Student Loan Debt: What Have I Gotten Myself Into?

Abstract
This study examined the effects that college debt has had on the graduated student population. A variety of research documents were examined including those that identified the problem, gave examples of the effects of students' loan debt, and proposals on how to lessen the burden on graduates. The results showed that many students are having to settle for jobs out of field, put graduate school on hold, and adjust their living conditions in order to meet monthly loan payments. These results indicate that many graduates have to make lifestyle changes in order to meet their biggest expense: their student loan. However, a solution may lie with two bills that were introduced in the House to help alleviate the financial burden to graduates and to help eliminate the shortage of graduates in the public sector.

Findings

One would think that when a person graduates from college he or she is able to obtain a nice job, pay rent for an apartment, and be able to pursue graduate school if chosen. This would seem feasible due to the fact that college graduates have the ability to earn a million dollars more during their careers as opposed to high school graduates (Winter, 2003). However many graduates who majored in marketing, the arts, or humanities have to take non-skilled jobs just to be able to survive.
In order to explain post-graduation debt, one must first look at the college experience. College tuitions are on the rise, and grants, which once far exceeded loans are on the decline (Winter, 2003). Students have to take out student loans and borrow on credit cards just to pay for college (Kim, 2003). In fact, eighty-three percent of graduates have to make loan and credit card monthly payments, which were used to pay for college tuition (Kim, 2003). A survey on how much debt graduates owe found that fifty-four percent owe anywhere from $10,001 to $40,000 (Herring, 2003).

This enormous debt has forced many students to put dream careers on hold. For example, one graduate, an aspiring comic book author, is forced to work seventy hours a week as a book clerk in order to pay off her $70,000 in college loan debt (Winter, 2003). Others are forced to move back home with their parents (Garland, 2003). In a Monster.com survey, forty percent of 1,831 graduates surveyed intend to move back home with their parents for at least seven months (Garland, 2003). This is due to graduates either not being able to find work in their field, or the absorbance that the student loan debt has on their meager salary.

Other graduates are able to live on their own, by making concessions in other areas. For example, many law majors have to work after they receive their bachelor's degree in positions such as legal clerks and secretaries (Winter). And those that do graduate from a program with lengthy college requirements have to settle for jobs in the private sector. Attorneys and physicians have to forgo public service jobs in clinics and government in order to make monthly loan payments (Franke-Ruta, 2003). One physician is quoted as saying, "Choosing a specific career, now entails a choice about how to repay one's debt" (Franke-Ruta, 2003). In addition, government industries such as teaching, public service, and social services are experiencing a shortage of workers due to graduates being more selective about their careers.

Meanwhile graduates, who having been paying on their student loans for a while, are finding financial problems. Graduates are having a difficult time trying to afford financial assets in life. Approximately one in six homebuyers has to adjust career goals in order to handle a mortgage and a student loan payment (Winter, 2003). Also, seventy- fiver percent of graduates surveyed by the Collegiate Funding Source said student loans payments hinder them from saving money and forty-four percent additionally said that these payments prevent them from retirement savings or contributing to a 401k plan (Kim, 2003).
Furthermore some graduates are trying to get on with their lives and forget about past debts. They believe they can handle the payments, but then when you add on the responsibility of a family, sometimes the burden is too great. Kevin Williams of Consumer Credit Counseling Services notes that most of his clients have debt that they amassed in college. "They don't come into our offices until they have graduated and started families" (Franke-Ruta, 2003). He further goes on to explain that most of his clients are in their late twenties to mid-thirties and that helping them to avoid bankruptcy is his biggest challenge (Franke-Ruta, 2003).

By now, one would have to hope that there is a solution to all of this debt. Hope may lie in H.R. 1304, also known as the "College Affordability and Lifetime Savings Act" (Miller, 2003). This bill, introduced by Rep. George Miller, D-Calif., would "change the current tax deduction benefit - which bases the amount of federal loan money students can deduct from their taxes on their income - to a tax credit program which lets students deduct from their income taxes 50% of the interest from their student loans" (Miller, 2003). For example, a student with $20,000 in college loan debt will be able to now save $350 under the new tax plan, as opposed to $105 under the old (Miller, 2003). In addition, Miller introduced H.R. 1306, the "College Opportunity for a Better America Act" (Miller, 2003). This new bill would help combat the shortage of public sector jobs such as: teaching, nursing, social services, and other critical public sector jobs by offering up to $17,500 in loan forgiveness for graduates who enter those careers (Miller, 2003).

As Americans get older, the need to replace retired workers and provide skilled care to the population increases. College graduates are needed to fill most of these jobs, however, with most degrees debt is becoming more common. Students are opting to shy away from careers that carry a low salary and high student loans debt. Graduates are seeing firsthand how hard it is to make ends meet, and now the rest of the nation is beginning to see their struggles. Representative Miller's plan to assist graduates who pursue government careers while easing the burden of debt is coming at a time when graduates need it the most. Hopefully the legislation will be enacted and next time a survey is taken about graduate debt, the statistics will be lower, and graduates will feel at ease taking a lower paying, public career.

Works Cited

1. Franke-Ruta, Garance. The Indentured Generation. Utne. Minneapolis: Sept/Oct 2003., Iss. 119; pg.61.

2. Garland, Susan. Mom and Dad I'm Home Again - As more twenty somethings move back in, parents need to set clear expectations. Business Week. New York: November 3, 2003. , Iss. 3856; pg. 110.

3. Herring, Hubert. Sticker Shock Hits When Student Loans Are Due. New York Times. New York, NY.: Oct. 26, 2003. pg. 3-8.

4. Kim, Jane. More College Graduates Postpone Their Dream Jobs To Pay Loans. Wall Street Journal. New York, NY. : Sept. 2, 2003.

5. Miller, George. Bill Introduced To Create Tax Credit Program For Borrowers. Student Aid News. Washington: Apr. 2003. Vol. 30, Iss. 4.

6. Winter, Greg. College Loans Rise, Swamping Graduates' Dreams. New York Times. New York, NY.: Jan. 28, 2003.