Burden of College Loans on Graduates Grows

Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.

While many economists say student debt should be seen in a more favorable light, the rising loan bills nevertheless mean that many graduates will be paying them for a longer time.

“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.

Two-thirds of bachelor’s degree recipients graduated with debt in 2008, compared with less than half in 1993. Last year, graduates who took out loans left college with an average of $24,000 in debt. Default rates are rising, especially among those who attended for-profit colleges.

The mountain of debt is likely to grow more quickly with the coming round of budget-slashing. Pell grants for low-income students are expected to be cut and tuition at public universities will probably increase as states with pinched budgets cut back on the money they give to colleges.

Some education policy experts say the mounting debt has broad implications for the current generation of students.

“If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for Student Access and Success. “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”

In some circles, student debt is known as the anti-dowry. As the transition from adolescence to adulthood is being delayed, with young people taking longer to marry, buy a home and have children, large student loans can slow the process further.

“There’s much more awareness about student borrowing than there was 10 years ago,” Ms. Asher said. “People either are in debt or know someone in debt.”

To be sure, many economists and policy experts see student debt as a healthy investment — unlike high-interest credit card debt, which is simply a burden on consumers’ budgets and has been declining in recent years. As recently as 2000, student debt, at less than $200 billion, barely registered as a factor in overall household debt. But now, Mr. Kantrowitz said, student loans are going from a microeconomic factor to a macroeconomic factor.

Susan Dynarski, a professor of education and public policy at the University of Michigan, said student debt could generally be seen as a sensible investment in a lifetime of higher earnings. “When you think about what’s good debt and what’s bad debt, student loans fall into the realm of good debt, like mortgages,” Professor Dynarski said. “It’s an investment that pays off over the whole life cycle.”

According to a College Board report issued last fall, median earnings of bachelor’s degree recipients working full time year-round in 2008 were $55,700, or $21,900 more than the median earnings of high school graduates. And their unemployment rate was far lower.

So Sandy Baum, a higher education policy analyst and senior fellow at George Washington University, a co-author of the report, said she was not concerned, from a broader perspective, that student debt was growing so fast.

Indeed, some economists worry that all the news about unemployed 20-somethings mired in $100,000 of college debt might discourage some young people from attending college.

A decade ago, student debt did not loom so large on the national agenda. Barack and Michelle Obama helped raise awareness when they spoke in the presidential campaign about how their loan payments after graduating from Harvard Law School were more than their mortgage payments.

“We left school with a mountain of debt,” Mr. Obama said in 2008. “Michelle I know had at least $60,000. I had at least $60,000. So when we got together we had a lot of loans to pay. In fact, we did not finish paying them off until probably we’d been married for at least eight years, maybe nine.”

Even then, Mrs. Obama said, it took the royalties from her husband’s best-selling books to help pay off their loans.

In 2009, the Obama administration made it easier for low-earning student borrowers to get out of debt, with income-based repayment that forgives remaining federal student debt for those who pay 15 percent of their income for 25 years — or 10 years, if they work in public service.

But if the Obamas’ experience highlights the long payback periods for student debt, their careers also underscore the benefits of a top-flight education.

“College is still a really good deal,” said Cecilia Rouse, of Princeton, who served on Mr. Obama’s Council of Economic Advisers. “Even if you don’t land a plum job, you’re still going to earn more over your lifetime, and the vast majority of graduates can expect to cover their debts.”

Even believers in student debt like Ms. Rouse, though, concede that hefty college loans carry extra risks in the current economy.

“I am worried about this cohort of young people, because their unemployment rates are much higher and early job changing is how you get those increases over their lifetime,” Ms. Rouse said. “In this economy, it’s a lot harder to go from job to job. We know that there’s some scarring to cohorts who graduate in bad economies, and this is the mother of bad economies.”

And there is widespread concern about those who borrow heavily for college, then drop out, or take extra years to graduate.

Deanne Loonin, a lawyer at the National Consumer Law Center, said education debt was not good debt for the low-income borrowers she works with, most of whom are in default.

Unlike most other debt, student loans generally cannot be discharged in bankruptcy, and the government can garnish wages or take tax refunds or Social Security payments to recover the money owed.

Students who borrow to attend for-profit colleges are especially likely to default. They make up about 12 percent of those enrolled in higher education, but almost half of those defaulting on student loans. According to the Department of Education, about a quarter of students at for-profit institutions defaulted on their student loans within three years of starting to repay them.

“About two-thirds of the people I see attended for-profits; most did not complete their program; and no one I have worked with has ever gotten a job in the field they were supposedly trained for,” Ms. Loonin said.

“For them, the negative mark on their credit report is the No. 1 barrier to moving ahead in their lives,” she added. “It doesn’t just delay their ability to buy a house, it gets in the way of their employment prospects, their finding an apartment, almost anything they try to do.”

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Lay-off notices sent to all Detroit teachers

The emergency manager appointed to put Detroit's troubled public school system on a firmer financial footing said on Thursday he was sending lay-off notices to all of the US district's 5466 unionised employees.

