Broke For Life: How Student Loans Are Robbing Your Future
Imagine a race you've waited your entire life to run. You're the favorite in this competition; all the analysts pick you to win the gold medal, you've trained diligently for four years -- you long to sprint, breathlessly, towards every dream you've held since childhood. The locker room was fun enough, full of like-minded individuals who wanted to run the race themselves, but most of them have already lined up at the starting blocks, awaiting the gun.At last, it's time for you to get to the track too, but suddenly you can't move. You look down, and both your ankles have been handcuffed to the radiator. Your hands have been superglued to the metal bench, and a rope hangs from an overhead pipe, attached to your neck. A legion of accountants stands just behind you, out of sight, brandishing knives and baseball bats, screaming for you to run.This is what it is like to have a student loan out of college.All of which may sound overdramatic, I realize, but I'm one of the 2 million of us who unfortunately have had to default on a student loan, and believe me, it's something I'd only wish on my worst enemies.Unfortunately it happened to some of my best friends. Within a few years after graduation, almost everyone in my old house was defaulting -- or about to default -- on these loans, and many of us had to rely on lies, fictitious family problems and feigned ignorance to get the creditors off our backs. We developed accents -- French, British, deeply redneck Georgian -- to muddle the poor chaps on the phone, and started leaving increasingly surreal greetings on the message machine. As it stands, even if I plant tomatoes next spring and hit oil, the Man won't let me have a credit card until well into the 21st century.Perhaps the only positive thing about having a student loan is there is always a bit of relativity attached; no matter how bad your situation is, there's always someone around who has it worse. Bernard Yee, a graduate of Columbia and Duke Law, still owes half of his original debt of $100,000, even after six years of payments. Bernard also switched careers after school from law to freelance writing, a move that didn't please his creditors much. "The debt prevents me from doing the things I want to do. I'm a decent writer, but I don't know if I can live on that kind of money."Melissa, a 25-year-old graduate who put in time at Miami of Ohio, American and Indiana University, owes $48,000 in 11 separate loans. Even with a 3.86 GPA and a solid stint through law school, she still can't find any work as an attorney. She lives at home with her parents and her cat in Connersville, Indiana. Even though she has another month until her deferment wears off, the lenders' letters come pouring through the door, sometimes five at a time, leaving her clueless as to what to do. "I have some used furniture and my cat," she says. "They can't have my cat."What has happened to the lot of us? Are we really a nation of capricious ne'er-do-wells hell-bent on ruining any future chances of owning our own houses? The best students, the ones with the most potential and self-discipline, are the ones now dreading the postman. How did so many of us get into this mess?The Indentured Student ClassWell, first of all, you can blame your alma mater. In 1965, when LBJ fired off the first rounds of Guaranteed Student Loans (still our favorite loan of choice), he meant it mainly as a small, local measure to help low-income families get through 'til spring. For a decade, things went swimmingly, and tuitions rose steadily with inflation and under the influence of marketplace controls. But in the mid-'70s, due primarily to the oil recession, more middle class families began struggling to foot the college bill. So in response, President Jimmy Carter promoted and signed the Middle Income Student Assistance Act, making it possible for pretty much anybody to get a loan. And everybody did.Then came the feeding frenzy. These loans are guaranteed, you see, so all the schools had to do was force students to get them, and they would get their money no matter what. No longer constrained by rational economics, colleges and universities suddenly saw the government as this giant wobbling teat just waiting to be sucked, and started a spastic race towards Who Could Charge the Most Ludicrous Tuition for Four Years, a pathetic charade usually led by our fine friends at Bennington and Swarthmore.Granted, university officials try to rationalize their exorbitant rate increases through lame excuses like "utilities upgrades" and "teacher's salary hikes" (both laughable, if you pay attention to what some teachers say about their pay if you can get the lights in their office to turn on), but deep down, they know what's going on. As David Lipsky and Alexander Abrams say in their excellent generational treatise, Late Bloomers, "If you want to see how many separate muscles there are in a university public relations officer's face, and you want to see how quickly those muscles can move, try bringing this up." Facts are facts: Since 1978, tuition has risen at twice the rate of inflation, forcing exponentially more of us to fill out FAF's.You can also try blaming the government. For the past 15 years, both federal and state support for higher education has been dwindling, forcing even more of the costs of college onto our backs. As a result, in 1992, Congress made it even easier to get loans for middle income families. Since then, borrowing under federal loan programs has risen 57 percent, to $23.1 billion. To put all this in perspective, consider that between 1965-1978 a total of $11.5 billion had been borrowed. These days, twice that much is borrowed in a single