Samantha Levine, a 25-year-old law student from Chappaqua and a Horace Greeley High School graduate, will owe close to $200,000 when she graduates Western New England University School of Law. She plans to pay the bulk of it over the next 10 years.
“I’m living at home,” she says. “Every single paycheck I make is going towards that student loan.”
And Levine is one of the fortunate ones. She lives rent-free at her parents’ home in Chappaqua (she commutes to the law school in Springfield, Massachusetts), and she has a job lined up upon graduation at a corporate immigration law firm where she currently works part-time. But, with every paycheck going towards her loan, how will she eat? Pay for gas? Go to the movies?
“I had a bit of a breakdown a month or two ago,” she confides. “I was worried I would never be able to stop working and start a family, which gave me a migraine—one of three migraines of my entire life.”
This semester—her last semester at law school, when she should be studying hardest—Levine is considering getting a weekend job working in retail. On her days off, she makes jewelry, which she sells online. In other words, she’s juggling up to three jobs while completing her coursework. (She is also thinking about working for an after-school program after graduating.) Is this what it takes for a future lawyer who doesn’t pay rent to pay back her loans? Levine is hardly alone; across the county, there are frustrated students worried to death about their post-graduate lives and how to get started in the world under a crushing debt burden. These students, when they were between the ages of 17 and 22, might not have possessed the maturity or foresight to fully understand how their loans might affect the rest of their lives.
Westchester has reason to care about student loan debt. Nearly 200,000 of its 950,000 inhabitants are between the ages of 5 and 19, so roughly one out of every five residents has tough decisions about college—and how to pay for it—looming on the horizon. And more than 51,000 county residents are between the ages of 20 and 24, ages at which they may have to start facing the realities of those loans—or pile on more debt to go to grad school.
A county full of college graduates (plus graduates-to-be) who carry large debt burdens translates into a shifting economy with different priorities than those of previous generations—generations that didn’t have to work four jobs and live at home to make their monthly payments. Student loans factor into decisions about what kinds of jobs to take (if there are any jobs to be had), how many children to have (or whether to have them at all), and whether to buy or rent property—decisions that affect the very makeup of our county. How would Westchester look if a quarter of us delayed buying houses and having families?
And delay they may have to. More and more students are choosing to take on these debt burdens—and being from a wealthy county doesn’t make them exempt. Sure, Westchester County boasts a median household income of $79,619, as opposed to the national median income of $51,914, but, according to the Wall Street Journal, “households with annual incomes of $94,535 to $205,335 saw the biggest jump in the percentage with student-loan debt from 2007 to 2010.”
Michael Fraher, retired former director of financial aid at Vassar College, notes that large families with an annual income of $250,000 are still eligible for need-based aid if they have more than one dependent in college (and modest assets). Clearly, it’s not just middle- to low-income families that are relying on financial aid.
In fact, most students are. According to the most recent data available, a survey of 2007-2008 graduates conducted by the US Department of Education, 66 percent—or two-thirds—of students in the United States who earned a bachelor’s degree had to take out a federal loan or a private-lender loan. In 1993, that figure was 45 percent.
And let’s talk default rate—are students paying the loans back? In September, the Department of Education reported that the two-year student loan default rate had risen to 9.1 percent (from 8.8 percent the previous year). Out of the 4.1 million borrowers whose first loan repayments were due between October 1, 2009, and September 30, 2010, 375,000 defaulted by September 30, 2011.
Students who don’t default on their loans could be stuck making payments well into adulthood. (Even President Obama recently admitted that he and his wife were not able to pay off their student debts until eight years ago.) It’s possible to pay off student debt over an increment of years much in the way mortgage payments are fashioned, with 10-year loans and 20-year loans. This method is less desirable than paying off loans over a shorter period of time, since it subjects students to the burden of long-term interest accrual, but choosing to focus one’s income on paying over a shorter period could mean significant social impacts, brought on by delayed financial stability, over the first 10 years out of college.
“I talk to at least three students a week who come to me, sometimes in tears,” says Richard Wolff, an economics professor at The New School for Public Engagement in New York City. “What’s opening up ahead of them is an unending vista of debt where they’re going to have to live hand-to-mouth and deal with deprivations they’ve never dreamed of.”
Take Maeve Simpson*, a soft-spoken recent graduate of a small, private college in Massachusetts, where she majored in Asian Studies. “I’ve got more than eighty thousand dollars’ worth of debt,” she confides. “At seventeen, when I took out the loan, I could not conceptualize what that would mean.”
