Massive college debt can burden graduates for decades

7:00 AM, Jun 25, 2012   |    comments
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ASBURY PARK, N.J. -- When James Perucho opens his Rutgers University tuition bill in the fall, $200 of it will go toward construction of academic buildings that he may never use but will add to the educational debt he will pay for years to come.

The $200 is small change compared with the $12,726 in tuition and fees the typical in-state undergraduate paid last year. But it shows how colleges and universities in recent years have hiked fees to cover lost government support and multibillion-dollar expansion programs.

"It adds up," Perucho, of Neptune City, said of that and other fees. The incoming junior, grateful for an ample scholarship, still wishes there was a way to have the fee waived for high academic performance.

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Higher education costs have outstripped inflation for the last 30 years, experts say, mostly because of dwindling government aid, more expensive housing and academic buildings to attract students, and more administrators.

The costs are being passed on to students and their families, who find themselves falling deeper into debt as the tuition bill climbs. The nationwide tuition debt is now closing in on $1 trillion.

Kathleen Bijas knows how debt repayment goes.

Saddled with $160,000 in student loans, the emergency room nurse from Ocean Township uses about half of her take-home pay to whittle down her debt, she said. At 27, she lives at home with her parents while the $1,608-a-month payments take their toll despite a stable job and comfortable salary.

"I won't be able to buy a home. I can't buy a car," said Bijas, who now makes about $60,000 a year. "The idea of getting married and getting kids is frightening. If I can't afford to move out of my parents' house, how can I afford to raise someone? It's all going right out the window."

Some experts say ballooning college debt and increases in tuition can't be sustained.

"The real problem is that education costs too much," said Glenn Harlan Reynolds, a law professor at the University of Tennessee and author of The Higher Education Bubble.

"You shouldn't have to borrow six figures to get a college education," he said. Taxpayers need to pressure lawmakers to keep public school tuition low, he said.

Outpacing inflation

Since 1980, the cost of college and university tuition, not including business or technical schools, has risen by an average of 7.5 percent a year, according to the U.S. Bureau of Labor Statistics. During the same time, inflation was just 3.3 percent a year, on average.

Total average tuition and room and board rates charged for full-time undergraduate students in degree-granting institutions in the 1980-81 school year stood at $7,341 in today's dollars. By 2009-10, that had ballooned to $17,633, according to the National Center for Education Statistics.

Educators and educational advocates frequently cite the drop in government aid over the years as the cause for the rise in tuition and subsequent increase in student indebtedness.

This year, state aid to higher education fell 7.6 percent nationally, according to Mark Kantrowitz of FinAid, a website that provides student financial aid information.

But Reynolds cites another reason for higher tuition: "administrative bloat."

"To be fair, some of (those positions) are required by federal law," he said.

But the more prevalent reason is "bureaucratic empire building," Reynolds said.

Between 1998 and 2008, public institutions shifted more spending to administrative personnel, as well as student services, such as counseling, according to a 2010 report from the Delta Project, a nonprofit organization that tracks post-secondary education costs. Instruction took a hit, according to the report.

Reynolds said student debt resembles the housing bubble in that "there's a lot of government money propping up" the increasing cost of a college education.

And the scrutiny of potential borrowers is weak, he said.

"Usually when people lend you money, they care about whether you can pay it back," Reynolds said.

When it comes to taking on mammoth debt, prospective college students still in their teens are seldom the best candidates to understand the possible debt that frequently haunts people for decades.

"You should really pore over how much it's going to cost you. But when you're 18, you just don't think of that," said Bijas, who plans to pay off her loans in 12 to 13 years.

Struggling

Bijas says the responsibility was hers.

She attended Fairleigh Dickinson University. She worked as many as 40 hours a week as a waitress, swimming instructor and lifeguard and maintained an 18-hour course load in her last year. When she graduated in 2006 with a bachelor's degree in psychology, she got a job as a behavioral counselor at a group home making $12.50 an hour.

Her monthly payments for her college loans amounted to about $600.

"I looked at my financial aid (payments) and I looked at my income and said it's not going to work," she said.

She returned to school in 2007, entering an accelerated one-year nursing program at Seton Hall University. It cost her $60,000. Interest on her outstanding loans accumulated while she attended.

Once out, she applied to 300 hospitals and health centers, taking a job with Community Medical Center in Toms River.

The impact of that debt affects her every day. But while in school, she felt she had no choice.

"When you take out a $35,000 loan at 10.7 percent interest, that's crazy," Bijas said, referring to one of her private loans. "But you can't not take it because you have to finish school."

Arianna Burlew, 20, of Manalapan, took the route that many financial advisers suggest. She attended Brookdale Community College and plans to finish at the University of Medicine and Dentistry of New Jersey with a bachelor's degree in health information management.

Still, she took on $10,000 in debt at Brookdale and is working full-time to pay for her classes.

"It's the only way I can pay out of pocket," she said.

Worst kind of debt

The most onerous thing about excessive student debt may not be the payments.

"For years I've heard that a student loan is good debt," Reynolds said, because repayment does not start immediately, among other reasons. "It's the worst, because you don't ever get out from under it."

Bankruptcy filings blotted out student loans before 1976. But after the 1970s, discharging student loans was only allowed under the U.S. Bankruptcy Code in certain cases and the conditions have narrowed ever since, according to FinAid.

Delinquent borrowers have faced additional tougher measures. In 2006, the amount of pay a creditor could garnishee rose from 10 percent to 15 percent.

The Department of Education in 2001 began to use 15 percent of Social Security disability and retirement benefits to offset unpaid student loan debt.

Kantrowitz stressed that the vast majority of borrowers repay student loans.

Starting three years ago, struggling debtors could find help through the Income-Based Repayment plan, which limits payments and forgives some debt after a certain number of years.

But Reynolds said forgiveness in this case comes with a penalty.

"You take a big credit hit," he said, adding that people who avail themselves of the option "are unable to buy houses and things like that."

(Ken Serrano, Asbury Park Press)

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