year.And still nobody wants to ease up on the problem, especially the current Congress, which now would like to see students pay back interest accrued even while they are in school. Apparently, the government doesn't seem to mind making indentured servants of us all.If we were honest, though, we could have a good case for blaming ourselves. I went to a high school that convinced us all that if we didn't get a degree from one of the Big Name schools, we would surely end up stocking Emergency Ponchos on the impulse item rack at Wal-Mart. And most of us fell for it. Many of our best and brightest skipped the deal on state schools and paraded towards the Browns, Dukes and Emorys, believing that your education was only as good as what you paid for it.And then most got doubly screwed. With the dramatic drop in birth rates for the period after 1970, you'd think that schools would cut costs to attract students; instead, they simply let any schmo with a pulse and a working ATM card into the party. Which, of course, devalued the B.A. degree to the point where simply having one didn't mean anything anymore.So when the recession of 1990 hit, everyone had two things: a diploma and a rejection letter from the company of their dreams, both worth the price of the paper they were printed on.Save Yourself, Before It's Too LateMostly, we were just idiots. I recall a faint, hazy memory of signing something vaguely financial when I was seventeen years old, just arriving at the university. I was more interested in the social scene a few floors up in my dorm and trying to find my sociology class without getting rained on -- the financial aid office was stuffy, and I had no idea what the officers were talking about. I assumed that most of the stuff I was getting were Pell Grants. I knew that "grant" meant I didn't have to pay it back, but the rest of that form eluded me until I graduated. But I know what the hell it means now.You, however, can choose to be smarter than the rest of us thugs and take care of this loan mess while you're still in college. There are ways. Loan officers, for one, are usually busier than hell, but will find time to tell you exactly what you will owe, and what you will not; don't be in a hurry to sign anything scary. According to Lola Hauss, who processes student loans at Capital University in Ohio, many students don't even pay attention to the fact they are borrowing so much money, leaving the paperwork to their parents. She claims that one of the main reasons students default on their student loans is that they didn't know they had to repay the money. To combat this, since the mid-80's, when the federal government mandated it, students receiving loans must go through an entrance and exit interview."At the entrance interview we explain that this loan is in the student's name," says Hauss. "We tell them to remember their lender and the guarantee agency. But I'm amazed at the number of students who don't know that information at the exit interview." It is at this interview that students should learn how deep they're digging. "The chart shows how much money the students are going to owe for their loans," says Hauss, "so when they think about what kind of car to buy or apartment to rent they can budget accordingly."Also, don't be shy about scrounging for scholarships; there are scholarships out there that literally go begging for recipients, and a few boring hours in the library may uncover a weird entitlement custom-made for you. And if you get a really wild hair up your arse, why not consider transferring to a state school? Most public universities offer identical educations to their private counterparts, at half the pretension and a quarter of the cost.There are a variety of things you can do to ameliorate the situation even after college, assuming you haven't defaulted yet. The magic word here is "defer," something you can do without hassle if you are going back to school (easy enough), cannot find work for the life of you and can prove it (easy, albeit embarrassing), or pregnant (not recommended). Deferment forms are pretty self-explanatory, and will generally get the Powers That Be out of your life for six months at a time. Don't get too hooked on the deferment drug, though -- you can't do any of the above for long before they come down on you with biblical intensity.And not to sound like some lame "stay-in-school" PSA, but your diploma is your best defense against defaulting. According to Kalman Chany, president of Campus Consultants, and co-author of The Princeton Review/The Student Access Guide to Paying for College, the best thing you can do to avoid problems is, very simply, to graduate. "Studies have shown that students with a four-year degree for most of them debt isn't a problem. Most students if they left school, they didn't complete their degree, they went and borrowed, they're in trouble because they don't have a degree to get a better job. That's where the real problem is."The Government Won't Save YouOf course, you and your loan officer aren't the only ones aware of the problem. Even the Clinton Administration -- at a time when it didn't seem capable of doing anything right -- dropped a few proposals on making the process less painful; last Fourth of July, Clinton enacted a bill that allows students to pay back their college loans over 30 years, instead of the usual 10. Ostensibly, this was to help poorer families afford the cost of sending their kids to college, but it didn't change the fact that it costs too much for anyone to send their kids anywhere. Not only that, but it only prolongs the inevitable pain of salary loss another two decades, while simultaneously forcing you to pay up to three times more than the original loan