It means she owes more than $1,000 per month, half of which her parents have agreed to pay. And not wanting to return home and live with her parents, she is set to move abroad and teach English in China, where she hopes to keep her cost of living low and find stable employment. Moving to another country seems extreme, but if the jobs aren’t here and living costs are only rising,
Simpson feels she’s making the responsible choice.
Sound grim? It is. National student loan debt hit one trillion dollars on April 25 of this year, earning it the moniker “1T Day.” And it’s likely to get even worse.Nearly 54 percent of graduates—or slightly more than every other graduate—under age 25 were unemployed or underemployed in 2011, and more than one in 10 student loan borrowers who began repayment after October 2009 defaulted within three years. The situation has all the ingredients to cause the next “financial bubble crash.”
Mark Kantrowitz, publisher of finaid.org, a financial aid guide, however, says comparing the mortgage bubble to the student debt crisis might be unfair. “Student loans are a tenth the size of the loans during the mortgage crisis.” Still, besides mortgage debt, student loan debt outpaces all other forms of consumer debt in this country.
“One trillion dollars will become two trillion much more quickly than the first trillion was accumulated,” says NYU American Studies Professor Andrew Ross, an organizer with the Occupy Student Debt campaign. He also notes that, during the housing crash, a lender or bank could reclaim a home, foreclose on it, and then sell it. In the case of student debt, there’s no asset equivalent, so there’s nothing for the lender or bank to reclaim.
“The crisis isn’t going away,” he says. The Occupy movement espouses principles such as blanket student loan forgiveness and government-funded public colleges patterned after those in countries like Norway and Sweden. (We’re not there yet, but just before its July 1 expiration date this year, the House and Senate finally came to an agreement over maintaining low interest rates on federally subsidized student loans that were set to double from 3.4 percent to 6.8 percent for more than seven million students.)
So if student debt is a problem and there isn’t enough money, the question arises: Why even borrow to go to private colleges? Why not just go to a state or community college?
NYU sophomore Natayna Trilby*, who will owe more than $100,000 after graduation, says her mother, an administrative assistant who makes less than $40,000 a year, pushed her to go to NYU. “It angers me,” she says, referring to the debt she will owe upon graduation. “But, we’ve all been conditioned to believe we must achieve higher education at prestigious universities to get a nice profession and rise in the workforce.” Trilby’s mother, a single mom with two other children in college, struggles to afford it.
While Trilby has a partial scholarship, the rest of her tuition is paid by a Subsidized Federal Stafford Loan. (The interest is paid for by the government while she’s in school.) However, her scholarship and loan do not cover her spending money or the cost of books and supplies. Her mother cannot afford to help her. So Trilby works two jobs while in school—she has a job as a barista and a work-study placement in school.
The situation isn’t unique to NYU students. Sarah Lawrence College, located in Bronxville, holds the title as the most expensive college or university in the country at $59,170 a year, including tuition, fees, room, and board. (Landmark College in Vermont came in second at $57,330 a year, New York University at $56,787 a year, and Columbia University was priced at $56,310. The average private college rings in at $38,589.)
However, Sarah Lawrence has an exceptional situation—it holds one of the lowest endowments amongst its peer colleges, like Vassar College in neighboring Poughkeepsie, which has $362,739 of endowment per student. Eighty percent of Sarah Lawrence’s operating expenses are paid through its tuition, and, with the recent recession, the endowment has only decreased. “The university’s faculty agreed to a salary freeze in 2010 in order to allow its financial aid office to provide gift aid to the student population,” says Heather McDonnell, associate dean of financial aid and admissions at Sarah Lawrence.
The tuition costs still rise, as sophomore Tupper Freily* can attest. He receives financial aid but recently discussed with his parents the possibility of not returning to Sarah Lawrence because of last semester’s spike in tuition and his family’s financial restraints. The school ended up offering Freily more financial aid, enabling him to return for another semester. But his story exemplifies a common one these days of a vicious cycle happening at private universities: Students can’t afford to attend private universities without financial aid, but schools with low endowments—like Sarah Lawrence—can’t afford to provide the aid it needs to attract more students. A university’s operation costs fall on the tuition.
So what’s the solution? Do professors have to give up their raises in order to keep tuition down? Does the government fund education, and how?
One possibility is that the country can embrace the principles of the Occupy Student Debt movement, which are fiscal transparency at private colleges (an issue President Obama has called to national attention this past year), interest-free student loans, student debt jubilee (loan forgiveness), and the government funding of higher education.
Are these realistic solutions? As far as his faith in government supporting legislation to bail students out, Occupy’s Ross responds, “It has zero chance of being passed.”
*Names have been changed to protect the indebted.