- The Washington Times - Sunday, July 12, 2009

If you recently earned a B.S., an M.A. or a Ph.D., chances are someone is holding a big IOU.

With tuition in the stratosphere, today’s graduates are facing the highest student-loan and credit-card debt levels ever — and the worst job market in a generation.

“The American Dream gets crammed down your throat — you gotta work hard, get an education, all that’s going to pay off for you,” said Will Mohring, 30, of the District, who graduated from the University of San Francisco last year with $80,000 in combined government and private student loans.

“But when you get out of college it becomes difficult to finance your American Dream. How do you get married with a lot of debt? How do you buy a house with a lot of debt?” he said.

The plight of students like Mr. Mohring has spurred legislation to help, and advocacy groups are lobbying for more.

As of July 1, federal student-loan payments can be adjusted for income, with the remaining balance eliminated after 25 years. Those in public-service jobs can have their loans forgiven after just 10 years of payments. In addition, interest rates on new need-based loans were reduced from 6 percent to 5.6 percent, and Pell Grants will rise to $5,350 this fall.

All are provisions of the College Cost Reduction and Access Act, sponsored by Rep. George Miller, California Democrat, and signed by President Bush in 2007.

“With the economy against this year’s graduates, this relief couldn’t come at a better time,” Mr. Miller said in a statement.

The Class of 2009 finds itself in the worst job market in 25 years. Unemployment for all 20- to 24-year-olds is more than 15 percent, according to the Bureau of Labor Statistics.

Just 20 percent of this year’s graduates who applied for a job have one, down from more than 50 percent two years ago, according to the National Association of Colleges and Employers.

The average student graduates with about $22,000 in debt, according to the Project on Student Debt, a Berkeley, Calif., nonprofit.

There is an estimated $700 billion in outstanding student loan debt — enough to merit its own bailout, some say.

Student groups applaud the changes, but say they do not address what they view as the underlying problem: tuition gone wild.

“What happens if you raise the loan limits is the colleges raise their tuition,” said David Smith, 29, founder and chairman of mobilize.org, a Washington-based group focused on college affordability.

Mobilize.org, in turn, is a leader within 80 Million Strong, a new grass-roots advocacy and lobbying coalition dedicated to addressing high youth unemployment, high student loan debt, credit-card lending practices and health insurance.

“We are seeing some very unreasonable tuition increases,” Mr. Smith said. “In many states that are getting into financial problems, they often balance their budgets on the backs of students.

“What it ends up doing is increasing the cost of education significantly, forces students to take another job, another loan or drop out of school,” he said.

Indeed, while tuition at public colleges is about a fourth of that at private universities, according to the College Board, it has risen somewhat faster over the last 20 years.

Both have grown more than 15 times faster than household income.

“We have a society allowing colleges to take the next generation of young people hostage, forcing them to go into huge amounts of debt to have an opportunity to survive in the workplace,” Mr. Smith said.

The good news is a college degree still pays off.

Those with a college degree earned an average of $57,181 in 2007, the Census Bureau reported in April. Workers with only a high-school education earned an average of $31,286.

Still, according to the Project on Student Debt, debt loads are growing faster than starting salaries.

“We are going to be the first generation to be paying our student loans back when our children go to college,” Mr. Smith said.

Mr. Mohring is working as a waiter at downtown restaurant Siroc this summer, hoping he gets some political staff work before he is forced by economic necessity to move back home.

“Right now, I’m fortunately avoiding it by waiting tables, but I’m going to have to make a decision sometime soon here,” the political science major said. “Both D.C. and San Francisco are not cheap cities to live in.”

“I want to work in the industry that I studied in. The situation is a little difficult with the student debt that I have to get paid back,” he said.

He has worked for San Francisco Mayor Gavin Newsom, a Democrat; the Democratic National Committee; and a congressional campaign in Florida.

That experience has not translated to work in Washington.

“I did interviews as far as you can get, no job came out of the contacts I have here. And the San Francisco city government laid off a couple dozen people.

“By the end of the summer, I need to really make a decision about how to get into a political career,” he said.

He lives with two roommates on Capitol Hill.

“Right now, my student loans are already half of my rent,” he said.

“If you default you get reported to credit-ratings agencies and that’s a whole mess there,” Mr. Mohring said. “You don’t recover from bad credit easily. The American Dream’s become the American Nightmare.”

Dennis Walton, 24, a German-American citizen, wrapped up his English degree at Hillsdale College in Michigan in 3½ years.

“If you finance college kind of on your own you kind of look forward to not paying too much,” said Mr. Walton, a native of Hanover, Germany, who has spent much of his life in the United States.

He worked as a resident assistant and earned scholarships to help pay his way, such as the literary scholarship he won junior year. He is still $36,000 in debt, and one of his loans is in forbearance.

“When I was in college I used my credit card just to survive and eat,” he said.

Attending high school in Germany placed him at a disadvantage in terms of U.S. college admissions since he hadn’t studied for the SAT before taking it the first time. (His U.S. college degree now places him at a disadvantage in the German job market.)

