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Loan debt, burden hit worse now - Student liabilities triple over decade
NY Times via the Houston Chronicle ^ | Jan. 28, 2003, 8:51AM | By GREG WINTER

Posted on 01/28/2003 12:53:56 PM PST by vannrox -- | Section: Business

Jan. 28, 2003, 8:51AM

Loan debt, burden hit worse now

Student liabilities triple over decade

New York Times

Every so often, when the phones grow quiet and the copiers still, Margot E. Miles glances at the lawyers devouring cases around her and thinks: "I could do that. I would love to do that."

A smile overtakes her as she envisions life as a lawyer -- fighting injustice, changing the world -- until the prickly reminder of having $25,000 in undergraduate loans wipes it away.

Dreams can wait. As for the need to quash her debt, she is not so sure.

"I go through this every day," said Miles, a legal secretary who graduated from the University of Pennsylvania five years ago. "I say to myself: `One day I'm going to do something phenomenal with this phenomenal education. I have to.' But it's just so hard to imagine taking out any more loans."

In their trek through college and beyond, student borrowers now amass an average of $27,600 in educational debt, almost three and a half times what they compiled a decade ago, according to a new survey by Nellie Mae, the student loan company.

And as college tuition has climbed, so has the number of students who borrow to help pay for it. Ten years ago, about 46 percent of graduating seniors had taken out educational loans in their undergraduate careers, according to the National Center for Education Statistics. By 2000, roughly 70 percent of them did.

The growing debt has begun to encroach upon other major purchases like homes and compels more than one in six borrowers, like Miles, to revamp their career goals to pay it off, the survey found. But perhaps most important, fewer students than ever say that taking out loans to attend college was worth it.

When Nellie Mae asked its borrowers a decade ago whether the benefits of their educational debt overshadowed the downside, nearly three-quarters gave a resounding "yes." Now, 59 percent say the positives outweighed the negatives, a warning sign that if debt levels continue to rise, students may start shying away from universities, or at least the more expensive ones.

"What's so worrisome is that for the first time, a lot of students are questioning whether they should have borrowed so much money," said Sandy Baum, an economics professor at Skidmore College who has conducted several such surveys over the last 15 years. "What will happen when people decide it's not worth it and won't go to college at all? We're not there yet, but we're really close."

The concern is grave enough that loan companies like Nellie Mae are urging students to borrow less, wherever possible, while some universities with big endowments are hurriedly increasing financial aid packages to keep educational debt to a minimum.

Still, for many students, loans have become an inescapable reality. Even after adjusting for inflation, the tuition and fees at private and public universities have more than doubled in the last 20 years, and though grants have increased as well, they have not nearly kept pace with the cost of higher education.

The outcome is that loans have essentially swapped places with grants on the seesaw of educational finance. As recently as 10 years ago, for example, loans accounted for a little more than 45 percent of all financial aid in the nation, according to the College Board. Today, they make up 54 percent, and few experts expect sudden changes in the equation.

For now, the scales still tip heavily toward higher education because college graduates can expect to earn $1 million more during their careers than those with a high-school diploma in tow, the College Board says, and advanced degrees are worth even more.

Student default rates are also at historically low levels, down to 5.9 percent in the fiscal year 2000 from 22.4 percent in 1990, a trend the Department of Education attributes to aggressive enforcement by universities, private lenders and the federal government to track down delinquent borrowers and to get them to pay up.

Statistics suggest that family background plays a big role in determining how students respond to higher debt levels.

According to the Nellie Mae survey, 62 percent of low-income borrowers said they regretted taking out so much in loans, compared with about half of those from families that were too well-off to qualify for federal grants. Similarly, only 54 percent of low-income students said the debt ultimately paid off in terms of their career goals, while 63 percent of their wealthier counterparts said it did.

There are many plausible explanations for the differing perspectives, researchers say. Because low-income students are less able to turn to their parents to help pay off their loans, they feel the burden more acutely. Maybe they have had less exposure to mortgages, car loans and other types of consumer debt, making their loans seem even larger.

Whatever the reason, it is the first time in the survey's 15-year history that low-income borrowers have expressed greater worry about their loans than their counterparts, providing a glimpse at the disparate impacts of rising debt.

"Beyond the concern that low-income students won't go to college, a bigger concern is that they will keep their debt down by working more hours during school," said Donald E. Heller, senior research association at the Center for the Study of Higher Education at Penn State University. "Working too many hours is one of the biggest factors in terms of not getting a degree."

"Indebtedness was becoming more and more of an issue," said William Wright-Swadel, director of career services at Harvard University. "We kept hearing, `I'm going to go work in industry for a few years, then I will return to what I care about.' Frankly I'm not sure how many of them were able to make the return trip."

TOPICS: Business/Economy; Constitution/Conservatism; Crime/Corruption; Culture/Society; Extended News; Government; News/Current Events; Politics/Elections
KEYWORDS: burden; children; college; cost; degree; educated; education; excessive; future; home; loan; saving; school; tax; university
I can see a storm brewing.
1 posted on 01/28/2003 12:53:56 PM PST by vannrox
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To: vannrox
At least when my generation got a bad education, it was cheap...
2 posted on 01/28/2003 1:02:02 PM PST by pabianice
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To: pabianice
I think they left out the fact that college tuition has been outpacing the growth of the economy by multiples. In recent years, with 2% economic growth, there have been 7%, 8% and higher tuition increases. Why? And where is the money going? And, as long as we continue to have a Federal Dept. of Education, what, if anything, are they doing about it?
3 posted on 01/28/2003 1:16:09 PM PST by henderson field
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To: vannrox
And as college tuition has climbed, so has the number of students who borrow to help pay for it.

