Hold the Loan

Sophomore journalism major Danielle Zimmerman has found out that living the college life isn’t as glamorous as it seemed in the brochures. On top of her classes and trying to maintain a 3.0 grade point

Sophomore journalism major Danielle Zimmerman has found out that living the college life isn’t as glamorous as it seemed in the brochures.

On top of her classes and trying to maintain a 3.0 grade point average, she works 20 to 30 hours a week at the Franklin Institute’s gift shop. For Zimmerman and many other students, this juggling act can be stressful, taking a toll on grades and social lives.

“There are some times when I have to finish an assignment the night before it’s due because I worked three days in a row,” Zimmerman said. “I don’t really have time for myself.”

Unfortunately her $8.75 an hour won’t cover the $5,000 she owes for tuition next semester. Like many students, she will be forced to take out a private loan – added to her $12,000 private loan from last year and her $4,500 in federal loans. Before the start of junior year, Zimmerman will be $12,500 in student loan debt.

It sweeps campus and the rest of the nation like the Black Plague. Fortunately, it’s not killing millions of people, but it’s certainly causing widespread broken dreams and empty bank accounts.

According to College Board, the average student loan debt of a graduating senior – excluding parent loans – is $19,237. The additional debt of getting a graduate degree ranges from $27,000 to $114,000. While Temple is arguably one of the most affordable universities, grads may have even more debt than the national average projects. Assistant Director of Student Financial Services Heather Reeder said the average loan debt for current undergrads is upwards of $27,000. Junior marketing major Hardley Jeannite said he already took out $39,500 in loans, and after getting his MBA, he expects he’ll owe $120,000. Junior bio-chemistry major Amy Smith said that while she currently only has $12,000 in federal loans, knows she’ll inevitably face some hefty debt with med school costing her over $300,000.

With all the students flocking to Student Financial Services, Reeder said some fail to realize the amount of interest they can accrue throughout the years of obtaining a college degree.

“They’re more worried about paying their bills immediately and don’t think about the interest that is going to pose the bigger problem in the end,” Reeder said.

A positive aspect of federal loans is that their interest rates are capped. By law, the government can’t charge rates above 6.8 percent, but private loans have fees and interest rates that are often variable and range up to 20 percent, according to College Board.

“Basically my whole life is arranged around making sure I can make my loan payments,” Tacchino said. “I always need to make sure that I’m working in a job that makes enough money to make the payments. That generally means that I won’t be getting a job in any time soon.”

But freshman psychology major Katie Taylor said she isn’t too worried right now.

“I haven’t thought about it at all yet,” she said.

However, with the rising cost of tuition and the average cumulative debt increasing by about 3 percent – or $550 per year – according to College Board, freshmen might be in for the biggest shock of all.

College Board’s annual reports, Trends in College Pricing 2007 and Trends in Student Aid 2007, explain why borrowing has become so appealing. They show that while consumer prices on average rose less than 29 percent over the past 10 years, tuition, fees and room and board at four-year universities rose 79 percent – now costing $12,796 a year.

On Sept. 7, Congress approved the Higher Education Act of 2007, a new student loan bill that aims to increase the government’s role in financing higher education. The bill offers forgiveness on loans to graduates who work for 10 years or more in more public service professions like firefighting, teaching and the police; limits monthly payments on federally-backed loans to only 15 percent of the borrowers’ discretionary income; and raises the maximum Pell Grant from $4,310 to $5,400 over the next five years by cutting much of the subsidies they give private loan companies.

Scholarships and grant money have increased. However, for almost 15 years, the maximum available per student in government-guaranteed student loans has remained at $23,000 total for four years, which is still less than half the average four-year tuition, and room and board of $51,000 at public colleges.

While private loans only made up 6 percent of the total education loans one decade ago, they made up 24 percent in the 2006 – 2007 school year. It has become an $85 billion dollar industry with more than $17 billion in private student loans issued last year, up from $4 billion a year in 2001, according to experts and lawmakers. Sallie Mae leads the pack with 10 million customers, $25 billion in private loans and another $128 billion in government-backed education loans.

Out of the $25,000 in loans that sophomore biology major Andrew Smith says he has so far, only $5,000 are federal loans while the other $20,000 is an Astrive loan that he took out in one lump sum his freshman year.

“I just wanted to make sure everything was covered, so I took out extra,” said Smith.

Organizational psychologist and associate professor Donald Hantula said this is what’s known as the “shorter-sooner, larger-later” problem.

“We all intend to do the right thing in the future, but when confronted with the present we often make sub-optimal choices,” Hantula said.

Reeder, who graduated from Temple in 1997 with a bachelor’s degree in communications and later got her MBA in education, can certainly offer students advice. She still has about $56,000 left to pay off.

“It’s hard, I know,” she said. Many students are taking out private loans and using the money to pay their rent, buy books, a laptop even food. That’s why she wants to point out to students that “educational expenses are supposed to be what they’re used for.”

Yet, Reeder is just as perplexed about the future of this student debt epidemic as some students may be.

“I don’t know who is going to pay back all these loans,” Reeder said. “I hope students are able to do it. I hope I’m able to do it.”

Economics professor Dr. Donald Wargo recommends that students create a monthly budget which he calls “managing your cash flow.” There’s a detailed worksheet for budgeting your expenses on the SFS Web site that can help students do this.

But his main advice for students is this: “Do not run up credit card debt.”

“Borrowing for consumption is bad, but borrowing for investment is good,” Wargo said.”By going to college, you double your earning capacity. That makes college a very good investment even if you have to borrow.”

Nicole Finkbiner can be reached at nicole.finkbiner@temple.edu.

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