November 15, 2011
Student Loans Derail Life Plans
Christi Longlois of New Orleans only slightly exaggerates when she says she and her partner “will be retired before we pay off our student loans.”
Longlois, who works at Tulane University, and Geneva Marney, who works at a non-profit, together owe $80,000 in student loans. Both in their 30s, they have more than 25 years of monthly payments ahead of them.
On their financial planner’s advice, they sold their house and began renting so they could make their $453 monthly loan payments, some of which funded Longlois’ graduate school, and pay their credit cards. They’d like to eventually send their infant twins to private school but don’t feel that’s very realistic.
In interviews with a dozen college seniors and young adults in their 30s, it became painfully clear that loan payments have blasted holes in many life plans – something their baby boomer parents didn’t even worry about.
In the pre-computer 1970s, my most distinct memories of Indiana University’s freshman registration, which resembled a cattle drive inside Bobby Knight’s basketball stadium, were the stadium’s echo and writing what seemed, at the time, like a very large tuition check.
One semester of in-state tuition and fees at IU, Bloomington: about $350 – using the Consumer Price Index for inflation, that would cost $1,900 today. But that’s not what happened. IU’s tuition and fees approach $5,000, because tuition inflation far surpasses the CPI.
Most students don’t pay the full sticker price, but loans are covering more and more of the cost increases, according to the College Board: total federal, state, and private loans to students grew nearly threefold – to $78 billion – from 1997 through 2007. Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, estimates that 12 percent of bachelor’s degree recipients in 2008 paid at least 10 percent of their income toward student loans – up from 5.8 percent of students about a decade ago.
Student’ loans can also boomeranging back to their baby boom parents, who often help make the payments after graduation – even though many can’t afford their own impending retirement.
On a warm October day, I wandered around Occupy Boston to ask college students how they and their parents are feeling about their debt. What became clear is that anxiety about the high toll of borrowing has grown, no doubt due to the sluggish job market.
Ali Press comes from a middle-class family. Her mother is an information technology manager and her father is a respiratory therapist. “My parents can’t believe how much money” college costs, the Boston University senior said.
A strong student, she said a merit scholarship covers her tuition but she has accumulated $60,000 in loans for housing and other expenses. “It’s a constant presence in the back of my mind,” said Press, who is taking five courses this semester so she can graduate early and stop borrowing money.
She and her parents plan to split the payments.
When will students and parents reach the breaking point?