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Part Seven Of Student Loan Series: Sticker Shock

Lucas Willard

As the price for higher education continues to climb, more students are taking on loans to help pay their way through college. But many students take on financial assistance without fully understanding what will happen once they leave campus and the bill comes due. In the seventh installment in our series, WAMC’s Southern Adirondack Bureau Chief Lucas Willard explores the “sticker shock” that can accompany student loan payments.

Emily Dorr graduated with a Bachelor’s of Fine Arts from SUNY New Paltz in December 2013. She attended community college before enrolling in a four-year school. Even though she went to a relatively cheaper state school, she still graduated at 27 with $40,000 in student loan debt, but it wasn’t until she got that first bill in the mail that she realized she’d have a hard time paying it off.

“The very first bill that I received was 800 dollars and some odd- but it didn’t matter – it was the first number that mattered. The 8 and all the zeroes that followed, it was just like, terrifying. I didn’t even make that in a month.”

Working part-time as a server, Emily also has an artist’s residency in Albany. Her federal loans are currently on deferment until she can make enough money to begin paying them back.

“The idea of continuously having debt until I’m in my 50s is not how I would have expected to earn my education.”

“I got very anxious, you know? My stomach kind of flipped, you know? Because I was like “don’t they know that I don’t have any money?”

Pat, who asked to have his last name withheld because he was wary of publicizing his financial difficulties, transferred to New Paltz from community college in 2010, but dropped out the next year.

After more than three years, carrying $15,000 in debt, he is working part-time as a courier to pay back his federal loan.

“I’ve been at this point just trying to find a job that gives me secure income, enough that I can pay off my debt. That’s my objective right now. I’ve put everything else just kind of on hold in my life  in order to see to this, because it’s obviously not going to go away.”

What Pat and Emily have in common is that they both acknowledge that they didn’t fully understand the risks of borrowing until well after leaving their college campuses.

Sandy Baum, a senior fellow at the Urban Institute and a research professor of education policy at George Washington University, says many college students don’t even realize they are borrowing money.

“And if they know that they’re borrowing money, they don’t know how much. And if they know the aggregate amount, they have no idea of what that means in terms of monthly payments. So we do have a real problem with financially literacy on this front. Some of it is information, but some of it is failure to process information, so really need to do a better job of when students are borrowing, they need to make sure they know exactly what they’re getting into.”

But even those who do anticipate what they’re getting into still experience some of the same hardships in finding work after finishing school.

Bryan, who earned a master’s degree in history from Monmouth University in December 2013, is in $110,000 of student loan debt. He said he was always aware of the amount he would have to pay back, but is now stuck living at home with his parents in the Capital Region.

Bryan, who is searching for an entry level position, also asked to have his last name withheld.

“I have qualifications, it’s just for those level jobs it’s hard to get ‘em straight out of grad school.”

Bryan has both federal and private loans, and is on an income-based repayment plan. Since he only holds a part-time unpaid internship, he’s off the hook for repayment right now, but he says because of his debt burden, when he does find employment, it must pay enough so he can cover his bills.

“The problem is that there’s a threshold. I would be fine taking something for less money than is directly relevant, but I just don’t have that option because of the loan repayment.

“It would be nice to say a year from now I’ll be completely financially independent and all that, but I just gotta take it week by week, and see what opportunities come, and make decisions on that.”

Baum says although student loan debt is high, now more than a trillion dollars nationally, the amount borrowed by today’s young workforce is not the big issue, it’s that today’s young people make less.

“The problem is people have lower incomes than they expected to have, and lower incomes in many cases than their parents had at this stage. And that is a bad thing.”

Baum says in some ways, things are becoming better for young borrowers, such as the advent of income-based repayment plans.

“Nobody should have to pay more than they afford. If your payment is too much, then you can be in an income-based plan, and you just pay a percentage of your income. So if people understood that and signed up for it, it would diminish repayment problems considerably.”

Repayment problems will continue to exist, of course. Baum said typically people who drop out of school are more likely to struggle paying back their loans, even if they borrowed less than students with a completed degree.  People like Pat.

“For a good amount of time I was deciding between making rent or paying groceries. didn’t find any way that I could actually fit in a student loan payment, so I went for a while without paying it and now it’s kind of out my hands so...It’s being taken from me.”

Pat eventually defaulted on his $15,000 loan, and now the bank garnishes 10 percent of his wages. He offered some advice to prospective student borrowers.

“I’ve met very few 18-year-olds who actually know what they want to do with their lives. I mean, I’m 25 and I’m just figuring it out. So I would say take a moment. You don’t have to rush.”

Emily, who did finish her degree, said her post-graduate experience changed her perceptions of college and higher education.

“I could have taken a different route to get the same amount of experience. But it’s just this kind of pressure like ‘Well, you only have your associate’s. That’s not good enough. Like, you have to get the full package.’ And then you go on for the full package and then you realize it’s just an overblown, overpriced piece of paper.”

She says she could go back to school to get her master’s, but only if she got a free ride.

Bryan believes he will find employment and begin to chip away at his debt, even though things appear to be stalled at the moment.

“The economy’s turning around. It’s unfortunate that I’m in this position where I am sort of stuck, but I am still pretty optimistic. It’s a big burden. Obviously I would like my payments to be lower, and all that, but I would not do anything differently.”

Baum’s advice is simple: People with college degrees are more likely guarantee themselves a more prosperous future.

“It’s really difficult to support yourself and certainly to support a family with only a high school diploma in the current economy. So getting some sort of post-secondary education is really vital for almost everyone. Choosing that, choosing carefully is really important.”

And that includes choosing how to pay.

Lucas Willard is a reporter and host at WAMC Northeast Public Radio, which he joined in 2011.