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Home / Articles / · Archive / News & Columns /  Feature | Degree in Debt: Believe it: Paying off that huge college debt may take a lifetime.
News & Columns

Feature | Degree in Debt: Believe it: Paying off that huge college debt may take a lifetime.

Posted // November 26,2008 -

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Raya Golden thought she was handling college in a responsible way. She didn’t apply until she felt ready to dedicate herself to her studies. She spread her schooling across five years so she could work part-time throughout. She checked that her school, the Academy of Art University in San Francisco, had a high post-graduate employment rate. But there were two things she hadn’t counted on. The first was the $75,000 in nonsubsidized federal student loans she’d have to take out for tuition and the living expenses her part-time jobs selling hotdogs and making lattes couldn’t cover. The second was that she’d graduate into a workforce teetering on the edge of the biggest financial crisis since the Great Depression.

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“All of a sudden, the work just dried up,” says Golden, who got her degree in traditional illustration. “I’ve sent out probably 100 résumés from L.A. to Canada, but I haven’t had a single response. Experienced people are getting laid off, so why would anyone take a chance on a college grad?”

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Shortly after graduating this past January, Golden moved from San Francisco to Los Angeles hoping there would be more work available, only to find hiring freezes at most of the production studios and animation houses. She has looked into fields ranging from children’s-book publishing to T-shirt design, but no one is hiring. For now, she’s doing her best to get by working part-time as a barista at Starbucks and sleeping on a friend’s couch.

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Golden has taken a three-month hardship deference on her student loans but is well aware that the longer she pushes off payments, the higher the interest will climb. She had hoped to consolidate her loans, which are now at $112,000, but every place she called either no longer handles consolidations or turned down Golden because she was not employed full-time. Since there’s no way Golden could possibly make her $1,400-per-month payments on a part-time barista’s salary, she brokered a temporarily reduced payment of $650.

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“It doesn’t even cover the interest,” says Golden, “If I pay that for two years, I’ll wind up owing $150,000. But I can’t see that I have any other choice.”

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As for her career future, Golden admits things look bleak.

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“I’ll probably have to go back to school to learn computer illustration,” she says, acknowledging that this means racking up even more debt with still no guarantee of a job. She is wary given that so far, despite her work ethic and excellent grades, the higher-education path hasn’t paid off at all.

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“My timing couldn’t have been worse,” she says, voice brimming with frustration. “I’m doing the exact same thing I was doing before I went to school, only now I have all this debt to carry around, too.”

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The panic starts … now
nThe economy these days looks frightening for just about everyone. Who would want to be a retiree with little to no earning potential, or a young family grappling with mortgage and childcare payments while facing the possibility, or reality, of job loss? But imagine trying to enter the labor force right now, making career choices that could affect your entire earning future. How are college graduates supposed to juggle student-loan payments with the realities of an imploding job market and family members too caught up in their own financial turmoil to help out? With all the attention focused on failing banks and government bailouts, the very legitimate panic felt by such graduates risks getting lost in the shuffle.

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“Most of the recent graduates I hear from are petrified,” says Alan Collinge, founder of StudentLoanJustice.org, an organization that fights for student-loan reform, and author of an upcoming book about the student-loan industry. “They have yet to find real jobs in their field, so they’re out there slinging hash to make ends meet. And then their loan payments come due.”

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Graduates like Golden are right to feel petrified. According to a recent College Board report, about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans. Graduates are expected to begin repaying within six months, healthy job market or no. Loans can be deferred, but never erased (unless you die or are permanently disabled). And when those payments do come due, many will face the prospect of paying back not only fixed-rate federal loans but also high-interest private loans. The private-loan industry is now responsible for 24 percent of student lending. Before the economic crisis hit, it was the fastest-growing sector of the student-loan industry. And though the $700 billion bailout bill includes provisions to enable the U.S. Treasury to buy troubled assets, including private loans from student loan providers, it provides no relief for the students who have taken out such high-interest loans.

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Collinge sees the proliferation of costly private loans and the abysmal job market as a potentially toxic mix, one that could result in a wave of bad loans echoing what has already happened in the housing industry.

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“Attention needs to shift from welfare of the banks to welfare of the students,” he offers. “Otherwise, I wouldn’t be at all surprised to see a dramatic spike in the number of people defaulting on their private loans.”

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Private loans weigh heavily on Rebecca Gretzinger’s financial future. When her $20,000 in government aid wouldn’t stretch far enough, she took out $20,000 in private loans from Sallie Mae in order to complete her bachelor’s degree. Since graduating two years ago, she has been paying $150 every six months to hold her private loans in forbearance. But, come December, she’ll need to come up with $640 a month in total loan payments—40 percent of her monthly income.

