Students Hooked on Debt Widen the Gap

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Federal student
loan programs were supposed to make higher education more affordable,
and thus more accessible, to those whose ambitions exceeded their
household income. As the thinking went, students could choose the
colleges they would attend based on their scholastic records and
other achievement, not their familial financial wherewithal. Thus
would upward mobility be ensured, at least in theory.

However, recent
developments indicate that the opposite may be happening. Indeed,
the relative ease of borrowing money to finance an education – and
the low interest rates at which those funds are lent – may be contributing
to a widening gap between affluent, middle class and poor students.

One of the
most striking aspects of a 2003 report – published by Nellie Mae itself,
and based on research that organization conducted – is the fact that
the amount of federal student-loan debt incurred by graduates of
public four-year colleges is growing at a much faster rate than
the tabs accumulated by their private-college peers.

From 1997 to
2002, the amount of indebtedness to federal loan programs increased
by 57 percent for public college graduates, as opposed to 35 percent
for their private-school counterparts. The average amount of debt
undertaken by public four-year college graduates in 2002 was $17,100
and the median was $16,200. For private college graduates, those
numbers were $21,200 and $18,400, respectively.

The Nellie
Mae report indicated that the trend of faster-growing debt among
public college graduates was first noted during the 1980's and has
intensified ever since.

Perhaps the
most alarming note in the report was sounded with the finding that
for four-year public college graduates, their debt financed 84 percent
of the cost of their tuition, books and fees in 2002, while loans
paid for only 71 percent of those costs in 1997. For all four-year
colleges, those numbers are 75 percent for 2002 and 61 percent in
1997. Meanwhile, the average private-college student paid for about
half of his or her education-related costs through loans.

A related report
posted on Smart Aid, the Student's Guide to Financial Aid, indicates
that the aforementioned trends have continued since Nellie Mae's
2003 report. In reading this and Nellie Mae's report, one finds
much evidence to indicate that the phenomenon of increasing public-college
graduate indebtedness has at least remained consistent and will
likely continue to grow.

One of the
main reasons for this is that a typical student at a public four-year
college comes from a working- or middle-class family. Their incomes,
as reports from organizations across the political spectrum attest,
have risen at a much slower rate than those of the wealthier families
that often send their kids to private college. So when a state university
or municipal college raises its tuition, students and their families
face more of a hardship in paying it than an affluent family does
in paying for a private-school tuition increase. Thus the public-college
student is more likely than her or his private-college counterpart
to borrow more money – if he or she can – in order to pay for a rise
in tuition.

Of course,
once students graduate, they have to think about paying off the
loans. Programs typically offer a six-month to one-year grace period
in which students don't have to begin repaying what they borrowed,
and paying the interest. A generation ago, that might've been enough
time for the holder of a newly-printed baccalaureate in liberal
arts to find employment that would allow entrance into the field
in which the student studied and to make enough money to get on
his or her feet. However, today's graduates may need even more time
to begin their chosen careers.

Sometimes students
decide to continue their studies for this reason alone. "Well,
it's another two years of not having to pay," explained one
of my students. "And the job market might get better."
For that student, like many others, more schooling will mean more

Whenever they
begin paying, graduates will have to fork over anywhere from $100
to $600 a month. Students who don't have a trust fund or any other
hereditary financial cushion must turn over a much larger portion
of their incomes – which are typically lower than those of private-college
graduates – to pay for their degrees.

Career novitiates
who have recently graduated from public colleges also must spend
larger portions of their income on rent and other necessities. Given
that the greatest concentration of jobs for the young and ambitious
is in high-cost urban areas such as New York, Boston and San Francisco/Silicon
Valley, this is even more of a hardship for these young people than
it is for their more "preppy" counterparts. This also
means that the State U grad who's trying to make it in the big city
will probably have to live in a marginal neighborhood and/or with
roommates. Either of these is a detriment to forming the social
networks that so often propel a young person's career after he or
she has made the initial entry.

To afford a
larger place or to live alone – or to buy the clothes and other accouterments
of a young professional's life – they may rely on another form of
loan: credit cards. While exact figures aren't available, many recent
graduates report using their paychecks for rent and student loans.
"For everything else, there's Visa," becomes an unintended
truism for the young and ambitious but poor.

from working- and middle-class backgrounds are thus hooked into
a cycle of debt: They'll probably continue to need loans to buy
cars, homes and such – all to maintain some semblance of the possibility
of upward mobility. Their wealthier private-college peers, meanwhile,
are less bound by such concerns and can devote more of their time
and energy to pursuing dreams or building power, and less to worrying
about how to pay for everything, with interest.

10, 2005

Nicholas [send her mail]
teaches English at the City University of New York.

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