The crushing debt of the college grad

July 12, 2006

It’s the time of year when many of the big publications trot out the latest horror stories on the crushing debt that college students graduated with this summer.
USA Today reports that the average senior was more than $19,000 in debt when he or she walked across the stage to grasp a diploma.
But as writer Sandra Block notes: “That’s a problem Joe Palazzolo would love to have.”
Joe, you see, graduated from Rutgers University at the age of 25 with student loans of more than $116,000. He has to pay that boodle back to the tune of $800 per month.
Happily, not every college grad is in that jam. But according to USA Today, in 2004, “nearly 8% of gradating seniors carried student loans of $40,000 or more.”
That’s up considerably from 1993, when the Project on Student Debt claimed that only 1.3% of college grads had a debt that large to repay.
This is perhaps no problem if you happened to be smart enough to study otolaryngology or corporate finance law in college. According to an article on student debt in the New York Times Sunday magazine, many of the country’s elite law firms “now pay first-year associates up to $145,000 a year,” providing them with more than enough money to pay down those college loans.
And the National Institutes of Health actually set up a “loan-repayment program” for its med-school grads, with millions of dollars from Congress to “increase the ranks of this country’s ‘physician-scientists.’”
But those aren’t the average grads from Northern Michigan, or any middle-class town in the country. Most young people graduate from college with a piece of paper of dubious value and no Uncle Sam or rich employer to bail them out.
In recent weeks, I’ve met two business school graduates waiting tables in a restaurant and prepping cars at an auto service firm. Both are jobs that require the level of skill you get from a high school diploma. No doubt, these grads will move on to bigger things, but still, to get out of college with an unforgiving weight of debt is a rough way to go for a person in their early 20s.
It wasn’t always that way. In the 1970s, there were outright grants and low interest loans at 3% that you could take forever to pay back. My wife graduated from Central Michigan University, making it through school on a series of part-time jobs and Pell Grants. I got out of college owing no more than $300.
But since the 1970s, the more the politicians in both parties talk about the need for college assistance and grants, the more expensive and debt-prone an education has become. Vows of universal free college education are made periodically and then -- poof -- forgotten until the next State of the Union speech or election campaign. As the Times notes, the federal and state programs for assisting college students “has been outfitted with countless gears and pulleys,” very much like the maze of our tax code.
And the losers in this Mousetrap game of gears and pulleys are college students.
For all of the political promises regarding education through the years, what we’ve come to is a bait-and-switch system. The student is tempted with the bait of implied assistance with tuition and then learns that all grant avenues are closed other than that of a loan. Do middle class families even bother trying to get college grants these days? They did in the past.
Yet, it‘s foolish to simply toss money at college students in advance: as many parents have learned the hard way, some students have a predilection for blowing their tuitition without producing a passing grade. But there are new “debt forgiveness“ proposals being considered by some states and employers to help students who‘ve literally made the grade.
Debt forgiveness deserves to be explored. According to the Project on Student Debt, two-thirds of all four-year college grads have significant debt to repay, up 50% over the grads of a decade ago.
And many people who get out of college are burned out from being broke for years on end. It’s not just about starting a career -- they want to start their families. Consider what an average $19,000 debt means to such a grad, along with the knowledge that buying a house these days is double or triple what it was 10 years ago.
Rock singer Bono of U2 was named one of Time magazine’s “Persons of the Year” in January for haranguing the leaders of the richest countries on earth to forgive the debts of impoverished nations in Africa and South America. But what we need is for a Bono to get the debt monkey off the backs of our own college grads right here in America. Investigating debt forgiveness programs would be a good start.