In debt, forever
How can you cope with $55,000 in student loans on $33,000 in income?
By Tim Jones and Jodi S. Cohen
Chicago Tribune staff reporters
March 5, 2006
Margo Alpert is on the 30-year plan. Every month between $500 and $600 is automatically deducted from her salary to pay off college loans. By the time the 29-year-old Chicago public-interest lawyer is in her mid-50s and thinking seriously about retirement, she will finally be free of college debt.
"It's going to be part of my life forever," Alpert said. "I don't think about it at all because it's just a fact of life."
Alpert's experience with her version of debtors' prison is not unusual in the realm of recent college graduates whose unpaid loan and expense obligations have soared in the past several years, leaving them with debts that can range from double to more than triple their annual salaries.
Because of higher tuition, steady or declining grants and state aid, and a greater dependency on loans, the average student's debt has increased by more than 50 percent over the last decade, after accounting for inflation, according to the U.S. Department of Education.
And as Congress moves to cut the budget deficit, the cost pressure on college students and those preparing to enter university is about to worsen. The era of low-cost loans is ending, and interest rates on many federal education loans are poised to leap starting July 1, because of congressional cuts, adding thousands and perhaps tens of thousands of dollars in new debt onto the long-term costs of a college education.
The rate for so-called Stafford Loans, which represent the vast majority of federal education loans, will be fixed at 6.8 percent, compared with the current variable rate range of 4.75 percent to 5.38 percent. The rate for loans taken out by parents on behalf of their children will increase from 6.1 percent to 8.5 percent.
Changes to federal student loan guidelines, however, will raise the loan limits for freshmen and sophomores.
"Reality will begin to hit for student loan borrowers this summer," said Robert Shireman, executive director of the Project on Student Debt in Washington, D.C. "A lot of borrowers were helped in the past two years by the ability to lock in low-interest rates. That opportunity is slipping away."
The new interest rates will result in payments that are 20 percent higher compared with the 2004-05 rates, doubling the total interest paid over the life of the loan, according to the Project on Student Debt.
"It's very worrisome to our kids. They come out of [undergraduate] school with $30,000 or $40,000 in debt, and then they marry someone with $30,000 or $40,000 in debt," said Karen Foley, president of Scholarship Chicago, a non-profit organization that helps arrange financial aid for low-income students.
"Debt can be character-forming, but we don't want it to be so crushing that they then conclude they can't go to graduate school or that they can't get into a particular profession because most of their money goes to repay debt instead of going into a savings plan," Foley said.
Over nearly a decade, average debt for a four-year college graduate rose from $12,100 to $19,300, with about 25 percent of recent graduates having borrowed more than $25,000 to pay for their undergraduate degrees, according to national education statistics.
A few universities have responded by guaranteeing that students whose families are below a certain income level will not have loans as part of their financial-aid packages.
The impact of big debt from education loans manifests itself in ways that cannot be easily measured. Career plans are altered. Lifestyles are restricted or changed. Home purchases are put on hold. Family plans are often delayed to allow for debt payments.
This is the life of Carrie Gevirtz, a 28-year-old social worker who finished a University of Chicago master's degree in social work last year.
Her debt is $55,000. Her annual income is $33,000.
"I can't afford my lifestyle. I'm not in a position to buy a place. I can't buy a condo and don't know when I would, unless my income changed dramatically," said Gevirtz, who makes a monthly payment of $250 to retire the debt.
Gevirtz supplements her income by baby-sitting for friends and teaching kickboxing at a health club.
"I was not prepared for this. ... It really freaked me out," she said.
Luke Swarthout, the higher education associate for the Washington-based Public Interest Research Group, said the combination of rising tuition and higher interest rates has led to "an increasingly worrisome picture for students," one that affects career and personal decisions.
"College is about opening doors to our nation's young people," he said. "Excessive student loan debt has the effect of closing those same doors by limiting the choices students can make."
Large debt from education loans has long been recognized as a common encumbrance for medical and law school graduates who eventually move into high-paying careers. The strain of debt, though, is greater on individuals who choose less lucrative professions -- teaching, social work, the ministry and public-interest law, where attorneys generally make far less than their fellow lawyers in corporate law.
