Merry Christmas from the Department of Education

My first student loan payment was due yesterday, Saturday, December 13, 2013.

What surprises me the most is that I’m not completely freaking out. And, based on many things I’ve read, I probably should be.

Six months ago, right before I graduated, I was required to attend what my university dubbed an “exit interview” to make sure I, along with a sizeable chunk* of the class of 2013 that was “awarded” (yes, that is really the verb they use in the financial aid notification letter) student loans, didn’t default and make the school look bad or completely f*** up my first year out of college by pretending that I don’t owe thousands of dollars to the university and the U.S. government. You’re given a 6-month “grace period” before payments are due & you start getting charged interest.  This is extremely generous (not) considering that it takes the average college graduate 6-7 months to find a job, depending on which source you cite.  So, if in 6 months you’ve managed not to blow through what little money you have in savings, and you miraculously find a full-time job that pays above minimum wage AND comes with health insurance, congratulations! You probably won’t default on your first payment. Probably.

Sometimes I like to play a little game with myself. It’s called, what are some creative ways to describe how much debt I’m in?

  • I owe approximately 8 times the amount that I sold my Toyota Camry for in 2009 after I graduated from high school. That car paid for my books my freshman year.
  • My debt totals less than 1/3 of the national average, which is now $35,200 (up from $26,600 just two years ago!!)
  • Assuming I continue to make the same amount of money for the foreseeable future, I will turn over 7% of my income for the next 10 years in order to pay off my student loans.
  • I could buy 46 brand-new iPhones, OR make a down payment on a $260,000 house, OR buy a 2009 Honda Civic for the amount of money I owe. Instead, I’m sharing a one-bedroom apartment , take public transportation, and continue to use my taped-together Dell laptop.
  • My minimum monthly payment amounts to 8 times what I pay each month for basic health insurance.

Perhaps you’re wondering why my debt is comparatively so low to that of the other poor slobs who were unlucky enough to graduate alongside me. The short answer: the post 9/11 GI Bill. The long answer involves telling you about how my dad became disillusioned with the financial industry after getting his MBA, quit his job at a bank, and, with a toddler to provide for, joined the military in 1993. This is how my family ended up moving every three years, and why I attended 5 different elementary schools, 2 different middle schools, and 2 different high schools. My first year in college, my dad got deployed to Iraq for 3 months. Then, about a year later, he volunteered to go again for 6 months. As a result, he was given 36 months worth of undergraduate educational benefits; he generously gave 18 months to me and 18 months to my sister. So I only had to take out loans for the first two years I was in school. Otherwise, my debt probably would have topped the $25,000 mark.

*********************************

Everyone is doubtless aware of the spate of articles denouncing the so-called Millenial generation that has circulated widely during the last couple of years. I’d like to propose that there’s a close link between all of that nonsense & the student loan crisis.

It starts, I think, with the American Dream and an obsession to “grow the middle class.” Not that extravagance, billionaire status, and celebrity aren’t still facets of the American Dream–but pretty much no one contests the idea that everyone should own a car, a house, and get a college education. Pretty much.

I had a fairly heated argument with my younger sister not that long ago. She was complaining that a Bachelor’s degree doesn’t mean as much as it used to, simply because a greater number of people have Bachelor’s degrees now than, say, 30 years ago. She thought the solution might be to limit the number of degrees awarded each year. I told her that yes, that might work to some extent, but then posed the following questions:  Is education a universal right? Shouldn’t everyone who is qualified to get a Bachelor’s degree have the opportunity to get one? Who will decide who is “worthy” of getting a degree? What will the new definition of “worthy” be in a system where only a select percentage of the population is “allowed” to go to college?

