An ed­u­ca­tion in debt: Grads buckle un­der bur­den

The Washington Times Weekly - - Culture, Etc. - BY AN­DREA BILLUPS

In Muskegon, Mich. high school hon­ors stu­dent Rachel Har­ris has taken to the Web to seek do­na­tions in a cy­ber-at­tempt to af­ford her dream col­lege, Notre Dame.

In New York City, at­tor­ney Robert Ap­ple­baum, who owes more than $96,000 in stu­dent loans, has watched what was once a per­sonal rant ar­gued on the In­ter­net turn into a Face­book group with 128,000 mem­bers who have signed on in sup­port of his idea of urg­ing the fed­eral gov­ern­ment to spear­head col­lege loan for­give­ness. Do­ing so would be a cer­tain way to jump­start con­sumer spending, he de­fends.

The strug­gling U.S. econ­omy is im­pact­ing col­lege ed­u­ca­tion and youth­ful as­pi­ra­tion as more fam­i­lies have lost jobs and sav­ings. To­day’s stu­dents are forced to bor­row more, put a four-year de­gree on hold while they work, or even choose de­gree pro­grams that aren’t their hearts de­sire — but may one day al­low them the means to pay off their ed­u­ca­tion. Money is avail­able, but con­cern re­mains over whether to­day’s stu­dents will gar­ner enough fi­nan­cial suc­cess to ever pay it back.

Many grad­u­ates are feel­ing the pinch.

“I loved be­ing a district at­tor­ney,” says Mr. Ap­ple­baum, 35, who worked in Brook­lyn D.A.’s of­fice for five years af­ter he grad­u­ated from Ford­ham Law School. “But I quit (to en­ter pri­vate prac­tice) be­cause I had to pay off my loans — I’d put them on hold for five years. Al­though I had great pas­sion for my job, I just couldn’t pay off law school and also pay my rent. The only dif­fer­ence be­tween Sallie Mae and Citibank and the mob is the ce­ment shoes.”

Higher ed­u­ca­tion at­tor­ney Shel­don E. Stein­bach says he can un­der­stand to­day’s col­lege fi­nance co­nun­drum.

“It’s a pretty com­plex time,” says Mr. Stein­bach, a part­ner in the Wash­ing­ton law firm Dow Lohnes who served for decades as the gen­eral coun­sel for the Amer­i­can Coun­sel on Ed­u­ca­tion.

“Even fam­i­lies that have saved are fac­ing dra­matic losses in their col­lege tu­ition plans,” he said of the dive in the mar­ket that has slashed in­vest­ments, even for ed­u­ca­tion. “There are many fam­i­lies out there who are chang­ing plans. Stu­dents are stay­ing at home, work­ing, go­ing to com­mu­nity col­lege for their first cou­ple of years then trans­fer­ring to a four-year school, “ to keep their costs low.

“It’s a very rea­son­able and ac­cept­able way of go­ing to col­lege,” he adds. “I think for many stu­dents, they are com­ing to terms with the fact that you don’t have to go to a school with all the bells and whis­tles. I think you will see more and more kids also trans­fer­ring from the smaller pri­vate schools to the state pub­lic uni­ver­si­ties. Money is short and fam­i­lies have to make the determination as to how they are go­ing to deal with this.”

Higher ed­u­ca­tion ex­perts say de­mand for stu­dent loan money is higher than ever this year with fed­eral loans still plen­ti­ful for those who need them. Pri­vate loan fi­nanc­ing, which many stu­dents have re­lied upon in the past to aug­ment fed­eral loans, is less plen­ti­ful or tougher to get.

“It’s clear that the broader eco­nomic cri­sis means that more fam­i­lies are go­ing to have trou­ble,” says Sandy Baum, a pro­fes­sor of eco­nomics at Skid­more Col­lege and an­a­lyst for The Col­lege Board in New York.

“Lots of schools are do­ing ev­ery­thing pos­si­ble to in­crease fi­nan­cial aid this year and peo­ple are work­ing hard on so­lu­tions, know­ing that many fam­i­lies are go­ing to have trou­ble. I’m op­ti­mistic in the sense that I think there is a lot of aware­ness of the po­ten­tial cri­sis and that more stu­dents and fam­i­lies are go­ing to have trou­ble pay­ing with their own re­sources.”

For-profit in­sti­tu­tions may have to lend money them­selves to stu­dents. Those stu­dents seek­ing pri­vate loan dol­lars will likely face a tougher time from more cau­tious lenders who will seek a credit-wor­thy co-signer on some stu­dent loans, she said.

“If you don’t have a par­ent who is credit-wor­thy, you will have a harder time.”

In 2008, some colleges and uni­ver­si­ties went into mo­men­tary panic amid fears that some banks, stung by the fall­out of the sub-prime mort­gage cri­sis and stock-mar­ket fall­out, were slow­ing the amount of fed­eral stu­dent loans and pri­vate-la­bel loans to stu­dents. But the Bush ad­min­is­tra­tion and Congress took swift action giv­ing the Depart­ment of Ed­u­ca­tion more au­thor­ity to en­sure th­ese loans were avail­able.

“Right now, it’s sta­ble and we cer­tainly haven’t reached a cri­sis point yet,” says Terry Har­tle, se­nior vice pres­i­dent for gov­ern­ment and pub­lic af­fairs at the Amer­i­can Coun­cil on Ed­u­ca­tion in Wash­ing­ton.

