Students take on long-term burden as debt loads rise

By Laura Van De Pette
November 4, 2005

Jerry Zurek

It’s three o’clock in the afternoon and Megan O’Brien, an early childhood education major is running around her dorm-room frantically trying to throw off her jeans and change into her work clothes. She has been in classes since 8:15 this morning and is exhausted but manages to rush out the door in time for work with text books in-hand to study on her dinner break.

“I’m graduating in less than two years and will be $35,000 in debt before I ever get a job. Having to face such a huge debt scares me,” O’Brien said.

The explosion in student debt has been propelled by rapid increases in college costs, far outpacing the rate of inflation.

Nearly two-thirds of students attending a private, four-year college or university take on student loans while they are in school. As of last year, the average indebted graduating senior was $17,600 in debt on graduation day.

A recent study on student debt finds that a “sizeable proportion of college degree recipients either do not borrow at all or graduate with modest amounts of federal student loan debt.” This is according to the Federal Student Loan Debt: 1993 to 2004.

Over the past few decades, the average tuition, fees, room and board charges at private four-year institutions have risen far faster than the rate of inflation. At private, four-year colleges and universities, expenses have risen by 51 percent since 1990, after taking into account inflation, according to the Center for Economic Policy Research (CEPR). This means the cost of college goes up twice as fast as other costs. For example, if a college tuition and something else both cost $10,000 in 1996, today the tuition would be $20,000 whereas the other expense would only be $15,000.

“I am in over my head in interest rates. I have acquired even more debt as a result of interest being tacked on to my debt as soon as I received my loans. I feel like I’m simply treading water,” said O’Brien.

Students are receiving more loans, compared to grant aid, because of policy changes during the 1990s. In 1992, Congress passed the Reauthorization of the Higher Education Act. This legislation increased the amount of money students could borrow under the student loan program, changed the definition of need so that it was easier for dependent students to qualify, and made unsubsidized loans available to dependent students for the first time, according to CEPR.

“I have so many different loans and grants it’s difficult to keep them straight. But even with the Pell grant, which is a state grant, the Stafford loan, and an academic scholarship, I am struggling to pay for my tuition and will continue to struggle for many years after graduation,” said O’Brien.

The financial aide department at Cabrini explains that subsidized loans do not accrue interest while the student is in school or in a grace period, whereas unsubsidized loans begin to accrue interest from the date of disbursement. Subsidized loans are a part of a student’s aid package, and a student must meet need qualifications in order to receive them. Some unsubsidized loans also require that the student be financially needy under student aid guidelines, but some, such as Parent Loans for Undergraduate Students (PLUS), are available regardless of need, up to the total cost of attendance.

Getting a college degree is a good investment if the student can find a well-paid job after graduation. This investment has paid off for many graduates. Recent college graduates currently receive about 80 percent more in pay than recent high-school graduates. This is up from about 40 percent more in pay in the late 1970s, according to CEPR. O’Brien wonders what will happen to all the college graduates who are in less lucrative careers like education or students who plan to attend graduate school, “the debt is just going to pile up, bigger and bigger.”

O’Brien said, “I do not regret making the decision to attend Cabrini, I know it is the best investment, but I find it disturbing that an average Cabrini student like myself is graduating with double the debt as compared to the national average of $17,000.”

Because of the rising costs of higher education, even students who take out loans are working a significant number of hours while in school. Since the average number of hours worked is already above 20 hours per week, there is not a great deal of room for students to work more and stay in school full-time. Among students at private, four-year institutions who took out loans in 2003-04, 83 percent reported working during the school year, putting in an average of 22 hours per week, according to CEPR.

“It really is a ‘Catch 22,’ I was working part-time during last semester, sometimes up to 25 hours each week to help my mom pay the bills because the interest from my loans was quickly accumulating, but then I had no time for my homework and I knew my grades were slipping so I worked less but then I could barely pay my monthly bills. It’s a big problem with no solution, said O’Brien.”

Looking at the statistics gives college students a grim look at post-graduation life as the numbers show students from low-income backgrounds take on more debt than their peers from higher- income families. These students’ families are also less likely to help them to pay off that debt later on. One out of every five students from a higher income receives help paying off their loans from their parents, compared to only one- in-ten from lower income families, according to CEPR.

“My mother is a Catholic-school teacher and I will most likely follow in her footsteps. The notion of having a job teaching right after graduation is a nice one, but then I remember that my mom could not handle paying for my college on her salary, so it’s definite that I will struggle to pay off my debt. Trying to start a career, establish myself as an adult and repay my enormous debt is something I am not at all prepared to do, but I have no choice. My college experience has been extraordinary but thinking about the reality of repaying $35,000 after I graduate leaves a bitter taste in my mouth that may last until the last penny is paid back.”

Loquitur welcomes your comments on this story. Please send your comments to: Loquitur@yahoogroups.com . T editors will review your points each week and make corrections if warranted.

Posted to the web by Shane Evans

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Laura Van De Pette

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