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At the height of the Occupy protests last fall, young people held signs announcing how much they owed in student loans. While the pundits were asking each other what, exactly, the protesters wanted, a big part of the answer was on those signs: Students are leaving colleges and universities with a staggering financial burden and bleak job prospects.
"When you get out of college at 21 with a 30-year loan, it's soul crushing," says Scot Ross, executive director of One Wisconsin Now, a progressive organization that is launching an advocacy campaign on the issue. Ross is on leave to serve as communications director for gubernatorial candidate Kathleen Falk.
The student loan landscape has shifted dramatically since the parents of current students and recent graduates left college. In 2006, the U.S. Education Department's National Center for Education Statistics reported that most borrowers who finished college in the early 1990s were able to manage their student loan burden. Most paid the loans back in 10 years. Today, many students face 20 to 25 years of making payments. In the early '90s, about half of students borrowed; in 2006, two-thirds had to borrow. And their loans are much bigger.
Federal and state policy and budgetary decisions in recent years have contributed to the student debt burden. Public funding for public universities has fallen steeply at the same time that tuition has skyrocketed. Congress slashed funding for Pell Grants that helped the most needy students and put provisions in place to protect private lenders.
Federally funded student loans are no longer available from Sallie Mae, and its private loans have much higher interest rates than do home or car loans.
Last year, students borrowed more than $100 billion dollars - a new record. The College Board, an advocacy group that works to ensure that every student has the opportunity to prepare for, enroll in and graduate from college, reports that students are borrowing twice as much as in 2001. The total amount owed on all outstanding student loans is expected to reach $1 trillion next year. A full-time undergraduate student borrowed an average of almost $5,000 in 2010, 63% more than a decade earlier after adjusting for inflation, according to the College Board.
These young debtors are not just those who opted to attend prestigious private universities. Tuition at public universities has soared as those institutions struggle to offset cuts in public funding. University of Wisconsin-Madison's in-state tuition jumped from $5,866 in 2005 to $9,672 in 2011. The estimated total cost for a year at UW-Madison was $15,256 in 2005. Now it's $25,421.
About half of 2010-2011 bachelor's degree recipients at UW-Madison will have borrowed an average total of $24,493, says Susan Fischer, director of the office of Student Financial Aid. For those who go on to graduate school, the debts increase sharply. About three-quarters of law school graduates will have loans and owe an average $99,723. Almost 90% of medical school graduates will have borrowed, and their average debt will be $151,383.
To make matters worse, student loans differ from all other kinds of debt in two significant ways. They are excluded from bankruptcy protection, and it is not possible to refinance or restructure loans to take advantage of falling interest rates.
"It is easier to be a deadbeat dad than it is to lose your student loan debt," Ross says of the lack of bankruptcy protection. "What does that say about us as a nation?"
People on disability who can't afford to pay their student loans can even have their payments garnisheed, Ross notes. The only recourse, he adds, is "loan rehabilitation, which means you have to agree to make extended payments and take a new loan, with added fees. You end up with even more debt."
Ross admits he has a dog in this fight. He borrowed about $30,000 in 11 different loans to pay for his bachelor's and master's degrees. He laughs, a little ruefully, when he admits that, at 42, he is in "year 12 of a 30-year student debt," and says he's fortunate to have a job and be able to keep up with the payments.
Ben Manski, founder of the Liberty Tree Foundation, is another advocate for reforms to the student loan system. He contends that the huge increases in student debt are the inevitable result of cuts to higher education in state budgets.
"Generation X was the first generation to experience the impact of debt and a restructured job market," says Manski, 37, who was recently appointed campaign director for Green Party presidential candidate Jill Stein. "We are overemployed and overworked. We do not have job security. Retirement is not even a consideration. The Millennials have it even worse, because of high unemployment. When you have this kind of debt, you lose freedoms - the freedom to engage in public service, for example, or pursue the career you are most fitted for as opposed to one that will make ends meet."
Despite the heart-stopping debt statistics, the UW's Fisher thinks it's still possible to get at least an undergraduate degree without going very deeply into debt.
"Sometimes, students accrue big debt because they change majors and take longer to graduate. Or they choose a private or out-of-state public school that the family really cannot afford. My advice to incoming students is to work while they are in school and live frugally. And get in and get out. If they do that, I think they can finish with a minimal amount of debt."
But starting working life owing tens of thousands of dollars during a period of high unemployment has many students wondering how they will be able to afford to marry, have children or buy a house. Paying off even a relatively small loan in a sagging economy is proving very difficult for many people. Here are some of their stories.
'You can't live your life without worrying'
Christina Spector left UW-Madison with an undergraduate degree in elementary education and psychology (2002), a graduate degree in educational leadership and policy analysis (2008) and a law degree (also 2008).
