton, who also went to Wilson High, attended Harvey Mudd College in California—a small, West Coast version of MIT—then Brown University for a single semester.

He dropped out in his sophomore year when his money—from family and scholarships—dried up and he, too, faced the prospect of taking out massive student loans. He now plans to finish his degree some day at a public university in Oregon.

“I urged him to seriously think about his decision and not only how it would affect him in the next four years, but how his decision would affect him in the future and the rest of his life,” says Clayton Knapp. “I wanted to be a voice of reason.”

Alex Knapp could be in a much worse bind. He has nearly $30,000 in savings from a settlement he got after a car accident when he was a child. And his mother and stepfather have agreed to help him with an additional $5,000 a year.

Still, even with that assistance and Drexel’s offer of a $10,000-a-year merit scholarship, Knapp says he’ll finish $105,000 in debt.

“Maybe I’m just dumb,” he says, “but I have this feeling that it’s going to be OK.”

THE COLLEGE DROPOUT
Courtney Morse, 22
Education: Three years at Portland State University, where she was student body president in 2006-2007
Salary: $2,000 a month, as secretary of state candidate Kate Brown’s field organizer
Current student loan debt: $43,000
Expected repayment date: 2038

As student body president at PSU, Morse spent lots of time in 2007 lobbying the Oregon Legislature for more higher education money.

Then, with only a year to go before earning her own undergraduate degree in political science, she dropped out. The interest rate on one of her loans was 14.25 percent, and with $43,000 in debt she made the decision that taking out more money to finish college just wasn’t worth it.

“I was a hopeful freshman,” says Morse, a Wisconsin native who paid out-of-state tuition for her first and second year at PSU before qualifying as an Oregon resident in her junior year. “I thought I could pay it back.”

But the debt spiraled: She took on as much debt in her third year at PSU as she did in her first and second years combined. It was all she knew to do. “As you’re going through college, you’re just doing what it takes, because you can’t imagine leaving college,” she says.

Eventually, however, the debt became unmanageable, especially given her plans to work as a political organizer. “It’s really a problem that my generation is experiencing firsthand,” Morse says. “I think a lot of people don’t appreciate the severity of it.”

In July, Morse expects to have to begin paying off her loans, which she had deferred for a year. Her share of the rent at the house she shares in the Hawthorne neighborhood with three roommates is $400. Her monthly loan payment will be $528.

The prospect of returning to school seems slim. “I don’t honestly see it as a possibility for a while,” Morse says.

THE RECENT COLLEGE GRAD

Graham McConnell, 24
Education: Graduated from Cleveland High School in 2002 and Pacific University in Forest Grove in 2006
Salary: $31,000, as Internet marketing assistant for Geochron, a Portland clockmaker
Current student loan debt: $24,000
Expected repayment date: 2020

Student loan debts don’t sink everyone. But even for graduates who budget their money well, the amount they owe cramps their lifestyles.

McConnell graduated from Pacific University two years ago with a major in business. For the first 18 months after graduation, he lived at his parents’ Mount Tabor home. His first job out of college was making $7.50 an hour at Hollywood Video.

He now lives in a one-bedroom apartment near the same neighborhood where he grew up and works at a company that makes sophisticated clocks. From his entry-level salary of about $31,000 he must cover his monthly student loan payment of $166 together with his monthly rent of $700 and a $225 car payment. That leaves him with only $700 a month to pay for utilities, food, cell phone bills, clothing and gas. As for savings, he’s able to put aside $50 a month.

Yet McConnell doesn’t second-guess his college choices. His parents also helped him with about $12,500 a year, meaning he had to take out just $28,000 in loans, about 40 percent more than the national average. “I think it’s totally worth it,” he says.

He does small things to save extra cash. After listening to a radio program on getting better gas mileage, he “hyperinflates” the tires on the used car he bought last year, a 2005 Honda Civic with 30,000 miles that came with a lifetime guarantee of free tires (a good thing, since hyperinflating wears out tires faster). He’s still on his parents’ cell phone “family plan.” He also coaches club soccer for $2,000 a season. “I do it because I love it, and the money is extra,” he says.

And he doesn’t have a credit card. That kind of debt worries him. “I would never want to have that hanging over me,” he says.

To get ahead—and to maintain the lifestyle his parents, a Multnomah County paralegal and a Department of Justice administrator, gave him and his sister—McConnell now plans to take on even more debt and go to graduate school, perhaps to study business. His view is optimistic.