Danielle West, a legal and policy research manager at NARAL Pro-Choice America in Washington, has about $60,000 in outstanding loans from undergraduate and graduate school. West said she took the non-profit job because she wanted to work on reproductive-rights issues.
"The fact that I am going to be paying money for so long bothers me," she said. "I was talking to my grandmother the other night, and she just doesn't understand that everyone I know has student loans. She doesn't understand how I can have so much debt so young in my life."
Study after study has shown that people with college degrees earn more than those who lack degrees. But the choice of attending college or going into less lucrative fields has an increasingly hefty price tag.
Chicagoan Lisa Southerland, who earns $48,000 as a state public defender, will have qualified for Medicare coverage when she stops paying $450 a month for federal and private loans. Southerland, 40, graduated from Loyola University's law school owing $76,000.
"I am on the 30-year plan," she said. "I think I'll pay until I'm 70 unless I win the lottery or ... marry a guy who works at a big law firm making the big bucks."
While she locked in a low-interest rate on her loans, she worries about future borrowers.
"People who don't have that many resources are going to have to pay that much more when they get out," she said. "Fewer and fewer people are going to be able to buy a home and have the kind of lives our parents had, even on less education."
Even as 23-year-old Casey Torgusson is paying off his undergraduate education, he plans to go further into debt when he starts graduate school this fall.
His debt of about $35,000 could more than triple with the $100,000 he expects to finance for a two-year master's degree program in international development. What's more, his new federal loans will come with the new, higher interest rates.
"It is just very tough," said Torgusson, a University of Notre Dame graduate whose annual salary at a Washington, D.C.-based non-profit is less than the one-year cost of graduate school.
"It was OK when I just had the undergrad [loans]. Going back on top of that, especially now that I'm on my own, is really kind of unnerving," Torgusson said.
Torgusson says he puts $225 a month toward paying off his student loan debt. Without that obligation, he said he could afford a car.
"College costs are becoming outrageous," he said. "Even if you took down the interest rates, the sheer amount is going to be a lot to pay back."
How can you cope with $55,000 in student loans on $33,000 in income?
By Tim Jones and Jodi S. Cohen
Chicago Tribune staff reporters
March 5, 2006
Margo Alpert is on the 30-year plan. Every month between $500 and $600 is automatically deducted from her salary to pay off college loans. By the time the 29-year-old Chicago public-interest lawyer is in her mid-50s and thinking seriously about retirement, she will finally be free of college debt.
"It's going to be part of my life forever," Alpert said. "I don't think about it at all because it's just a fact of life."
Alpert's experience with her version of debtors' prison is not unusual in the realm of recent college graduates whose unpaid loan and expense obligations have soared in the past several years, leaving them with debts that can range from double to more than triple their annual salaries.
Because of higher tuition, steady or declining grants and state aid, and a greater dependency on loans, the average student's debt has increased by more than 50 percent over the last decade, after accounting for inflation, according to the U.S. Department of Education.
And as Congress moves to cut the budget deficit, the cost pressure on college students and those preparing to enter university is about to worsen. The era of low-cost loans is ending, and interest rates on many federal education loans are poised to leap starting July 1, because of congressional cuts, adding thousands and perhaps tens of thousands of dollars in new debt onto the long-term costs of a college education.
The rate for so-called Stafford Loans, which represent the vast majority of federal education loans, will be fixed at 6.8 percent, compared with the current variable rate range of 4.75 percent to 5.38 percent. The rate for loans taken out by parents on behalf of their children will increase from 6.1 percent to 8.5 percent.
Changes to federal student loan guidelines, however, will raise the loan limits for freshmen and sophomores.
"Reality will begin to hit for student loan borrowers this summer," said Robert Shireman, executive director of the Project on Student Debt in Washington, D.C. "A lot of borrowers were helped in the past two years by the ability to lock in low-interest rates. That opportunity is slipping away."
The new interest rates will result in payments that are 20 percent higher compared with the 2004-05 rates, doubling the total interest paid over the life of the loan, according to the Project on Student Debt.
