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Spring 2011

50th Anniversary State of Education Series
POST-GRAD BLUES
As tuition rises, student debt crisis escalates

In the last issue of The Scholar, we explored several reasons why college tuition feels so expensive and unmanageable, including rising tuition costs due to a decline in state education budgets, the high costs of running a university, and the fact that college is worth more in today’s world, which also means it costs more to get earn a degree. Naturally, this has led to an increase in both federal and private-sector student borrowing. Financial experts predict that student loan debt could reach a whopping $1 trillion by the end of 2011—and that this may be the next financial bubble to burst.

Tonja Lesmeister and her husband, Troy, met in college in the early 1990s. Both were first-generation college students and came from families that could not afford to set money aside for college tuition. Though their parents were supportive of their dreams of going to college, Tonja and Troy were left to navigate the complicated world of college finances on their own.

Coming from a low-income family, Troy received the maximum amount of federal grants available at the time. Because Troy was in school to become a pilot, there were extra costs that he had to cover; he ended up borrowing the full amount of student loans available to him. Tonja received some grants, but also took out a large amount of loans. She worked three jobs in order to cover the gap, but when she was put on academic probation, Tonja cut back on her work hours to focus on her studies and took out even more loans.

When Tonja and Troy graduated and married less than five years later, they consolidated their loans at an 8 percent interest rate—considered “good” at the time—and began paying off their nearly $36,000 in loan debt on a graduated payment plan (allowing the couple to pay a smaller amount in the beginning when their income was lower, with their payment amounts gradually increasing).

lesmeister family For several years, the Lesmeisters were successfully making their payments—which were primarily just on interest—even as their family grew. Just before they could begin paying down the principal balance, Troy’s job went south following the terrorist attacks on 9/11. The airline industry tanked. Because Troy didn’t have steady employment, they were forced to defer their student loans for three years.

It’s been 15 years since Tonja and Troy graduated from college. They are now 40 years old, have four children—two of whom they just adopted from Jamaica—and still owe $36,000 in student loans. Though they pay well over the minimum amount due every month, they’ve made zero headway on their balance. As three of their children approach college age, the Lesmeisters are growing increasingly concerned about paying for their education. Though they don’t want their children to be faced with the same unmanageable student debt, they also know that what little money they can provide for tuition won’t be enough.

Though the Lesmeisters’ situation may seem unusual, it has become increasingly common in today’s high-tuition and high-student-debt reality. In 2009, a PBS segment on student debt reported that seventy million people—one quarter of the nation’s population—owe a collective $700 billion in student loan debt, more than America’s total credit card debt. Whereas Tonja and Troy had roughly $18,000 in loans apiece, the Project on Student Debt says that today’s graduate carries an average of $24,000 in student debt, leaving graduates with unmanageable monthly payments in an uncertain job economy.

Unlike mortgages, credit cards, and nearly every other kind of debt, student loan debt cannot be wiped clean through bankruptcy. Default rates are on the rise, and the government is threatening to sue people
who have defaulted on their student loans.

Understandably, many people are quick to ask the question, “Is a college education worth it?” For the majority of Americans—and for America as a whole—earning a college degree even with student debt almost always pays off.

In 2009, the average annual unemployment rate rose sharply for all levels of educational attainment. But the unemployment rate for those with only a high school diploma was 5.1 percentage points higher than the unemployment rate for those with at least a four-year college degree, as reported by College Board in 2010.

Georgetown University Center on Education and the Workforce stated in a 2010 report that as the economy continues to recover over the next few years, 60 million Americans are at risk of being excluded from the middle class and will remain trapped in low-wage jobs that require a high school diploma or less. Between 1973 and 2008, the share of U.S. jobs that require a college degree increased from 30 percent to 60 percent. Yet today, less than 40 percent of Americans hold at least a two-year degree. By 2018, America will be short 3 million college degrees.

Americans should not be forced to choose between a life in low-wage jobs, or twenty years of high payments on student loans. Because the likelihood of tuition decreasing over the years is slim, and the amount of government aid is likely to decline, the role of scholarships in the majority of students’ education is exceedingly important. Instead of student loans, scholarships can be used to bridge the gap for students, making Scholarship America’s work all the more relevant in the coming decades.

News & Publications

For the Media

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Spring 2011

50th Anniversary State of Education Series POST-GRAD BLUES As tuition rises, student debt crisis escalates

KATIE COURIC SUPPORTING SCHOLARSHIP AMERICA WITH BOOK PROCEEDS

"A DOLLAR A DAY" CAMPAIGN OFFICIALLY LAUNCHES 50TH ANNIVERSARY CELEBRATION

THE INSIDE VIEW: NOTES FROM SCHOLARSHIP AMERICA

SCHOLARSHIPAMERICA.ORG GETS A FRESH NEW LOOK

50th Anniversary State of Education Series
POST-GRAD BLUES
As tuition rises, student debt crisis escalates