"It was a conscious decision to go to UW-Madison for the in-state tuition. I had scholarships, a little help from my parents, and I always had jobs while I was in school," she says. But it wasn't enough.
"The first time I signed a promissory note, I had such a hard time of it. I cried for two days about entering that system, but I had no other choice."
A school administration consultant for the State Department of Instruction, Spector will pay $550 a month for a total of 25 years before her loans are paid off. Her husband, who has a master's degree and is employed by the American Federation of Teachers, makes student loan payments of $200 a month.
That $750 monthly expense means they must live very frugally.
"We are on a really strict budget," she says. "We don't make large purchases unless we absolutely have to. We bought much less house than we qualified for, and we drive an inexpensive car. We are thoughtful about little things like buying coffee. We take our lunch to work. We can't travel, so we use our vacations to visit family."
One place where the family does not cut corners is on daycare for their 2-year-old child.
"Daycare costs more than our mortgage, but that's one thing you're not going to scrimp on."
The debt drives all the family's decisions - having another child, making a career change, moving.
"It's difficult sometimes, because you can't live your life without worrying about it," she says. "I am much less inclined to take any kind of risk because of it."
Spector knows she could ease the financial burden by abandoning a job she loves in the public sector and joining a private law firm.
"I never went to law school wanting that. I always wanted to work in the public sector. I have friends from law school who have made that decision so they could pay off their loans. To me, it seems like selling your soul. I just couldn't do it. That would be a true prison on top of the bondage of the loans."
'We have given up many things'
A Madison West high school graduate, Ben Manski has an undergraduate degree in sociology and a law degree from UW-Madison. His higher education left him with $70,000 in student loan debt. His wife, Sarah, also has debt for her student loans.
"I am paying about $500 a month. For both my wife and me, it's about $800 a month. It's a major part of our budget, almost as much as we pay for housing," he says.
Although Manski could be earning big bucks in a private law firm, he has stayed true to his commitment to use his education to work for social change. Founder of the Liberty Tree Foundation, he ran for the state Legislature as a Green Party candidate in 2010. He also practices a little law and teaches sociology at Madison College.
"I had other choices I could have made," Manski says. "I was offered a lobbying job for an insurance company when I was 22 years old that would have paid $80,000 a year. I turned it down."
Manski and his wife have had to make difficult choices because of their student loans.
"It is very difficult to save, and we have given up many things. We are not in a position where we can help others financially. And, certainly, we are not having a family until we have the ability to afford kids," he says. He and his wife recently started a new website, posipair.com, designed to put environmentally responsible businesses in touch with each other and with customers, in an effort to generate some independent income.
Manski, who comes from a family of teachers, has a passion for education and would like to teach full time.
"I think there's no higher calling than teaching and no more important institution than education," he says.
Sometimes, he says, his students ask him if their schooling is worth the money and if they will be able to get jobs when they finish. "I used to be able to say it is definitely worth it," he says. "But now that question is more difficult to answer."
'We can't take vacations'
When Kathy Wallace learned that her Kenosha employer, Powerbrace Corp., might be moving its operations to Mexico, she decided to follow her dream of becoming a math teacher.
With a bachelor's degree in math already in her pocket she would need only to complete the requirements for a teaching license. She enrolled at Carthage College, where she took night classes for four years on top of working 40 hours processing accounts payable. In 2006, she had to quit her job to student teach. She landed a job as a substitute teacher at Bullen Middle School in Kenosha and continued to work toward a master's degree through an online Walden University program. She completed the master's degree 20 months later, and now has a full-time teaching position.
But Wallace's career change left her with a total of $60,000 in student loans and the prospect of supporting her family of four on a teacher's salary and the modest disability payments her husband receives. Her loan payments are $700 a month.
"I've been paying the first one [for the undergraduate degree] since 2007, and I still owe about $19,000 on that one. I finished the master's program in August and owe $30,000 for that. It will probably take at least 12 years to pay it all off." Wallace will be 54 years old by then.
She says her husband's disability payments cover their mortgage, but the family has to get by on her income for everything else.
"We don't go out to eat. We can't take vacations. Our kids don't get to do things the other kids get to do. It's really hard knowing you can't do things for your own kids."
Those children, now 11 and 16 years old, both want to go to college.
"I've told them I'd chip in as much as I could. I've encouraged them to go for scholarships. The rest will have to be student loans," Wallace says. "My kids seeing me get more education showed them this is what you need to do to survive. Without college, there's not much out there for you."
Wallace hopes she may be able to take advantage of a loan forgiveness option for her federal Stafford and Perkins loans after five years of teaching. She qualifies on two counts - she teaches mathematics and she teaches in a Title 1 school. But she worries that she might not make the five-year requirement.