Let’s think for a moment about the benefits that come from having an educated populace. In addition to the economic benefits accrued by degree holders, there is a “cascade” of other positive effects: “Graduates…tend to have better health, rely less on government social programs, are less likely to be incarcerated, and are more likely to engage in civic activities.” [1] One might even argue that having an educated populace is essential to a functioning democracy; Thomas Jefferson certainly thought so. Among his more brief musings on the subject is the aphorism that “Light and liberty go together.” Of course, in 1795 the bar for general education was considerably lower than it is in 2013. And today, a bachelor’s degree is a pre-requisite for almost any decently-paying job. [2]

Despite having a degree from an elite university, I’m not an elitist. I don’t think that only “certain people” should be allowed to go to college. If I’m a better-educated version of an administrative assistant from the 1960s, so be it. If the baristas at Starbucks all have degrees from fancy liberal-arts colleges, I don’t necessarily see anything wrong with that on a superficial level. If the same jobs are available, but the required credentials for doing those jobs have risen in response to a higher volume of degree-holding job seekers, well, then, that just means that the populace in general is better educated. Can this lead to some degree of dissatisfaction? Sure, if you think that having a degree in English, History, Anthropology, Political Science, etc. entitles you to one of the ever-elusive “meaningful” jobs out there. And this is where horrible articles like this come from.

The problem with this kind of analysis is that it only considers one part of the equation. Underemployment is a real issue, not just an existential one. This is why:

  • In 1880, it cost on average $300/year to get a Bachelor’s degree from one of the top colleges in the country. Adjusted for inflation, $300 in 1880 equals $6,926 in 2010. [3]  Instead, in 2010-2011 the average tuition at a public 4-year college was $15,918 and at a private/non-profit college, $32,617. [4]
  • The average starting salary for the class of 2013 is $45,327. [5] In Illinois, that’s about $2,821.47 per month after taxes. If you’re making monthly payments on a $35,000 student loan balance, your monthly payment will be about $400. Guess what? “It is estimated that you will need an annual salary of at least $48,333.60 to be able to afford to repay this loan.” [6] Great.
  • Not all jobs are created equal. Many recent college graduates are able to find only low-paying jobs without benefits (i.e., health insurance), or get hired as contractors subject to firing without notice. Moreover, the likelihood that you’ll be forced to change jobs soon after graduating is higher than ever. Today’s youngest workers will hold 12-15 different jobs in their lifetime. [7]

Whew. This is a long post. But bear with me. I haven’t even discussed the aspects of student loans that make me truly angry.

********************

Among the many, many articles I’ve read about skyrocketing tuition costs, ballooning student loan debt, and depressed college graduates, this Rolling Stone feature is my favorite, not least because of the headline: “Ripping Off Young America: The College-Loan Scandal.” This is where I learned, for example, that the Department of Education will make an estimated $184 billion in the next 10 years on the new federal student-loan system, that the DOE makes money off of students who default on their loans, and that the official default rate is 13.4% – which The Chronicle of Higher Education says is a gross underestimate. Default, for those not in the know, is when you miss a monthly payment. This is the page from my “Student Loan Repayment Handbook” that sometimes makes it hard for me to fall asleep at night.

Chapter 8: Default.

“Once you are in default the following may occur:

  • The lender may declare the entire balance, including interest, to be immediately due and payable.
  • The lender may place your account with a collection agency and collection costs may be added to the outstanding balance.
  • Your default status will be reported to all schools you have attended or may be currently attending.
  • Your default status will be reported to credit bureaus.
  • Your academic records will be placed on hold.
  • The federal government may withhold your federal tax refund to repay your loan and interest.
  • If you default on a federal loan, you will be ineligible to receive assistance from any Federal program including:  Pell Grant, Supplemental Education Opportunity Grant, Federal Stafford Student loan, PLUS loans or Loan Consolidation.”

What the handbook doesn’t tell me is that if I ever miss a single payment, there are additional potential consequences including: not being able to get a cell phone plan, being blocked from buying homeowner’s insurance, and having such a damaged credit score that I wouldn’t even be able to rent an apartment. In other words, my earnings potential would basically be zapped to $0. You can’t get out of paying for student loans in the case of bankruptcy; in fact, the only way you’re exonerated from paying back what you owe is if you die.

All of this makes me wonder why college is so expensive. Why did my university charge nearly $60,000 per year? It’s not because faculty are being paid more. It’s not because the endowment shrank or alumni donations are at an all-time low. It’s probably because administrative costs have risen substantially [9] and because the university spends hundreds of millions each year either renovating existing buildings or constructing new ones. This frustrates me. I would rather have lived in a less-than-beautiful dorm than see it undergo no less than 3 renovations in 4 years. I saw no need for the university to build a new exercise facility (the one we had was state-of-the-art, supposedly) or a new sports arena, particularly when our football team isn’t very good anyway. Now I, along with thousands of other graduates, will be shouldering those costs for years to come.