In a statement posted on the website of Detroit Public Schools, Robert Bobb, the district's temporary head, said notices were being sent to every member of the Detroit Federation of Teachers "in anticipation of a workforce reduction to match the district's declining student enrolment".

Mr Bobb said nearly 250 administrators were receiving the notices, too.

The district is unlikely to eliminate all the teachers. Last year, it sent out 2000 notices and only a fraction of employees were actually laid off. But the notices are required by the union's current contract with the district. Any lay-offs under this latest action won't take effect until late July.

In the meantime, Mr Bobb said that he planned to exercise his power as emergency manager to unilaterally modify the district's collective bargaining agreement with the Federation of Teachers starting on May 17, 2011.

Under a law known as Public Act 4, passed by the Michigan legislature and signed by the state's new Republican governor in March, emergency managers such as Mr Bobb have sweeping powers. They can tear up existing union contracts, and even fire some elected officials, if they believe it will help solve a financial emergency. "I fully intend to use the authority that was granted under Public Act 4," Mr Bobb said in the statement.

He was appointed emergency financial manager for Detroit's schools two years ago by then-governor Jennifer Granholm, a Democrat, to close chronic budget deficits brought on by declining enrolment in the city. Over just the past year, Detroit's population has dropped 25 per cent, according to census data.

Mr Bobb has closed schools, laid off workers and taken other steps to cut spending but the district still faces a $US327 million ($311 million) budget deficit.

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Poor children arrive at British schools feeling 'tired and hungry'

Because their parents spend the money on beer, cigarettes, drugs and gambling? From my experience with them, those are the poor who have problems. Most of the poor DON'T send their kids to school hungry

Growing numbers of children are turning up at school unfit to learn because of crippling poverty, according to research published today. Teachers are reporting a rise in pupils entering the classroom feeling tired, hungry and dressed in worn-out clothes.

A study by the Association of Teachers and Lecturers found almost eight-in-10 staff had pupils living below the poverty line and a quarter believed numbers had increased since the start of the recession.

One teacher from Nottingham told of a sixth-former who had not eaten for three days as her “mother had no money at all until pay day”.

A teaching assistant from a West Midlands comprehensive told researchers that some pupils had “infected toes due to feet squashed into shoes way too small”, while another member from Halifax reported a boy who was ridiculed in the PE changing room because his family could not afford to buy him any underpants.

Some teachers told how pupils were consistently late for lessons as parents could not cover the bus fare to school. Other children from middle to lower income families have been forced to cut out school trips because money is so tight, it was claimed.

The disclosure follows the publication of figures showing a rise in the number of pupils eligible for free school meals as families struggle to stay above the breadline in the recession. Almost 1.2 million five- to 16-year-olds claimed free lunches last year – a rise of more than 83,000 in just 12 months.

Mary Bousted, ATL general secretary, claimed that problems would escalate further because of Government funding cuts – putting the Coalition’s social mobility drive in jeopardy.

“It is appalling that in 2011 so many children in the UK are severely disadvantaged by their circumstances and fail to achieve their potential,” she said. “What message does this government think it is sending young people when it is cutting funding for Sure Start centres, cutting the Education Maintenance Allowance, raising tuition fees and making it harder for local authorities to provide health and social services.

“The Government should forget empty rhetoric about social mobility and concentrate on tackling the causes of deprivation and barriers to attainment that lock so many young people into a cycle of poverty.”

The ATL, which represents 160,000 school staff, surveyed members ahead of its annual conference in Liverpool next week. Some 86 per cent said poverty was having a negative impact on pupils’ ability to learn. Eight-in-10 said pupils from the very poorest families came to school tired, three-quarters claimed they arrived hungry and some 72 per cent suggested they were unable to complete homework.

Four-in-10 said poverty levels had increased over the last three years. The comments follow claims from Lesley Ward, former ATL president, that poverty levels in some parts of Britain now mirror "the times of Dickens".

Craig Macartney, a secondary school teacher from Suffolk, said: “More children from middle to lower income families are not going on school trips and these families find it difficult to meet the basic cost of living. “A family with two or three teenage children who have one earner who loses hours, or their job, will struggle to reach the minimum income to pay for basics. “This will get worse as the impact of the cuts affects families. The number of young people with mental health problems has been on the increase in the last three years.”

Anne Pegum, a further education college teacher from Herfordshire said: “We have students who miss classes because they cannot afford the bus fare or cost of other transport to get to college. “We have students who miss out on meals because they do not have money to pay for them and in some cases then feel unwell and have to be helped by our first-aiders.”

A spokesman for the Department for Education said: “We’re overhauling the welfare and schools systems precisely to tackle entrenched worklessness, family breakdown, low educational achievement and financial insecurity. “We’re targeting investment directly at the poorest families. The most disadvantaged two year olds will get 15 hours free child care.

“We’re focusing Sure Start at the poorest families, with 4200 extra health visitors. We’re opening academies in areas failed educationally for generations and bringing in the Pupil Premium to target an extra £2.5billion a year directly at students that need the most support”.

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