"If I can get [those loans forgiven] it takes a lot of pressure off me. But we are facing layoffs again in our district."
'The interest is very high'
Tanya Oemig finished paying off her own student loans in her early 30s, but now, at 46, she faces paying back $15,000 she borrowed to send her children to college.
"They couldn't borrow enough themselves," she explains, adding that, as a single parent, she was unable to save for her children's higher education.
Until recently, Oemig was a communicable disease surveillance specialist with the Wisconsin Division of Public Health. Her salary there was not enough to pay the bills after taking on the new debt, and she had to add a second job. She finally decided she was on overload and quit both jobs to work for a software development company at a higher salary.
"I loved the work at Public Health, but I just couldn't afford to keep doing it. I was lucky to find a good place to work, and it pays enough that I'm able to make the payments on one salary now. There are people struggling a lot more than I am."
Still, Oemig worries about her children's prospects. Both still live with her. One graduated from Madison Media Institute in May with an associate degree and now works at a gas station while he looks for a job related to his skills and education. The other one is still at Madison College, working toward a two-year degree in information systems administration. He has a part-time help desk job, but his hours were cut recently.
"I worry about their job prospects all the time. Currently they don't make enough to support themselves. They can make their loan payments, but they can't pay for car insurance or cell phones. And I worry they won't find a job before their education is obsolete. They are both very discouraged."
Oemig thinks the time allowed before graduates have to start repaying student loans is unrealistic, given the dismal job market.
"Even if they had a job right out of school, they would have a lot of expenses getting started. They need more than six months so they can save enough to afford an apartment and maybe a car - to get their feet on the ground."
And she wonders why interest on student loans is so high when loans for other purposes are cheap these days. One of her sons has a Sallie Mae loan with an interest rate of 10%.
"I had good credit so I could get federal loans, but those who don't have to go to private loans where the interest is very high."
'Sometimes I wonder why I'm doing this'
There was never any question in Dustin Bradley's family that the Beloit Memorial graduate would go on to college.
"My grandparents didn't go to college, and my father [a third grade teacher in Wauwatosa] was the first and only one to get a degree. My family always encouraged me and expected me to get more education," he says. However, he admits that he drifted during his first couple of years at UW-Madison, struggling with the math required for the business program where he first enrolled, and finally finding his academic passion in sociology.
"I did the victory lap," he explains of his extra fifth year as an undergraduate. He will receive his bachelor's degree in May.
But Bradley's accumulation of student debt is not over. He plans to enroll in a paralegal certificate program next fall. It's a high-demand skill, and he's sure he'll find work. Then, after a few years of gaining experience, he wants to enroll in law school.
So far, Bradley's debt load is only about $12,500, lower than average, because his family was able to kick in for his first few years and because he worked an average of 32 hours a week while in school. But from here on out, he's on his own.
He's looking at paralegal programs at technical colleges in Madison and Milwaukee and at several online programs. The private web-based programs are convenient, especially for someone who has a job, he says, but they are more expensive. Programs at the tech schools cost about $4,000 for the one-year course. The costs for online courses that have accreditation range from $7,500 to more than $10,000. Bradley expects he will have to borrow that money on the far more expensive private student loan market, but hopes he can pay most it off before he starts law school.
That is where the really big debt will start to build. According to UW-Madison statistics, the average law school graduate in 2012 will owe almost $100,000. That number includes accumulated undergraduate debt, but law school alone leaves the average borrower some $80,000 in debt.
Still, Bradley is confident that incurring the debt will be a good investment. "I think I'll be making enough to make [the payments] manageable. But it's hard when I look at some of my friends who got jobs right out of high school at Chrysler or GM. They have high-paying jobs but don't have this debt. So sometimes I wonder why I'm doing this."
Cause for hope
Many college graduates face a sobering reality: turning 50 and still not being free of student loan payments. But there are efforts under way to ease the burden. The progressive organization One Wisconsin Now is launching an advocacy campaign that proposes the following for state residents:
- A "truth in lending" provision, similar to what's required for a mortgage, so students understand when they take out a loan how much they will be paying back and for how long.
- Bankruptcy protection.
- The opportunity to refinance or consolidate student loans.
- Provisions for forgiving student debt.
One Wisconsin Now is also creating a website that will highlight national efforts at helping students with excessive debt. U.S. Sen. Dick Durbin, for example, has introduced legislation that would treat private student loans the same as other private debt under bankruptcy. President Obama favors linking student loan repayments to income; providing debt forgiveness after 20 years; and allowing greater flexibility on interest rates.
"This is an issue that is just starting to bubble up to the surface," says One Wisconsin Now's deputy director, Mike Browne. "We're in relatively early days, legislatively."