***************************

So, all said and done, what’s the best way to describe the every-student-has-to-go-to-college-and-YIKES-don’t-look-at-how-much-it-costs-because-without-a-degree-you’ll-just-work-at McDonald’s system that we’ve built in the United States? For that, I’ll defer, again, to Rolling Stone:

“It’s cheering millions of high school graduates toward college every year, feeding them into the debt grinder under the banner of increased opportunity, when full disclosure would require admitting that there isn’t a hell of a lot waiting for them on the other side, where the middle class has nearly vanished and full employment is going the way of the dodo.” – Matt Taibbi

Sources

*I tried, I really did, to figure out the percentage of students at my school who are required to take out student loans as part of their financial aid package. But this information is either not publicly available or buried deep in an administrative black hole, ensuring that only the person who put it there knows how to find it.

[1] The Broader Societal Benefits of Higher Education
[2] It Takes a B.A. to Find a Job as a File Clerk – NYT
[3] Even in Countries Where Tuition Is Free, College Debt Can Be a Problem
[4] Fast Facts: Tuition costs of colleges and universities
[5] Average Starting Salary for Class of 2013 Grads up 2.4%
[6] FinAid Calculator
[7] Experience.com
[8] The Department of Education
[9] Administrators Ate My Tuition – Washington Monthly

And last but not least, that scandalous Rolling Stone article: Ripping Off Young America: The College-Loan Scandal.

15 thoughts on “Merry Christmas from the Department of Education

  1. I’ve been re-reading your post and wondering how you are doing in finding a job that will help you pay off your student loan. Have you ever thought about the Peace Corps? They pay you while you’re working overseas and also save money for you, so that at the end of your two- year, three- month service, you have about $5,000 plus anything you managed to save while working. They call it “the toughest job you’ll ever love,” and, for me, that was true. If you like to help people and to travel, it’s a great gig.

    1. Thank you for your thoughtful comment! I have thought about the Peace Corps, many times, but the thought of being away from my friends and family for over 2 years just seems inconceivable. Their end-of-service bonus is now closer to $7,400, which would allow me to pay off the majority of my student loans. Luckily, I do have a job working in a library, and since my monthly payments are reasonable, I’m not nervous about defaulting—for now. But I will probably have to switch jobs before the end of the year. Perhaps I should write an update post soon? And I still haven’t ruled out the Peace Corps!

  2. I know student debt can be daunting. In the UK, people who emigrate straight after graduation get let off the hook. Might be something to look into 🙂

    Another thing: start learning for free. Work, volunteer, go to free libraries and watch TED and YouTube… There’s a lot you can learn by working, reading and travelling (or even staying at home on YouTube) that doesn’t cost anything.

    And another thing: caring too much about politics will eventually exhaust you. Just try to make the best decision that someone in your shoes could possibly make. Find some work. Volunteer. Get involved in something exciting. Or travel and see what happens. Don’t let the student debt repayments upstage everything else in your life. There’s no good reason to over-rationalise or over-analyse the causes of what got you into this situation. That just causes worry.

    In a few years’ time, you’ll be settled down (somewhere in the world) with a job and some savings, and you won’t be as free to do whatever you want as you are right now. Make the most of it!

    1. Thanks for your comment, and for reading 🙂 I suspect that you are a much more optimistic person than I am! And your advice about volunteering and engaging in self-teaching rings true. I will have to disagree with you, though, about not over-analyzing the causes of what got me into this situation. I think that if enough people go along with a faulty system for long enough without criticizing it, then the broken aspects risk overwhelming and ruining the entire system. That’s part of what has happened with the student loan crisis: costs have been rising for years, yet people are afraid to talk about it since it gets described as an individual, rather than a societal, problem.

      1. You are of course completely right. I was in your shoes a few years ago. Everything seemed terrible. But it gets better.

        I’m reading a book called Academically Adrift at the moment. It explains the situation perfectly. It also says that it’s not just the universities’ fault. Worth reading.

