College financing has gotten to be too onerous and complicated, so it’s difficult for families to negotiate the process and, as a result, it’s hobbling graduates’ attempts to live normal lives. Congress has largely ignored these Americans, though, as it focuses on the national debt and the Tea Party agenda.
There’s been a sharp uptick in student loan defaults — the highest rate in a decade — as more students come out of college an average $24,000 in debt, yet can’t find jobs.
Part of the psychology embedded in a college education is that the diploma should enable you to get a living-wage job, pay off debts and live a prosperous life. That was the big selling point of a high-cost diploma. That isn’t happening now for most graduates.
When it came time for Cassidy Rumble Meyer to choose a college, she had a range of options thanks to great SAT scores, a solid grade point average and a stellar volunteer resume.
But when it came to mulling over elite universities, Rumble looked at the bottom line, which for private four-year colleges now average over $27,000 a year in tuition and fees alone.
Bad news for the coddled college masses who are waiting for a check from mommy and daddy: You might have to get a job. Your parents may not be willing or able to keep paying all those skyrocketing school bills.
According to a new study from Sallie Mae, in the last two years, high-income families have slashed the amount they chip in for their kids’ college education from 51 percent to 43 percent of the bill. Meanwhile, students from those families have had to pony up almost double what they used to, now covering 10 percent of total costs.
Turchan graduated two years ago from Fordham University and has a good job, as a sales associate at a commercial real-estate brokerage in New York City. But the crippling financial hangover has left him dispirited. “I’m over $100,000 in debt, and find it very hard making payments,” says the 25-year-old. “I often think about whether college was worth it. Before college I was making better money, and think about what I could be doing now if I had focused on saving and furthering my career.”
At 44, Mark Dinos is smart and successful, the kind of lawyer you want on your side if you’re in an insurance-related legal case. But the Chicago attorney gives himself less-than-high grades for how he prepared financially for his daughter’s college education; she starts at Northwestern University just days from now.
Ask him how he’ll manage $59,000-plus in tuition, room and board and Dinos (pictured) replies with a self-deprecating laugh: “Prayer. Fortunately I’ve had a very good year and can accommodate some of that. But Northwestern is only allowing my daughter to borrow $5,500 at the student rate. (That is actually the maximum amount that freshman are allowed to borrow in the Federal Stafford Loan program.) She got a $5,000 grant, so Mom and Dad are responsible for the other $49,000. And now I have to go borrow money at the dumb parent rate, 8.6 percent.”
You’d have no reason to think that Terry and Laura Truax of Chicago are in any way atypical college parents. Their son Sumner, 22, attends Lawrence University in Appleton, Wisconsin, where he’s double majoring in saxophone performance and music education.
Sumner (pictured) is a talented jazz player in the Lux Quartet, but he didn’t have to land any college scholarships to pay his way through school, nor did his parents apply for any financial aid. Terry, an attorney, and Laura, a pastor, saved for college ever since their son was a toddler, meaning the $42,000 in annual tuition has been manageable — even as two more Truax teenagers plan to start college in the next two years. Terry is a partner at Jenner & Block LLC; Laura is senior pastor at LaSalle Street Church.
College textbook publishers apparently haven’t heard there’s a recession going on.
The average college student spends $1,137 a year for textbooks and other course materials, up from $988 three years ago according to collegeboard.org.
The Consumer Financial Protection Bureau, which starts operating on Thursday, has oversight and enforcement authority over private education loans and most private education lenders.
By year’s end, Stephanie Bourque will owe approximately $165,000 in federal student loans. It’s an especially daunting debt load for the first-year University of Colorado pediatric resident whose annual income will likely fall between $40,000 and $50,000 during her three-year residency.
“I think it’s going to take a lot of effort and a lot of budgeting,” she says. “Even if my take-home salary increases, I still have a lot of educational debt to pay back.”
What if that weren’t true anymore?
Record debt, persistent joblessness, millions of underwater mortgages and a stock market that hasn’t gone anywhere in 10 years: For today’s kids who are entering the job market, it’s hardly a recipe for future success.