“My SATs were good enough to get in but not good enough for a scholarship,” he said. “They said I have to retake it. I studied and got 200 points more,” earning a half-tuition scholarship.

Mr. Walton works intermittently at Cafe Berlin on Capitol Hill and is seeking to work at Hillsdale College in the fall.

“I’m pretty stable right now. I won’t be forced to move home,” he said. “I’m entirely confident I’ll be paying off that debt in the near future.”

“People say why didn’t I study something more practical like business administration? I was not interested in that,” Mr. Walton said.

No matter what they study, students need to be practical and responsible about their education and their debts, he said.

“You have to work at your education,” he said. “Don’t go to a job interview and not know what you are talking about.

“In the current crisis, people are saying, ‘Why did I have to graduate at the worst time?’ You have to be flexible, you have to be prepared,” he said.

“Then it comes down to what am I going to do? Do I really think I’m going to get an education that is going to be worth it down the road? I see my $36,000 in debt and I know it was worth it,” Mr. Walton said.

He is pursuing a career in teaching or writing, he said.

One of the social costs of skyrocketing tuition may be to drive qualified graduates away from lower-paying, service-oriented fields like teaching and nursing, advocates say.

“When you’re graduating with these significant amounts of debt, it’s forcing people to choose careers and those types of employment that pay them enough to pay their debt, but not the career that they are most passionate about or that will make the greatest impact in their communities,” Mr. Smith said.

“Nonprofit or public service careers end up being a career that most feel they can’t choose.”

The new law contains two provisions to help those who choose — or get stuck in — lower-paying jobs and careers.

The Department of Education administers the income-based repayment program, which anyone with a federal student loan can apply for. The plan caps monthly payments at less than 10 percent of income for most of the one million people expected to enroll. Any remaining balances would be forgiven, if not already paid off, after 25 years.

Second, the public-service loan-forgiveness plan will eliminate federal loan balances after 10 years of payments by those in full-time public service careers, such as in government, nonprofit organizations and public health.

Student advocates say more is needed, especially in terms of higher state subsidies for tuition, which have been in steady decline — one reason public college tuition has risen faster than private tuition over the past 20 years.

Mr. Smith, of Mobilize.org, also questions why those in financial distress can’t shed their student-loan obligations in bankruptcy as they can other debts. And he says “predatory” campus lending practices by credit-card companies need to be reined in.

With the high cost of college, many students say they are forced to rely on credit cards to pay for daily expenses such as meals. And students lack the financial literacy needed to handle credit cards responsibly, Mr. Smith said.

“Students are graduating with an average of $3,000 to $5,000 in credit-card debt,” Mr. Smith said. “Campuses are a hotbed of credit-card dealers. They show up on campus and offer you a free t-shirt or a free pizza and you sign up for a new credit card. You start spending beyond your means and think you will be able to pay it back later,” he said.

Louis and Tynisha Joe of the District have $250,000 in student-loan and credit-card debt — and 18-month-old-twins, a boy and a girl.

Mrs. Joe, 23, received her master’s degree this month, but lacks work experience.

Mr. Joe, a native of Liberia, has started his own talent agency. He wants to start another business but is hampered by a bad credit rating — partly because of credit-card abuse by a family member.

“We sat down with a financial adviser, looked at our credit score, things we owed, things we didn’t even know about,” Mr. Joe said. “It opened our eyes as a young couple.”

He had to leave Salisbury University before earning his degree to care for his grandfather. He is now pursuing a communications degree online through Walden University.

“We owe all this money, it’s hard to get a job, we have to feed two other mouths, and pay the bills how?” Mr. Joe said. “We have to use loan money to pay bills.”

Current students can always fall back on hope that the economy will improve by the time they graduate.

“It’s sort of a terrifying prospect graduating into this economic climate,” said Nick Troiano, 20, a junior majoring in government at Georgetown University, where he said he is paying $30,000 a year in tuition, after financial aid.

“I have a friend who graduated last year and was laid off from Dow Jones,” Mr. Troiano said. “It’s scary out there. Some people are looking to go back to school.”

“That’s why I do feel pretty lucky. Hopefully, two years from now things will get better,” he said.

Things may be better, but one thing is certain — he will be in about twice as much debt.

Asked how much he owes now, Mr. Troiano laughed, “I haven’t totaled it, it hurts my eyes to do it. I’m going to graduate with probably six figures [in debt] or close to it.”

This summer, he is working at the Pike County Courier in his hometown of Milford, Pa., near Scranton, and for the youth group he started, the Pike County Youth Coalition, which advocates for young people and encourages volunteerism.

“Both don’t pay very much. My paying job is part time for the National Park Service [at Delaware Water Gap National Recreation Center]. Because of the stimulus they were able to create many jobs,” he said.

“The government’s turning into one of the best employers,” Mr. Troiano said.

The weak job market is driving Mr. Troiano and others to be volunteers. Friends are interested in AmeriCorps, the Peace Corps or the military and the National Guard.

“It’s a good opportunity to give back to the country a little while deferring student loans and earning money to pay them off,” he said. “In tough times, we find opportunity.”

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