  3. Very interesting piece.

    The increase in the cost of college tuition has been running at 3-5 times the rate of inflation for at least the last 30 years. You outlined some of the reasons why; I’ll add another (that admittedly only pertains directly to public colleges and universities): public funding has plummeted. At my alma mater (the University of Michigan), which I attended as an out-of-state student, state funding today is roughly 1/7 what it was in the mid-1980s (adjusted for inflation).

    Back in the Pleistocene era, when I was applying to colleges, I wanted to attend Northwestern. I applied for financial aid, and while I was accepted to the school and the administration acknowledged my need, they essentially said “tough luck, pal.” Even as an out-of-state student, the cost of attending Michigan was only about 40% that of NU. My parents were able to fund Michigan fully for me, but I would have been on the hook for roughly $60,000 in loans if I’d attended Northwestern for four years. I chose Michigan, and we all lived happily ever after. 🙂 Fortunately, when it was time for grad school, I had full-expense offers and TA guarantees from the five places I applied to and ultimately settled on the University of Chicago.

    In the end, I came out of the process completely debt-free. I was damn lucky and I realized it as much then as I do now. The current situation is absolutely untenable for today’s students and the cockamamie pricing “system” that is the college tuition situation today resembles the insanity that is the Rube Goldberg-like health care cost superstructure.

    1. I wasn’t aware of the precipitous drop in public funding for state colleges & universities, so thank you for enlightening me. I wonder what the nefarious reasons behind that are. Having attended a private, not-for-profit university (ha!), the funding structure is just so radically different that I didn’t even consider public funding, though it is still a substantial part of the university’s operating budget in the form of government-sponsored research grants awarded to faculty.

      Perhaps this is why my tale runs almost opposite to yours. I was admitted to the fancy school I chose to attend, but also to the University of Texas. UT also acknowledged my need, but funded only half of the cost of tuition. Ironically, I ended up paying less at a school with 3x the price tag.

      It sounds like you did very well at Michigan, nonetheless, considering your five funded graduate school offers! And I am glad you were able to attend your top choice in that situation. I am also hoping to pursue a PhD — one that is fully funded, of course. I already get many questions about why I’m not in a Master’s program, and the fact of the matter is that I simply couldn’t afford it. Your comparison to skyrocketing healthcare costs is also apt, given that it is another way to deny what should be basic human rights (education, health) to an increasingly large segment of the American population.

  4. This is long 😀 , but it is hitting hard. About the economizing the number of degrees, under no circumstances, I think it’s a no-no. That will demoralize a person to not continue if he/she doesn’t make the cut. Plus, that’s added years and even more money owed to that person.
    The other interesting part is where the cost, the payments are going. Yes, it freaky to think that portion of the money you put for “your” education contributes to the development of the school buildings.

    1. oh yes, where indeed does the money go? You should hear the amount the school spends on gardening every year. Yes, the campus is beautiful – but $10,000 on a single flowerbed?! Admittedly, that one is only a rumor – but one with at least some aspect of truth.

  5. This is the most comprehensive report I have read in a long time from a former student. The costs of education have soared beyond the means of the middle class, and this is not what it is supposed to be all about. We are edging closer and closer to the old dictum of only the wealthy can afford a college education without hardship. Does the government forgive any of the loan for teaching? When I took out a government loan years ago, a certain amount was forgiven for five years as long as I taught classes. After that period, I had to pay the rest of the amount due.
    It is a sorry situation, and our graduates are paying the price over and over and over. Disgraceful.

    1. Thank you for reading, and for your thoughtful comment. Sometimes I have the odd, almost out-of-body sense that I am one of the few remaining members of a rapidly shrinking middle class. It’s shocking and saddening to think that the opportunities I had while growing up may only be available to a smaller & smaller slice of society from now onwards.

      As for student loan forgiveness, I know that Teach for America comes with what one might call partial forgiveness. While you’re teaching, you (usually) qualify for loan forbearance–meaning you don’t have to make the monthly payments. Interest still accrues on the balance of your loan, however, and your loans aren’t forgiven at the end. Instead, you are given an Education Award of up to $5,500 per year (I wonder how close this is to the average amount that a TFA member receives?) But as noted on the TFA website, “Many corps members use their education award to help cover the costs of coursework required to obtain their teaching certification.” So I’m not sure how much is left over to help with student loan debt.

Share your thoughts below.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s