published Saturday, August 20th, 2011

Students piling up debt with college loans

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    File Staff Photo by Gillian Bolsover -- Students walk to and from classes on the University of Tennessee at Chattanooga campus.

To some college students, the thousands in federal loans they spend for school each semester can feel like Monopoly money because it can be years before a bill appears in their mailbox.

But unpaid debt, which for a UTC student averages $29,000 upon graduation, according to school figures, quickly becomes real, and a recent study by the Federal Reserve may indicate that students are assuming more debt than they can later handle.

"It's like starting life with a mortgage," said Pauline Abernathy, vice president of the Institute for College Access and Success, a Washington, D.C., and Oakland, Calif.-based nonprofit organization that tracks student debt. "It affects people's decisions about what career to pursue, whether to buy a home, start a family, whether they can save for retirement or their children's education."

The net increase in seriously delinquent student loan balances was $2.69 billion nationally in 1999 and now, more than a decade later, has reached $15.99 billion, the Federal Reserve says.

For credit cards, the net increase in seriously delinquent balances isn't as steep -- in 1999 it totaled $6.97 billion and in 2011 it was $10.77 billion, according to a New York Federal Reserve report on household debt and credit.

Growth in student lending also rapidly increased while other forms of debt declined, according to the report. Student debt, including federal and private lending, jumped 25 percent, from $440 million in 2008 to $550 million in 2011.

But credit card debt was down 20 percent in the same four-year period, landing at $690 million in 2011.

At UTC, total student loans increased from $25.7 million in 2006 to $36.4 million in 2010, records show.

Students are often programmed to accept loan offers, said Charles Putnam, a senior at the University of Tennessee at Chattanooga who expects to graduate nearly $20,000 in debt. They hear that an education is the best investment you can make and guess they'll get a good job and be successful, he said.

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BY THE NUMBERS

UTC

  • 44.8 percent -- Percentage of students with loans
  • $29,039 -- Average debt upon graduation

Source: UTC

  • Figures from Cleveland State and Chattanooga State community colleges were unavailable by press time

"When you get offered these loans, it's not like it's written in big read letters, 'You will pay this back,'" said Putnam. "All you think about is, 'I got to pay rent and don't want to work three or four jobs.' I feel like it's real, but I don't get the reality of it. The money is given to me, and I will not start paying back till six months after I graduate."

Economic troubles are fueling student lending and delinquency. Many people facing layoffs or trimmed hours returned to universities or community colleges to train for a new careers, but some still graduate with few options.

But a lack of education about student loans is also contributing to delinquency, officials said.

Some students don't know that they can request deferment of their loans in certain cases or be placed on income-based repayment plans, which lower required monthly payments to be in line with an individual's earnings. If they have paid on the loan for more than 25 years, it can be forgiven, she said.

Students should educate themselves on repayment options before signing the dotted line on a loan and shop carefully for their school of choice, officials say.

Beginning in October, schools will be required by federal law to publish the net price of attendance, including food, housing and other expenses. Surprisingly, the bottom-line cost at expensive schools can be much lower than schools with low tuition because they have more grant aid available, Abernathy said.

"Looking at tuition alone is very deceptive," she said. "Tuition is like the sticker price on a car and that's not often what people pay."

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about Joan Garrett McClane...

Joan Garrett McClane has been a staff writer for the Times Free Press since August 2007. Before becoming a general assignment writer for the paper, she wrote about business, higher education and the court systems. She grew up the oldest of five sisters near Birmingham, Ala., and graduated with a master's and bachelor's degrees in journalism from the University of Alabama. Before landing her first full-time job as a reporter at the Times Free Press, ...

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EaTn said...

A student loan is relative to the salary upon graduation. In addition to disclosing the cost of attending, a school should also be required to disclose the number of job and salaries offered to graduates in all of their programs.

August 20, 2011 at 6:41 a.m.
kingtutley said...

Wrong, student loans are NOT relative to salary. You can graduate from UTC with a BS in education and teach middle school and make LESS in a year than your student loan, or you can get your BSEE and make enough to cover yourself.

College is quickly becomming unaffordable for the masses as the class system slowly separates the upper class from the ever growing lower class and ever shrinking middle class. You will eventually see it revert to what it was many decades ago - only the rich go to college, the rest of us must squeek by as servants to the wealthy.

August 20, 2011 at 7:36 a.m.
Astropig said...

"You will eventually see it revert to what it was many decades ago - only the rich go to college, the rest of us must squeek by as servants to the wealthy."

Wrong. You will see college become a place where smart parents send their kids.Parents that don't spend their kids college money on new cars every couple of years, don't buy extravagant houses that they can't afford and don't live a lifestyle beyond their means on borrowed money (thus socializing their kids to believe that that kind of lifestyle is "normal").

When I see Logan's Roadhouse full every night and wage slaves driving $50,000 Tahoes because their neighbors have one ,but claim that the only way to send their kid to school is with federal sugar, something is out of whack.

