Sentenced To Debt

Sara Graves is a married, thirty-year-old mother of three with a college degree. She also has upwards of $25,000 in student loan debt, on which she pays an interest rate of 6.5 percent. She’s one of nearly forty million Americans who collectively owe in the neighborhood of $1.2 trillion in student loan debt. That accounts for the second largest consumer debt in the country, exceeding credit cards and car loans and trailing only mortgage debt.

When discussing her situation, Graves worries about her children. “I made the correct decisions,” she says, “but the extra burden of the student debt that I’m dealing with right now is definitely delaying our initial plan of saving money for our children so that they wouldn’t be in this position.”

As a working, single mother in her early twenties, Graves decided her best path to a good middle-class life was to enter college as a nontraditional student. Her determination and drive were clear.

“I sat down with my adviser,” she said. “I figured out exactly which courses I needed to take to get my degree. I didn’t have any extra fluff courses in my curriculum. I completely just went straight through, worked really hard, got the credits that I needed to get the degree, and in the end it cost me more money than it would have had I just gone about it nonchalantly and not rushed my way through it.”

Graves attended college year round. But because of the limitations on yearly aid, she racked up student loan debt she would have otherwise avoided had she taken longer to graduate.

Like millions of other college graduates, Graves is carrying around a debilitating debt.

As Senator Tammy Baldwin puts it, student loan debt is “a defining issue of our generation.” Since 1985, college tuition has gone up 559 percent, and with it, massive indebtedness. In a nationwide survey of more than 61,000 individuals conducted by One Wisconsin Institute, those with student loan debt reported an average length of repayment of twenty-one years, ranging from seventeen years for those with some college but no degree up to twenty-three years for debtors with graduate degrees.

Respondents shared some of the real-life economic consequences of this debt. Rates of home ownership were 36 percent lower among individuals still paying on student loans versus those who have already paid them off. And almost two out of three of those currently repaying a student loan purchased a used car instead of a new one.

Robert Hiltonsmith, a policy analyst at Demos, a New York-based public policy organization advocating for economic justice, authored a recently released report with even more sobering statistics about the wealth loss attributable to the student loan debt crisis.

A household headed by two adults who both took out average loans to graduate with bachelor’s degrees is saddled with a debt of about $53,000. This translates into a lifetime wealth loss of nearly $208,000, the Demos study calculates. Students from low-income families, students of color, and for-profit students will lose even more, the study said.

Even having a job in the field you have studied for is no guarantee you can meet the demands of your student loan payments.

Robert Applebaum was an assistant district attorney in Brooklyn, New York. Having gotten his law degree in 1998, he was saddled with around $65,000 of debt. A self-described “former Republican,” Applebaum comes from a family of law enforcement, including a father who was a New York City police officer.

“I wanted to serve my community and make it a safer place to live,” Applebaum says.

Unfortunately, he could not afford rent, living expenses, and his student loan payments on a starting assistant district attorney’s salary of $36,000. He went into forbearance, meaning his student loans did nothing but amass interest exponentially. After five years in the DA’s office, his loan had swelled to $85,000 and with no solution in sight, he made the decision in 2004 to leave his job and go into the more lucrative private sector.

He regretted leaving a job in public service he loved, but felt no other choice. In 2009, public service loan forgiveness went into effect, which included income-based repayment followed by loan forgiveness after ten years. But this program serves only a select segment of the population, and he was long out of public service when it began.

With the tenacity of a former prosecutor, he has made justice for student loan debtors his next case. In 2009, he authored a column entitled “Forgive Student Loan Debt to Stimulate the Economy” and, based on the massive response he received, founded StudentDebtCrisis.org.

President Obama and Demo­crats in Congress have tried to address this crisis. They backed legislation to keep the interest rate on federal student loans at 3.4 percent. In July, Republicans failed to act before rates doubled to 6.8 percent. A month later, the Democratic leadership “blinked” and acquiesced to a deal that, while keeping rates below 6.8 percent for the moment, will cost borrowers billions more in interest over the next decade.

Shortly thereafter, Obama an­nounced a new plan to “shake up the current system” and “rethink the way in which we pay for higher education.”

The President’s new plan would allow all borrowers to cap their federal student loan repayments at 10 percent of their income. It would also notify borrowers that this option is available to them, tie financial aid to college performance based on an as-yet undetermined rating system, and promote a variety of initiatives to encourage “innovation and competition” in higher education.

There is broad agreement among progressive advocates that expanding income-based repayment options to more Americans would be a big win, though it would require Congressional approval, which seems unlikely.

“Every American borrowing student loans needs the option of income-based repayment plans that will work for them today,” says Anne Johnson, executive director of Generation Progress, the youth division of the Center for American Progress.

The American Federation of Teachers also praised Obama’s expanded income-based repayment option. But it raised a serious question about his “innovation and competition” proposal, warning that it “amounts to Race to the Top Goes to College.” It cited pitfalls of linking financial aid to arbitrary measures of college performance. It noted the possibility the policy could create “perverse incentives that will devalue community colleges and non-degree-seeking learning, disincentivize colleges from admitting students with disadvantaged backgrounds, and devalue teaching and learning in favor of what is easy to measure.”

The federation also pointed to problems at the state level.

“The major contributor to rising college costs is state disinvestment in higher education,” it said. “We want a plan that encourages investment in all states.”

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This article originally appeared in the November 2013 edition of The Progressive, by Scott Ross and Mike Browne