“I’ll have to have more debt,” he says, “but I’ll also be making more money.”

 

[McDuck]

THE LESS-OPTIMISTIC PROFESSIONAL

Erin Bray, 27
Education: Bachelor’s degree in English, Whitman College 2003
Salary: $40,000 as an English teacher at Evergreen High School in Vancouver, including $4,500 for coaching girls’ soccer
Total debt: $16,000 in student loans, $250,000 in home loans, $7,000 in credit-card debt, plus her husband’s $25,000 in student loans
Expected repayment date: 2033

The financial footing of Bray’s childhood compared with her mother’s can be summed up with the tale of two Christmases.

Bray, who lives in North Portland, grew up in Cañon City, Colo., southwest of Colorado Springs.

Just before she turned 16, in 1996, her mother and father—a nurse and a teacher—gave her a 1988 Toyota Corolla for Christmas.

Growing up on Staten Island as the daughter of a truck driver and a stay-at-home mom, Bray’s mother, Dianne, was more likely to get a pair of used ice skates under her Christmas tree, as in fact she did one year.

Bray, however, attended one of the best private colleges in the Northwest, en route to improving on her parents’ educational achievements, which in generations past probably would have meant greater financial security for her for life.

Now she’s not so sure.
Bray points to her easy access to credit—in the form of student loans, credit cards and a home loan—as the source of her progress. She graduated from college, paid for a wedding, and purchased a house, all before turning 30.

Yet credit is also how Bray has masked the limitations of her $40,000 teaching salary. “Our life doesn’t necessarily reflect the life of debt,” she says while drinking a Miller High Life after work in the living room of her 1,000-square-foot Arbor Lodge home, surrounded by a hodgepodge of furniture from Target, IKEA and yard sales. Her husband, Eric Marsh, is a fourth-grade teacher in Canby who earns less than $40,000 a year but has $25,000 of his own student debt from undergraduate and graduate school.

College-educated women are the only demographic group among young people today whose earnings have risen compared with the previous generation, according to author Tamara Draut.

Still, Bray feels like something of an exception. Since graduating with $18,000 in student loans, just under the national average, she’s shaved only about $2,000 off the top, with $165 monthly payments at 2.9 percent interest. “I don’t feel like I’ll ever be wealthier than my parents were,” she says.

THE PESSIMISTIC PROFESSIONAL

Josh Seeds, 31
Education: Bachelor of science degree in biochemistry, Washington State University, Pullman; master’s in environmental science, WSU, Vancouver
Salary: $45,000, as a water-quality analyst for the Oregon Department of Environmental Quality
Current student loan debt: $90,000, plus $21,000 in student debt from his wife
Expected repayment date: 2043

By the time Seeds pays off his student loans, he expects to be 67 and eligible for Medicare and Social Security. His youngest child will be in his 30s.

Seeds faces $90,000 in student loan debt, and that doesn’t include the $21,000 his wife, Kara, owes for one year of nursing college.

With three kids and a fourth on the way, juggling the cost of housing, food, gas and clothing is so difficult, Seeds has had to put his loans in forbearance, which means he’s not chipping away at the accumulating interest of 6.25 percent. Instead, he and his wife are focused on paying off just her debt.

An Idaho native, Seeds took out loans to pay his $14,000 annual tuition at WSU. He graduated in 1998 with a degree in biochemistry and moved to Portland shortly after finishing school, briefly working for the Oregon State Public Interest Research Group collecting money and signatures. He then got a job as a researcher in a lab at Oregon Health & Science University, making $16,000 a year with benefits.

By the time Seeds left that job three years later, he was earning $19,000 a year and making minimum monthly payments of about $120 on his undergraduate loans. To earn more and to get out of the lab and into the field to do environmental work, he decided he needed a master’s degree—and to take on more debt.

“I knew what I was getting into,” Seeds says. “At the same time, I was still operating under the same assumption, which might have been willful naiveté. But you kind of do figure that when you have a graduate degree, you’re going to be good to go.”

What he found was a job at a Legacy Emanuel Hospital neurobiology lab, studying strokes and earning $11 an hour at first, then $12.75. He was 28, a single parent with a daughter at the time. Eventually he managed to eke out a raise that brought his hourly wage to $19.50.

He now earns $21 an hour at DEQ.