College shouldn't be a mass entitlement. The masses decision making process is too dumbed down for it to be so.

August 20, 2011 at 7:58 a.m.
EaTn said...

There's always a bight side---you can graduate with a C average from a state school in an easy curriculum, become governor and run for president.

August 20, 2011 at 8:15 a.m.
Humphrey said...

well that has never happened.

August 20, 2011 at 2:09 p.m.
kingtutley said...

Astropig - I never said it was any sort of entitlement. I said it is becomming too expensive for the masses - ie, most people. Hence, you will see fewer people going to college and those people will tend to be from wealthier familes.

While I agree that frivolous spending habits of the me-centered society as a whole is driving this trend to an extent, so is the fact that UTC has increased tuition year after year by anywhere from 7-10%. It will soon be impossible for many to attend simply because they lack funds and don't want to be saddled with a 50k balance when they graduate with their degree in forrestry or some other such useless degree.

August 20, 2011 at 4:27 p.m.
Astropig said...

"It will soon be impossible for many to attend simply because they lack funds and don't want to be saddled with a 50k balance when they graduate with their degree in forrestry or some other such useless degree."

Nope. It will still be possible if:

1) Parents send their kids to the excellent community college system around our area that they have already paid for with their taxes.Core courses there are less than half the cost of 4 year schools and most integrated university systems now make it easier than ever to transfer.

2)They begin saving when the child is born. Here's some math- 18 Years times $50/month = $10,800 in college savings by graduation(even assuming no return on that money). Cable TV, Video games and the latest moon boot basketball shoes should be the last thing that parents of modest means buy their kids if they are concerned about their future.Double that $50 and there should be more than enough to send them the last two years on your own dime.

3)They buy used cars instead of new. The first 28% of a car depreciation comes in the trip home from the dealer. That money can add up to big bux if you just do it twice in 18 years.

4)Kids can legally work when they turn 16. They can kick in $50 a month to their fund and have some "skin in the game" and they will appreciate the sacrifices that their parents make to educate them.

5)They stop relying on the promises of politicians to do the job that they as parents need to do-Educate the kids they love so much. The HOPE program in Georgia has pulled the rug out from under quite a few students this year because it was designed by politicians seeking votes.When times got tough, it became another broken program that will fail to deliver on its promises.

I could go on. Like, buy groceries on sale,marked down. Shop in thrift stores for barely used clothes.Buy marked down bakery cakes that say "Happy Bar Mitzvah!" before the kids can read for their birthday.Teach your kid to drive a stick shift to their job mentioned up there in number 4. Over time a manual shift will be cheaper to own (better gas mileage and lower repair bills).Teach them to cook-They can make their own meals at college and save having to pay restaurant prices.

If you are graduating with 50k in student debt, you will be a wage slave for many,many years. Thats tragic.

August 20, 2011 at 7:16 p.m.
EaTn said...

As I said in the first comment on this topic--it's relative. By that I mean if you have a $40 thousand debt upon graduation, that's about the price of a nice new automobile. The problem is if you get a mediocre degree that pays $25 thousand per year, the debt will be a burden for a long time. However, if you get a better paying degree that starts at $75 thousand and up, the debt will be like a car payment for a reasonable period of time. That's why students need to plan ahead on what college will cost and what will it pay upon graduation.

August 20, 2011 at 7:40 p.m.
rolando said...

One thing forgotten, astro...inflation. Especially with the way the dollar is falling.

My two years of tuition-free community college [EE] in the mid-50s cost me a couple hundred, maybe...that was for books, student fees, etc. CalTech was a couple thousand a year if memory serves. A lot in those days [$1.25 min. wage]. Not counting gas at 25 cents/gal.

That was then. Compare it to today. Now compare it to what it will probably be in 2029 when Jr/Sis is ready for college. Your $50K or so savings might pay for a semester. So you saved valuable dollars and watched them turn into pocket change. Better to invest in hard objects -- paintings, stamps, collectables [Barbie comes to mind] etc. They at least keep up with inflation/taxes. If you are smart, when the cash is needed, you sell them quietly -- for cash. Forget eBay.

Further, over the years, your COLA pay raises eventually put you into a higher tax bracket and your money is worth even less.

August 20, 2011 at 10:02 p.m.
morganw said...

This is a problem caused by elitism and status symbols. Students think they are all entitled to a 200k education and don't take into consideration that financing that much money is a stupid idea. The loan amounts these kids are able to take out are ridiculous. A person of the same age and financial situation as your typical college student would be laughed at if they tried to finance a 200k house, and thats even a secured debt. Ultimately though, these are adults by law they signed the note and promised to pay and the terms were clearly stated on the loan contract. They need to pay for their mistakes themselves just as any of us would for not paying our mortgages or even small loans without credit check provided online.

December 14, 2011 at 9:18 a.m.
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