"It's very worrisome to our kids. They come out of [undergraduate] school with $30,000 or $40,000 in debt, and then they marry someone with $30,000 or $40,000 in debt," said Karen Foley, president of Scholarship Chicago, a non-profit organization that helps arrange financial aid for low-income students.
"Debt can be character-forming, but we don't want it to be so crushing that they then conclude they can't go to graduate school or that they can't get into a particular profession because most of their money goes to repay debt instead of going into a savings plan," Foley said.
Over nearly a decade, average debt for a four-year college graduate rose from $12,100 to $19,300, with about 25 percent of recent graduates having borrowed more than $25,000 to pay for their undergraduate degrees, according to national education statistics.
A few universities have responded by guaranteeing that students whose families are below a certain income level will not have loans as part of their financial-aid packages.
The impact of big debt from education loans manifests itself in ways that cannot be easily measured. Career plans are altered. Lifestyles are restricted or changed. Home purchases are put on hold. Family plans are often delayed to allow for debt payments.
This is the life of Carrie Gevirtz, a 28-year-old social worker who finished a University of Chicago master's degree in social work last year.
Her debt is $55,000. Her annual income is $33,000.
"I can't afford my lifestyle. I'm not in a position to buy a place. I can't buy a condo and don't know when I would, unless my income changed dramatically," said Gevirtz, who makes a monthly payment of $250 to retire the debt.
Gevirtz supplements her income by baby-sitting for friends and teaching kickboxing at a health club.
"I was not prepared for this. ... It really freaked me out," she said.
Luke Swarthout, the higher education associate for the Washington-based Public Interest Research Group, said the combination of rising tuition and higher interest rates has led to "an increasingly worrisome picture for students," one that affects career and personal decisions.
"College is about opening doors to our nation's young people," he said. "Excessive student loan debt has the effect of closing those same doors by limiting the choices students can make."
Large debt from education loans has long been recognized as a common encumbrance for medical and law school graduates who eventually move into high-paying careers. The strain of debt, though, is greater on individuals who choose less lucrative professions -- teaching, social work, the ministry and public-interest law, where attorneys generally make far less than their fellow lawyers in corporate law.
Danielle West, a legal and policy research manager at NARAL Pro-Choice America in Washington, has about $60,000 in outstanding loans from undergraduate and graduate school. West said she took the non-profit job because she wanted to work on reproductive-rights issues.
"The fact that I am going to be paying money for so long bothers me," she said. "I was talking to my grandmother the other night, and she just doesn't understand that everyone I know has student loans. She doesn't understand how I can have so much debt so young in my life."
Study after study has shown that people with college degrees earn more than those who lack degrees. But the choice of attending college or going into less lucrative fields has an increasingly hefty price tag.
Chicagoan Lisa Southerland, who earns $48,000 as a state public defender, will have qualified for Medicare coverage when she stops paying $450 a month for federal and private loans. Southerland, 40, graduated from Loyola University's law school owing $76,000.
"I am on the 30-year plan," she said. "I think I'll pay until I'm 70 unless I win the lottery or ... marry a guy who works at a big law firm making the big bucks."
While she locked in a low-interest rate on her loans, she worries about future borrowers.
"People who don't have that many resources are going to have to pay that much more when they get out," she said. "Fewer and fewer people are going to be able to buy a home and have the kind of lives our parents had, even on less education."
Even as 23-year-old Casey Torgusson is paying off his undergraduate education, he plans to go further into debt when he starts graduate school this fall.
His debt of about $35,000 could more than triple with the $100,000 he expects to finance for a two-year master's degree program in international development. What's more, his new federal loans will come with the new, higher interest rates.
"It is just very tough," said Torgusson, a University of Notre Dame graduate whose annual salary at a Washington, D.C.-based non-profit is less than the one-year cost of graduate school.
"It was OK when I just had the undergrad [loans]. Going back on top of that, especially now that I'm on my own, is really kind of unnerving," Torgusson said.
Torgusson says he puts $225 a month toward paying off his student loan debt. Without that obligation, he said he could afford a car.
"College costs are becoming outrageous," he said. "Even if you took down the interest rates, the sheer amount is going to be a lot to pay back."