Perhaps, putting cause before effect, that should have been:

As the number of students who borrow to pay for it, college tuition has climbed.

4 posted on 01/28/2003 1:24:33 PM PST by Voltage
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To: vannrox
"In their trek through college and beyond, student borrowers now amass an average of $27,600..."

I've got about three times that, and you don't hear me complaining. Of course, college would not be so expensive if everybody and their dog were not able to borrow at low rates thanks to the FedGov's student loan programs.
5 posted on 01/28/2003 1:38:29 PM PST by Henrietta
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To: vannrox
The thing I don't like about student loans is that they usually send you an additional $3000 or $4000 above paying for tution. To any young college student this is free money, that they don't have to worry about paying back. These people don't realize how fast it adds up to owing a large amount of money. My old roommate had this problem.
6 posted on 01/28/2003 1:38:37 PM PST by cpprfld
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To: vannrox
Conspicious by its absence is any mention of the type of degree. If a person spends 5 or 6 years getting his degree in black studies or a BA in history they are going to have a very difficult time using their education to further their careers. If however they get a degree in computer science, chemistry, physics, business, accounting or any 'useful' discipline, they will have a much greater probably of increasing their income potential enough to pay back the loans. (It worked for me)
7 posted on 01/28/2003 1:55:13 PM PST by Bob Buchholz
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To: henderson field
In recent years, with 2% economic growth, there have been 7%, 8% and higher tuition increases. Why? And where is the money going?

We have our first child in college this year and that has been my question as well...why does college cost *so* much?

8 posted on 01/28/2003 3:44:43 PM PST by aberaussie
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To: aberaussie
We have our first child in college this year and that has been my question as well...why does college cost *so* much?

It doesn't have to. I was married to a full professor at a major university and did more than my share of teaching when I was working my way through graduate school. We formed some opinions on the subject; take them for what you paid for them.

There are millions of kids going to private colleges because they are attracted to the campus life or the drama program or the fancy television production studio or the archaeology department. But the fact is that the majority of kids don't have to go to private colleges and aren't going to benefit from rarefied programs because they aren't going to work in these fields after graduation. They're going to get normal jobs like the rest of us. Hence, studying something fascinating often just means four years of academic pleasure and self-exploration. The question the parents must ask themselves is: is it realistic for our kid to have fun studying all this cool but useless stuff for four years? Can we afford this pleasure? Or should he be doing something cheaper and more practical? Should he perhaps be going to a state school?

Because the thing is, there just aren't that many kids, on a percent basis, who really need to go to $32000-a-year private schools. Some kids are going to spend four years drinking and hooking up no matter where they go to school. Before a parent agrees to go neck-deep in debt to send her child to a private school, she should ask herself if he really needs to be in that exclusive, costly writing program in order to become a novelist, or if he's more likely to get an actual job if he goes to the computer science department at State. Is he really going to be an anthropologist, when there are no jobs around for anthropologists? If not, then why spend more than thirty grand a year on being in a private school's anthropology program?

We all have choices to make. I'm not saying that it's a bad thing to send a child to a fancy private school. I'm saying that for most kids it's not necessary and they won't come out of it any more brilliant than if they went to a public university. My daughter is going to go to a private school because we can't find a public one that offers training in the area she will be going into. My son will be going to a state school. You have to make the best choice for your situation.

9 posted on 01/28/2003 4:32:16 PM PST by Capriole (Yes, I'm pro-choice. My choice is a Browning Hi-Power 9 mm.)
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To: Voltage; vannrox; henderson field; Capriole; Bob Buchholz
What Voltage, and vannrox and Henderson Field and capriole and Buchholz said!

Another possible factor in the increasing college loan debt "crisis" is that parents can no longer afford to foot the bill for their child's tuition. Therefore, students wishing to go to college are taking out loans. Why can't parents foot the bill? They are overtaxed. Why are student loan defaults a problem? Because, somehow, some loan recipients forgot it was a loan. It was an entitlement.

Right now, the universities are at a supply and demand advantage, as my esteemed posters preceeding me have said. You MUST have a college degree to get anywhere. Yet, a college degree means nothing. Sort of like how having an American Express card used to be prestigious. NOW, you have to have the platinum krypton titanium American Express card, because EVERYBODY can get an American Express card.

We put our son through college, sans student loans. Couldn't do it today. Tough option today for responsible parents who want to provide for their children, and not encourage them to encur the debt themselves, at taxpayer expense. The price tag for a college education is a rip off, and a shell game.
10 posted on 01/28/2003 8:15:53 PM PST by Fizzie
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To: Fizzie
I am reminded of what a friend of mine said. He was going to college to get a degree as a pharmacist. This was back in the 50's. He was poor and barely able to pay the costs. The required classes included many which he felt were completely unnecessary, and so he had 'developed' a plan to reduce the program from 4 years to 3. Fortunately he didn't present it to the Dean, as shortly thereafter the Dean presented a plan to increase the program from it's current 4 years to a new 5 years!

The Dean's plan benefited the college! What a surprise!

11 posted on 01/29/2003 7:51:40 AM PST by Voltage
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