Still, he must choose between replacing work shoes with holes or buying inexpensive clothing for his 9-year-old daughter and two sons, ages 4 and 1. He and his wife, who stays at home to take care of their family at their two-bedroom bungalow in the Boise-Eliot neighborhood, grow some of their own food, don’t eat out often and don’t often buy alcohol.

Seeds’ father went to college on the GI Bill and worked as a financial manager for a timber company. His mother went back to school when Seeds was 10. She then got a job as an auditor for the Internal Revenue Service. Both Seeds’ parents could retire before 65, and now they live comfortably in Idaho, traveling to U.S. National Parks with their trailer in tow and visiting their grandchildren in Portland.

It’s disheartening to Seeds, one of three children, that he won’t be able to achieve what his parents did. Moreover, it’s frustrating he probably won’t be able to help his own children attend college because of his own debt, he says.

“I think there’s a myth out there that if you get a degree, you’ll be able to pay off your loans and the jobs are out there,” Seeds says. “When you talk to the loan people or the financial aid people at school, their attitude is, ‘Don’t worry about it, you’re going to take out these loans, but then you’re going to be able to get a great job, and you’ll be able to pay them off, no problem. You’re young, and the loans aren’t that big.’ I definitely feel like I was lied to.”

There may be good news for all five of these folks. Democratic and Republican policymakers are demonstrating increasing awareness of the massive financial burdens facing Gen-X’ers and subsequent generations. Congress has worked to reduce interest rates on federal student loans.
“I think we’re reaching a tipping point,” Draut says. “Most people think the amount of debt it takes to get a bachelor’s degree today is too high.”

U.S. Sen. Gordon Smith (R-Ore.), who’s facing a tough re-election battle in November, is one of those people. He’s voted to increase the funding for federal Pell Grants, the most important form of financial aid for low-income students.

Some advocates, however, hope for more. That includes Smith’s Democratic opponent, Oregon House Speaker Jeff Merkley. He’s calling for an expansion of the Pell Grants program, which does not yet have the funds to help students who qualify to pay more than about one third of the cost of tuition.

“This is the first generation coming of age after 30 years of disinvestment in the public sector,” Draut says. “It’s a new era, we haven’t modernized our social contract, and this generation is dealing with the consequences.”

Annual tuition at Oregon’s public universities ranges from $4,000 to $8,000 for residents and $4,000 to $13,000 for nonresidents. That’s if they’re earning 15 credit hours.Private loans were less than 5 percent of all student loans 10 years ago, according to the Institute for Higher Education Policy. There’s no legal limit on interest rates on private students loans, and they can go as high as 18 to 20 percent.

Half of borrowers with private loans—which have variable interest rates sometimes higher than 10 percent—are low-income students with salaries below $20,000.

Many of the statistics in this story were originally cited in Tamara Draut’s 2005 book, Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead.

Last week The Wall Street Journal reported the Bush administration was using U.S. Treasury funds to buoy the unstable student loan market. The move comes on the heels of several private lenders’ decision to withdraw from a federal student-loan program because of diminishing profits.

Originally Published on
Find this story at www.wweek.com/editorial/3429/11034

 

[rawiron1]

College is getting WAY over-rated. Everyone doesn't need 50 degrees and the ones that do have 50 degrees are just as broke and unemployed as those who don't have 15 masters. Ed McMahon said it best when he said that it doesn't matter how much you make because when you spend more than you make you are broke.

Jason: 34
Education: Bachelor’s degree in Administration of Justice with a Minor in American Government. Associates in the same field of study. State trained and certified arc welder.
Salary: $83,000 as a management analyst for GSA. $4,000 as a retail sales rep 2 evenings a week.
Total debt: $194,000 for a home mortgage, 30 year fixed, 5.75%. NO OTHER DEBT THANK ME VERY MUCH!
Expected repayment date: 2035

Jason

 

[McDuck]

The $555,000 Student-Loan Burden

 

[McDuck]

Jason: 34
Education: Bachelor’s degree in Administration of Justice with a Minor in American Government. Associates in the same field of study. State trained and certified arc welder.
Salary: $83,000 as a management analyst for GSA. $4,000 as a retail sales rep 2 evenings a week.
Total debt: $194,000 for a home mortgage, 30 year fixed, 5.75%. NO OTHER DEBT THANK ME VERY MUCH!
Expected repayment date: 2035

Jason

Sounds good Jason.