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“I’m in my mid-20s, and I’m still living with my parents,” she says. “I don’t have any resources to fall back on. I am very concerned that my private loans will be put into default once I have to start paying them back. “

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Gretzinger works at an insurance company call center, a job that doesn’t require a college degree. It’s neither well paid—her salary is based on commission—nor stable—she was laid off in April and then rehired in October—and Gretzinger holds out little hope that she will be able to support herself, and her debt, on what she makes. She has tried searching for better jobs near her family home in Green Bay, Wis., but despite her degree in business administration with a minor in marketing, no one is hiring.

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“I don’t know what my plans for the future are,” she says. “But I realize now that I will never be able to have children or even a house of my own. I went to college to better myself but found myself much, much worse off then I ever could have imagined.”

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Gretzinger concedes she’s lucky to have a job at all, and she’s right. The nation’s underemployment rate reached 11 percent in September, its highest rate in 19 years. Underemployment figures include not only the unemployed but also part-time workers who want full-time jobs and jobless workers who want but are no longer seeking full-time employment. For recent graduates landing in a job market that already contains more than 17 million underemployed, the prospects are indeed depressing.

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For those unable to find adequately paying jobs, and there will be plenty, the consequences of defaulting on student loans can be life-altering, ranging from ruined credit reports to garnished wages to liens placed against property and bank accounts. Not even declaring bankruptcy can hold them exempt. In these dicey economic times, an inability to pay could deliver a crippling blow to young people who barely have had a chance to get their feet wet in the working world. Such realities only add to the disillusion many like Golden and Gretzinger are experiencing regarding the nation’s investment in their educations and their futures.

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“I no longer believe that my job is safe, and there are very few other jobs out there,” Gretzinger says. “The rescue plan may help the banks, but it’s not going to help me. I believe that it will take years to get this country back on its feet.”

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It seems all graduates can do these days is hang on and hope the new administration brings about some kind of economic change that will work in their favor. But, for many, hope feels like a pretty tenuous thing.

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For years, young people have been banking on the message that acquiring job skills and an education will pave the way to financial security. Instead, for many, the quest for a college degree has only dumped them even deeper into the financial pit. For a country depending on coming generations to get us out of the economic mess we currently find ourselves in, such lack of faith in a brighter future truly is a petrifying prospect.

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“I feel like I’m on the Titanic,” says Golden. “Who got out first? The rich people. Everyone else was just left to drown.”

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Nan Mooney is the author of (Not) Keeping Up with Our Parents (Beacon, 2008). This story is reprinted with permission from AlterNet.org

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Feature Sidebar | Lend Me Your Years: Utah students face down a bad economy by staying in school
nBy Eric S. Peterson

 
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REPLY TO THIS COMMENT
Posted // December 3,2008 at 04:08 People have to look at what they are investing into. Education is an investment that only pays off over time. The question isn’t if people should get an education, but what they are studying. If you have a degree in something that won’t pay off, is it worth it? I got my degree in Accounting and though it isn’t the most entertaining job but I have a great feeling of being a few months away from paying off my debt and not worrying about debt.

 

REPLY TO THIS COMMENT
Posted // December 3,2008 at 04:07 People have to look at what they are investing into. Education is an investment that only pays off over time. The question isn’t if people should bet an education, but what they are studying. If you have a degree in something that won’t pay off, is it worth it? I got my degree in Accounting and though it isn’t the most entertaining job but I have a great feeling of being a few months away from paying off my debt and not worrying about debt.

 

REPLY TO THIS COMMENT
Posted // December 2,2008 at 09:52 I just graduated with a Master’s degree in Business and have $18,000 in debt. The problem is that within six months, I have no belief that I will have a job that pays me any better than what I do now. (and I don’t make that much now) There is no way that I can make the $200 payment in 6 months. I had hoped to get a new job in a higher paying field, but there is nothing out there. I apply for jobs everyday and I do not get any responses.

 

REPLY TO THIS COMMENT
Posted // December 1,2008 at 11:05 Up until very recently, it’s super easy for students to wrack up debt. The banks troll for them. That plus their credit card debt makes it all that much worse.nnit’s actually a bigger problem in utah than most people want to believe. Mostly because the schools here are so affordable (relatively speaking) that very poor students go into debt to attend them. And with the local culture pushing their young’uns to marry far too soon the debts have as much to do with paying for rent and baby food and clothes as it does for tuition.nnRemember, we’re a hot locale for bankruptcies and have been for a long, long time. This is a big reason why. After being so dumb with their debts in school they compound it by being dumb with their debts afterward, trying to keep up with the Christiansens and buying houses far too expensive.

 

REPLY TO THIS COMMENT
Posted // November 30,2008 at 14:21 Jmo:nnWe may have made this difficult for you to read this package of stories on line , and for that I apologize. The sidebar, called Lend my your years, follows the main story. It is a local story about debt and college. The story explains that state colleges and universities in Utah, because they are relatively less money than private colleges, are a better deal and have fewer students graduating with huge debt load. But as a mother of two--one at a pricey private college and one who will be going to the U. of U. next year, I’d still advise you do whatever you can to reduce your debt load before you graduate. It’s an un-pretty picture, no matter which state you live in or where you get your loan.

 

 
 
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