Weight of debt grows for grads

Statesman Journal
By Chris Hagan

When Allison Barker started at Western Oregon University two years ago she knew studying to become a high school teacher was risky, but hoped the economy would turn around by the time she graduated.

“When applying to colleges I thought ‘Well, teaching’s not very profitable but it’s something I’ve always wanted to do’,” the 20-year-old Seaside native said. “In five or six years from now everything will start looking up, there will be more jobs, but it’s all gotten worse and worse. Now that I’m in the middle of it and $50,000 in debt, I can’t see the light.”

Barker isn’t alone.

Last month the College Board released a study showing federal student loans had doubled in the past decade after adjusting for inflation to more than $1 billion in the 2009-10 school year.

This week the Project on Student Debt published a report showing that while the average debt for Oregon students in the class of 2010 is just below the national average of $25,200, that debt figure increased almost 7 percent over the past year to just less than $24,000.

Overall, 63 percent of Oregon students graduated in debt in 2010.

Mark Kantrowitz, editor of the financial aid sites FinAid.org and FastWeb.com, estimates nationally the total outstanding debt on student loans at more than $950 billion, more than Americans owe on credit cards.

“For the longest time students have been told education debt is good debt, you can get a good job to pay back the debt,” Kantrowitz said. “Now with the high unemployment that isn’t necessarily true. It’s a temporary situation, but it still puts more pressure on the student.”

Kantrowitz said the main issue has been the inability of grants and other forms of aid to keep up with rising tuition costs. That has forced students to take on additional debt, but also shift enrollment to less expensive schools.

Kris Jerome, 18, and Cortley Williams, 18, both moved to the western part of the Oregon from Pendleton for school.

Jerome came to Willamette University as a film studies major, but Williams decided to start at Clackamas Community College to save on tuition.

Both will be taking out loans to cover the costs.

“Next year I’m going to have to,” Jerome said. “My parents took the loan this year, and I’m going to have to take the next one.

“It’s kind of scary because I don’t know what I’m going to do for the next three years,” he said. “It’s kind of intimidating to think about.”

Williams will be facing the same issues once she graduates, but hopes starting at Clackamas will limit the payments down the road.

“Right now I’m able to keep the debt low, which is really, really nice,” Williams said. “I’m able to go to school for $11,000 instead of $30,000.”

Poor job prospects — young college graduates have an unemployment rate of 9.1 percent — coupled with rising debt have also made default more likely.

Last month the Department of Education released the 2009 cohort default rate, which tracked student borrowers who began repaying loans in the 2009 fiscal year.

The report showed the default rate increased to 8.8 percent up from 7 percent in 2008. Oregon came in just below average at 7.74 percent.

Still, Kantrowitz cautions that figure understates the total as it only looks at the year after a borrower enters repayment and doesn’t take into account those using deferment or other options.

He said there’s little reason for any borrower to default on student loans with options such as Income Based Repayment, which allows for payments tied to how much a graduate makes above 150 percent of the poverty line.

“That reduces your payment to an affordable level regardless of your income,” he said. “The fact that people are defaulting is kind of a mystery given that there are all these options available.”

Patty Hoban, director of financial aid at Willamette, said one of the keys to managing college expenses is to plan for all four (or more) years, not just one at a time.

“I would say the main thing is definitely apply to all the schools you’re interested in, but when you get the financial aid offer you have to do the math, and not just for one year but for four years,” Hoban said. “I think a lot of people, and I’ve heard them say this, we’ll just figure out this one year here and see what happens next year. That’s not a good plan.”

Hoban said she’s cautioned students from taking more loans than they can handle, to the point of recommending they investigate other schools.

“I’ve said flat out to people looking at borrowing $20,000 a year on top of their federal student loans, you’re going to graduate with $100,000 in debt,” she said. “No undergraduate degree is worth that. Not even Harvard is worth that.”

James Brooks, the director of financial aid and scholarships at the University of Oregon, said any time a student can put into researching aid is worth it.

“If you spend a couple of hours online searching and you find $2,000 in scholarships, you’ve made $1,000 an hour,” Brooks said.

Kantrowitz agrees, cautioning that the best time to plan for debt is before it’s incurred. After that it’s important to watch every dollar spent in college.

“A pizza a week over four years is $2,000,” Kantrowitz said. “By the time you pay back that debt it’s going to cost you about $4,000. Before you spend student loan money on anything else, ask yourself if you’d buy it at twice the price, because ultimately that’s what it’s going to cost you.”

Those money management skills are only going to become more essential, Kantrowitz said. With education costs continuing to rise and wages and grants staying steady or dropping, a college education is going to only get harder to pay for.

“I’m not at all optimistic about the next decade in terms of more and more students — especially low-income students — are going to be increasingly priced out of an education,” Kantrowitz said.

“The question is when do you have the point of pain where people just can’t afford to go?” he said. “It’s clear that if you have a flat line for incomes and the debt keeps on rising it’s going to cross at some point.”

chagan@StatesmanJournal.com, (503) 399-6702 or twitter.com/chrishagansj

Online resourcesFastWeb.com, FinAid.org: Run by student aid analyst Mark Kantrowitz, the sites provide info on student aid and scholarships options. Recommended by Willamette and University of Oregon financial aid offices.

ProjectonStudentDebt.org: An initiative of the Institute for College Access & Success, a nonprofit independent research and policy organization. Publishes a yearly report on student debt levels, available on the website.

Trends.CollegeBoard.org: A study by the College Board looking at recent trends in higher education, including sections on student aid and college pricing.

StudentAid.ed.gov: The federal student aid website with information national grant and loan programs.

fafsa.ed.gov: The official website for the Free Application for Federal Student Aid.

OregonStudentAid.gov: Oregon Student Assistance Commission, with information on grants, scholarships and other opportunities available to Oregon students.

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