How lend­ing pat­terns might change for stu­dents en­ter­ing this fall, “We won’t know for an­other cou­ple of months,” he said. “My guess is that fed­eral stu­dent loans will be widely avail­able but the avail­abil­ity of pri­vate loans will de­pend upon the broader avail­abil­ity of credit in the fi­nan­cial sys­tem. We won’t know what that will look like un­til closer to Septem­ber.”

Na­tion­wide, the fed­eral stu­dent loan de­fault rate has been de­clin­ing steadily since the early 1990s, Mr. Har­tle said, when it peaked at 22 per­cent. Now it hov­ers around six per­cent for all types of stu­dents and all types of in­sti­tu­tions, mov­ing lower for four year schools and higher for trade and tech­ni­cal schools.

As stu­dents and fam­i­lies face tough choices in the months ahead, the Obama ad­min­is­tra­tion has pro­posed broad changes that would elim­i­nate pri­vate banks from the fed­eral stu­dent loan pro­gram. The pres­i­dent has ar­gued that such a switch would save the na­tion about $4 bil­lion a year in sub­si­dies by elim­i­nat­ing pri­vate banks and mak­ing loans di­rectly from the Depart­ment of Ed­u­ca­tion to bor­row­ers.

Such a plan was ini­tially floated by for­mer Pres­i­dent Bill Clin­ton in 1993, but Congress de­cided not to go along with it, set­ting up a di­rect loan pro­gram al­ter­na­tive that let stu­dents de­cide which of the two pro­grams they wanted to par­tic­i­pate in. “In the end, the com­pe­ti­tion be­tween th­ese pro­grams proved to be a good thing be­cause it im­proved the qual­ity of ser­vice avail­able to stu­dents and fam­i­lies and in­sti­tu­tions,” Mr. Har­tle said. “Even peo­ple who had ar­gued for one or the other now con­ceded that the com­pe­ti­tion cre­ated a much bet­ter stu­dent loan sys­tem than we would have had oth­er­wise.”

Mr. Har­tle says that now that Mr. Obama has re­newed dis­cus­sions, his pro­posal is not without con­tro­versy and will have a tough road ahead in the Congress. “Banks that make stu­dent loans make po­lit­i­cal con­tri­bu­tions to mem­bers of Congress,” he said. “The big dif­fer­ence be­tween now and 1993 is the Depart­ment of Ed­u­ca­tion has shown that it has the abil­ity to run a stu­dent loan pro­gram and the banks aren’t ter­ri­bly well-re­garded by much of the pub­lic right now. I don’t know what will hap­pen.”

As the method for get­ting money into the hands of stu­dents shapes a Wash­ing­ton de­bate, stu­dents face their own dilemma. Is it worth go­ing into deep debt to fi­nance a de­gree, par­tic­u­larly for many with as­pi­ra­tions to grad­u­ate work in pro­grams like medicine or law? And if you do bor­row the money to fol­low your pas­sion or dream, will you find fu­ture work that will al­low you to pay it all back?

The Michi­gan high-school stu­dent, Miss Har­ris, is so in­tent on get­ting to Notre Dame, where she hopes to study biomolec­u­lar en­gi­neer­ing, that she’s ad­ver­tis­ing her wor­thi­ness on­line — www.iwant­to­ — seek­ing the kind­ness of strangers as a way to de­fer some of the costs of the $46,000 a year tu­ition at the vaunted Catholic uni­ver­sity in South Bend, Ind. Her story, boast­ing her 3.97 grade point av­er­age and her youth­ful determination to use the In­ter­net to fundraise, has been broad­cast on Fox News and in other na­tional me­dia out­lets. She notes, in de­fense of the ex­pen­sive tu­ition, that the faith-based ed­u­ca­tion is im­por­tant to her, even as she has al­ready been ac­cepted at a solid in-state school, the Uni­ver­sity of Michi­gan.

Mr. Ap­ple­baum, who also pur­sued his dream to at­tend a top­tier law school, sounds a cau­tion­ary note for stu­dents like Miss Har­ris. While he ini­tially bor­rowed about $75,000 to com­plete law school, his de­fer­ment and com­pound­ing in­ter­est on his stu­dent loan, as he pur­sued a le­gal ca­reer in pub­lic ser­vice, has pushed the amount he now owes over $96,000. He cre­ated a Face­book group in Jan­uary, “Can­cel Stu­dent Loan Debt to Stim­u­late the Econ­omy” where he makes a bold case that the eco­nomic stim­u­lus won’t tweak the na­tion’s spending — “the mid­dle class was com­pletely left out of this de­bate” — but by for­giv­ing stu­dent loans, many suc­cess­ful peo­ple caught in the bor­row­ing trap, would be freed to spend again.

Lit­tle did he know that his own fi­nan­cial quandary would put him at the cen­ter of a grow­ing move­ment, with 2,500 new group mem­bers join­ing his cy­ber-cause daily.

“I’ve some­how be­come the poster-child for stu­dent loan re­form. The stu­dent loan move­ment has now be­come my full­time job,” he jokes, but then turns se­ri­ous as he talks about a cri­sis that he says con­tin­ues to swal­low up good peo­ple, seek­ing a col­lege ed­u­ca­tion that may no longer be af­ford­able.

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