Student Loan Crisis Affects University Students

In what is believed to be the 'land of gold' by many, students today face a lot of problems.

CHELSEY STERLING, The Tower

U.S. student loan debt has reached about $1 trillion, roughly equal to the country’s credit card debt, USA Today reported on October 19, citing the New York Federal Reserve. With the national unemployment rate estimated at 9.1%, the impact is staggering for students who will enter a tight job market, each with thousands of dollars of debt.

Students at the Catholic University of America have varying responses, with some wary, and others more optimistic. Megan Pollard, a student at Columbus School of Law, says that coping with post-graduation debt is a matter of choosing the right job after graduation to help pay off student loans.

“I wouldn’t be applying to jobs that I wouldn’t want to get,” she explains.

Patrick Lightfoot, also a law student, agrees. “I think subconsciously, when choosing a job, I would try to focus on those that I thought would pay better,” he says.

This attitude follows the assumption that jobs will be plentiful enough to afford graduates a choice. According to a report published by the John J. Heldrich Center for Workforce Development at Rutgers University, recession prospects are bleak, even for college graduates. While students who entered the job market from 2006 to 2007 earned an average salary beginning at $30,000, recession-burdened students graduating in 2010 earned on average $27,000. The employment rate statistics are even more alarming. Students who graduated in 2006 or 2007 had a 90 percent chance of getting a job, whereas students who graduated in 2010 had only a 56 percent chance at being employed.

In a survey of 2009 Catholic University graduates conducted by the Office of Planning and Institutional Research, 58.1% of the polled students were shown to be employed in a full-time paying position. Of the small sampling that responded, 6.3% were unemployed, and 1.6% were self-employed. It is worth noting that not all students included in the survey were looking to join the workforce. The survey did not specify whether the positions held by the recent graduates were related to their fields of study or likely to develop into full-time careers. Catholic University’s graduating class of 2009 was the first of the graduating classes to be affected by the recession.

As a law student, Lightfoot is concerned about paying off his debt from his undergraduate degree. University grants were a decisive factor in his choice of graduate schools. As he put it, “One of the reasons I chose [CUA] is because I could get scholarships. This way, I can work towards paying off my undergraduate debt.”

Other students, however, seem less worried. Some seemed confident that their degrees would land them a job that would enable them to pay off their student debt, while others said that they were just hoping to get through school before worrying about debt. Often the student cited parents as helping to pay off their loans, at least in the short-term.

The moderate level of concern among Catholic University students may be partially accounted for by the student-loan default rate, which is heavily weighted toward for-profit universities – often online schools that offer fast-track degree programs. In USA Today, Senator Tom Harken, a Columbus School of Law graduate, said that almost half of defaulted federal student loans are directed towards for-profit universities, which educate only 10 percent of higher education students.

The College Board reports that of Catholic University’s current freshman class, nearly all of the 77 percentwho applied for need-based aid were offered aid. Of these, nearly half had their full financial needs met. The average need-based loan was $3,433, whereas the average need-based scholarship or grant award was $17,324.

Both students in general and in society as a whole may be expected to pay the cost of higher debt rates and, ultimately, a higher default rate on the loans that accompany the cost of a higher education. This dilemma is being called the “student loan crisis,” and is a looming concern for not only students, but for economists and the United States government as well. Many have likened the student loan crisis to America’s current economic crises, worrying that, like the housing bubble, the student loan bubble will eventually burst and leave thousands floundering.

As has long been a concern, students who take out significant loans may be hurt in the long run by the debt they accrue over the course of their college education. By taking out a sizeable loan, students saddle themselves with long-term debt, risking their financial stability in ways that can last long after graduation day.

Mark Kantrowitz, publisher of FinAid.org, was reported in USA Today as saying that “students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married [and] having children.”

This concern is echoed by the students themselves, who worry about what their lives will look like after college.

“Primarily it seems that loans are a threat to our personal lives after college; however, student loans may have a much bigger impact,” said sophomore Samantha Cannon. “One of my main concerns is the effect of the student loan bubble bursting. The tuition of colleges around the country keeps increasing, people are taking out more loans, and there is an inadequate amount of jobs which is a recipe for economic disaster. Student loans are so entwined with our ability to pay for colleges that it will mean chaos for not only our education system, but also for all other parts of life.”

As both students and economists are discovering, this is a problem not only for the students, but for the broader economy as well.

Because of the recession, students must take out more money to pay for rising tuition costs. The economic situation, however, also means that banks run a greater risk of students defaulting on their loans. According to the US Department of Education, out of the more than 3.6 million borrowers who entered repayment during fiscal year 2009, more than 320,000 defaulted on their loans.