College Loan Slavery: Student Debt Is Getting Way Out of Hand
The quest for a college degree is dumping millions of young people deep into a pit of debt from which many will never recover.
Raya Golden thought she was handling college in a responsible way. She didn't apply until she felt ready to dedicate herself to her studies. She spread her schooling across five years so she could work part-time throughout. She checked that her school, the Academy of Art University in San Francisco, had a high post-graduate employment rate. But there were two things she hadn't counted on. The first was the $75,000 in nonsubsidized federal student loans she'd have to take out for tuition and those living expenses her part-time jobs selling hotdogs and making lattes couldn't cover. The second was that she'd graduate into a workforce teetering on the edge of the biggest financial crisis since the Great Depression.
"All of a sudden the work just dried up," says Golden, who got her degree in traditional illustration. "I've sent out probably a hundred resumes from L.A. to Canada, but I haven't had a single response. Experienced people are getting laid off, so why would anyone take a chance on a college grad?"
Shortly after graduating this past January, Golden moved from San Francisco to Los Angeles hoping there would be more work available, only to find hiring freezes at most of the production studios and animation houses. She has looked into fields ranging from children's book publishing to T-shirt design, but no one is hiring. For now, she's doing her best to get by working part-time as a barista at Starbucks and sleeping on a friend's couch.
Golden has taken a three-month hardship deference on her student loans but is well aware that the longer she pushes off payments, the higher the interest will climb. She had hoped to consolidate her loans, which are now at $112,000, but every place she called either no longer handles consolidations or turned down Golden because she was not employed full-time. Since there's no way Golden could possibly make her $1,400-a-month payments on a part-time barista's salary, she brokered a temporarily reduced payment of $650.
"It doesn't even cover the interest," says Golden, "If I pay that for two years I'll wind up owing $150,000. But I can't see that I have any other choice."
As for her career future, Golden admits things look bleak.
"I'll probably have to go back to school to learn computer illustration," she says, acknowledging that this means racking up even more debt with still no guarantee of a job. She is wary given that so far, despite her work ethic and excellent grades, the higher education path hasn't paid off at all.
"My timing couldn't have been worse," she says, voice brimming with frustration. "I'm doing the exact same thing I was doing before I went to school, only now I have all this debt to carry around, too."
The economy these days looks frightening for just about everyone. Who would want to be a retiree with little to no earning potential, or a young family grappling with mortgage and child care payments while facing the possibility, or reality, of job loss? But imagine trying to enter the labor force right now, making career choices that could affect your entire earning future. How are college graduates supposed to juggle student loan payments with the realities of an imploding job market and family members too caught up in their own financial turmoil to help out? With all the attention focused on failing banks and government bailouts, the very legitimate panic felt by such graduates risks getting lost in the shuffle.
"Most of the recent graduates I hear from are petrified," says Alan Collinge, founder of Student Loan Justice, an organization that fights for student loan reform, and author of an upcoming book about the student loan industry. "They have yet to find real jobs in their field, so they're out there slinging hash to make ends meet. And then their loan payments come due."
Graduates like Golden are right to feel petrified. According to a recent College Board report, about 60 percent of 2007 college graduates had student debt, each taking out an average of $22,700 in loans. Graduates are expected to begin repaying within six months, healthy job market or no. Loans can be deferred, but never erased (unless you die or are permanently disabled). And when those payments do come due, many will face the prospect of paying back not only fixed-rate federal loans but also high-interest private loans. The private loan industry is now responsible for 24 percent of student lending. Before the economic crisis hit, it was the fastest-growing sector of the student loan industry. And though the $700 billion bailout bill includes provisions to enable the U.S. Treasury to buy troubled assets, including private loans, from student loan providers, it provides no relief for the students who have taken out such high-interest loans.
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