The problem of rising college tuition and massive student debt affects all of us -- even if we're not in school or don't have college-age kids. College graduates burdened by loan payments are forced to take the highest-paying job, no matter what. Many budding artists, activists, entrepreneurs, inventors, teachers, clergy, and spirited non-conformists are shuttled off to a cubicle somewhere before ever testing out their ambitions. The next Rachel Carson or Spike Lee may never be heard from. There must be a better way to finance higher education. And there is, if you look at Europe's example or America's work colleges -- described in sidebars here. -- The Editors
For many ambitious Americans from modest backgrounds, college debt has helped transform their 20s and early 30s from an age in which to explore the world, establish themselves, or pursue idealistic or artistic goals into a time of oddly limited career options and scaled-down dreams. "It colors every little decision you make," says 26-year-old Gabriel Schnitzler, who graduated from Yale Law School in 2001 with $106,000 in loans and now works for a small corporate firm.
Undergraduate college debt is rising rapidly. A decade after loan-based student aid surpassed grant-based aid as the major source of college funding, graduates of four-year colleges who entered the labor force in 2002 owed an average of $18,900, according to the Nellie Mae Corporation, a leading provider of student loans. That's a 66 percent increase since 1997.
Whereas college graduates once started their adult financial lives with an eye to the future, today's graduates emerge from college just hoping to stay above water financially. A 1998 Nellie Mae study found that a quarter of private-college grads and about 40 percent of newly graduated doctors and lawyers had student loan obligations that exceeded their current salaries. Low-income and African American grads surveyed in 2002 reported feeling particularly burdened by their debts.
Students who majored in the arts, music, and the humanities tended to have especially burdensome ratios of debt to earnings. Indeed, careers in publishing and the arts have been marked by a steady drift toward extremely low-paying, short-term positions in lieu of true entry-level jobs. Internships, one-year fellowships, and trainee slots have exploded as a means for organizations to capture hardworking novices without having to pay them a formal wage or contribute to retirement programs. Though these programs provide young adults with valuable experience, they often delay for years their entry into positions that pay truly adult wages.
"We're just making it harder and harder to be a young person and to start getting ahead," says Hans Riemer, former director of the youth and economics think tank the 2030 Center and now political and issues director of Rock the Vote. Real wages for young people ages 25 to 34 declined 15 percent from 1979 through 1996, according to a 1998 Department of Labor study.
Add to this mix the increase in credit card debt and you have the makings of a real problem. Credit cards are nearly universal among college students and young adults today. Are the cards financing frivolous consumption or covering living expenses? According to Marie O'Malley, vice president of marketing for Nellie Mae, 27 percent of those surveyed used credit cards for part of their college expenses. "That's just an indication that we may have a population that's comfortable with credit," she says, "but may not be making the smartest decisions about how to finance if they don't have cash on hand for college education."
It could also indicate that even record-high student loans are not enough to cover soaring college costs. Federal loans are capped at $5,500 per year for students' junior and senior years at a time when some universities charge as much as $36,000 per year. Indeed, students who graduate with the highest levels of credit card debt also have the highest levels of loan debt and are more likely to have attended expensive four-year colleges and be from low-income families. This suggests that they're either using their credit cards to supplement their loans for educational expenses or for the higher level of personal expenditures that are the norm at institutions geared toward the wealthy.
Borrowers often find that, rather than becoming more manageable over time, their debt increasingly becomes a problem as they age, says Kevin Williams of the Consumer Credit Counseling Service in Fort Worth, Texas. "Generally we get people who have gotten into debt in college, but they don't come into our offices until they've graduated and started families," he says. Most of the group's clients are 28 to 35 years old, and keeping them out of bankruptcy has become a big challenge. Student loans come into the picture "once they've graduated and reality hits, and they don't get the job paying the amount they had hoped, and then the problems arise when you add credit card debt and rent and car payments."
While society urges the young to save and invest in the future, the new structural realities -- rising tuition, declining federal aid, high college debt, easy credit card access, low salaries, and high housing costs -- combine to make young people net debtors, not net savers. And though it is seldom acknowledged as such, debt is another of the many social and cultural factors that make young people today defer growing up. Nellie Mae reports that a substantial portion of college graduates say their debts have delayed their purchasing of a home -- even with today's low interest rates -- and some have even put off having kids.
The exceptions, of course, are young people with big corporate salaries, or those who can avoid substantial debt thanks to affluent spouses or parents. For the children of the middle and lower classes, going to college and graduate school should be the single greatest opportunity to get ahead. Yet the very student loan system designed to help them realize their dreams is, ironically, now leaving many of them falling behind.
When Stefanie Davis, 27, was a student at Georgetown Law School in 2001, the subject of student loan debt and future legal salaries was an ever-present topic of conversation. Davis, who is married to a software developer, had the privilege of attending law school relatively debt-free. Most of her contemporaries were not so lucky, however; 94 percent of law school students nationwide borrowed to cover their legal education.
While her debt-laden classmates worked as summer associates at large corporate law firms, earning as much as $30,000 for three months' work, Davis could afford to take a lower-paying fellowship in the field of public-interest law. Now a staff attorney at the Washington Legal Clinic for the Homeless, Davis earns a salary that she describes as being "in the low 30s." Meanwhile, her fellow recent grads earn anywhere from $80,000 to $135,000 as associates at big-city law firms.
The plight of poorly paid attorneys is unlikely to generate much public sympathy. Yet the staggering increase in law school tuition costs, which have jumped 140 percent at public law schools and 76 percent at private ones since 1991, is beginning to have some worrisome social consequences. Thanks to "mortgage-size law school debt payments, public-interest organizations are facing pressing challenges to recruit and retain talent, and low-income communities are dealing with a lack of representation," says Sheila Ketcham, a former program associate at Equal Justice Works, the national association of public-interest lawyers. "This is one of the largest crises in the legal profession."
Debt levels for newly minted lawyers rose 59 percent between 1993 and 2000, to an average of $84,400. According to a recent study by Equal Justice, those high debt levels keep two-thirds of law students from even considering jobs in the government or the public-interest sector.
It's a similar story for doctors. Medical school costs have soared, and new doctors in 2002 graduated with an average debt of $103,850, according to the Association of American Medical Colleges (AAMC). From an average annual salary of $145,000 for family practitioners to $300,000 for plastic surgeons, debt payments of more than $1,500 a month prevent many from serving the poor in public hospitals and clinics that can pay as little as $45,000 per year. "Choosing a specific career," says AAMC president Dr. Jordan Cohen, "now also entails a choice about how to repay one's debt."
Garance Franke-Ruta is a senior editor of The American Prospect. Reprinted from the liberal political journal The American Prospect (May 2003). Subscriptions: $19.95/yr. (10 issues) from 5 Broad St., Boston, MA 02109.