was worth. What was $75,000 turns to $159,000 under current interest rates by the time 2025 rolls around. That Trivial Pursuit contest in the dorm lounge was fun and all, but the dread of still paying for it whilst slurping fiber drinks at the age of 56 is an emotion I'd rather avoid.Another Clinton idea was the inception of AmeriCorps, a plan that may have helped him garner most of the youth vote for the '92 election. Passed into law last year, the bill allows students to work off their student loan debt by putting time and effort into government-sanctioned community service projects. Michelle Von Ville, after graduating from Ohio University in journalism, opted for a service job in inner-city Chicago. For helping build community programs, she was paid $640 a month, but when her project was put under the aegis of AmeriCorps, she got $4725 lopped off her student debt. "The work I did was rewarding," she says, "but the concrete benefit was that it cut into my loan."Would that this were the usual story with AmeriCorps, but it is far from a cure-all. Only 100,000 students will be able to use the expensive program over the next five years (which is 2 percent of those expected to graduate over this time), making it a much-ballyhooed drop in a bucket the size of Saturn. Even discounting the national statistics, the annual $4725 is hardly incentive to put one's personal life on hold for two years and fetter oneself to some community project at the peak of one's post-collegiate energy. Especially when you probably spent that much buying chem textbooks and eating pizza.Or Kiss Your Future Good-byeThis distinct lack of altruism is not just a drawback to AmeriCorps, it's endemic to everyone with a big loan. People thousands of dollars in debt can't take jobs in the public sector, or even jobs in the lower rungs of the private sector. They need money, and fast, which is leading thousands of people away from careers that actually mean anything. Like Daniel Gross, a Washington Post writer, says, "the 'payment due' notices that start to arrive after graduation often force debtors to put dreams of working as a public defender, or of teaching school in the Mississippi Delta, on hold.""I can't afford to take a job that pays any less than the one I have now," says Patty Cole, an electronic publisher spending a week's pay every month on loans, "Even if I wanted to, I couldn't try to do something cool like working at a start-up magazine, or something noble like working at a food bank."So while we collect horror stories, Congress continues to sell us up the river. Pell Grants, those wonderful little beasts that we can use and abuse without compunction, are now under fire from the current Congress. Never mind that Pell Grants have declined from 75 percent of our federal college financing to 34 percent in 20 years -- nobody seems to think that educating any of us is a risk worth taking.And to be honest, many of our parents are doing a little of the same. Curiously, they may be the only generation in history that never really paid for any higher education -- theirs or ours. William McPherson, a senior fellow at the Brookings Institute, calls it "a tricky intergenerational question. Is it right that a couple whose parents paid for their education may now want their children to pay for their own?" For years, our folks and other elders have been looking at us across a minefield of sexual diseases, government fraud, family fracture and emotional trauma -- and shrugging with a diffident grin. But this money thing may hit us the hardest, because it is the ultimate jail sentence. With sizable chunks of your post-college earnings allocated for paying off student loans, it's simply foolish to consider planning a wedding, starting a family, or putting a down payment on a home. Money is the entry card to adulthood.Indeed, if you actually go ahead and default on a loan, life becomes quite different. Certain drug stores don't take your checks anymore. Nobody types "please" or "thank you" in their form letters anymore. After a few months, you start to feel genuinely disenfranchised, as if the picket fence and new car were silly daydreams anyway. After a few years, the haziness is replaced by a hardened cynicism, a defiant recklessness that comes with having nothing to lose. "We will attach your paycheck," a creditor says on the phone. "Ha ha! Try and find me, Poindexter!" is the immediate reply.Lunatic Fringe -- Or A Nation Of Millions?In the end, we have exacted some sort of weird revenge on the system that made us this way; paralyzed by apathy, and accountable to no one, we will most likely have no part of the world they wanted us to inhabit. "You're banished," say Lipsky and Abrams, "and you're about to become a little bit of a criminal."Which, again, may be a little overdramatic. The one thing we can always count on is each other, since we are all in it together. There are currently 21.6 million of us encumbered by our student loans, 21.6 million with our futures mortgaged, with our careers, marriages, families and houses held in limbo while we scrape and claw just to get even, 21.6 million Sisypheans pushing rocks to the tops of hills, covering for the other on the phone, faking illnesses, doing what has to be done. And -- hollow comfort that it may be -- there will soon be many more.It's a raw deal, for sure, and one that many of us will fight with well into the millennium, each in our own fashion. Just like the guy on campus at the University of North Carolina who I overheard last week, talking to his girlfriend: "I have a friend at an Ivy League who borrowed ninety thousand dollars." "Really?" "He's going to pay it back, a thousand a year." "For how long?" He smiled. "Forever."