Student Debt: Study Up Before You Sign Up

It’s that time of year again. Students nationwide are heading back to college and signing fresh promissory notes for financial aid. I am one of them. Many of us will mourn the loss of the summer sun while we simultaneously anticipate carving pumpkins and the smell of fallen leaves.

As our quest for knowledge continues and in that vein, I dare to ask, how much student debt do you have and, more importantly, do you understand the parameters in which you agreed to such debt?

As a graduate student, I am skilled in the art of back to school preparation – including ensuring that my financial aid paperwork is signed and ready for disbursement. However, until recently, I didn’t actually know what I had gotten myself into, and what legislation is in place to protect – or harm me. Knowledge is power; the lack of it can be costly.

Doing a little math, I was shocked to learn that the sum I will owe at the conclusion of my graduate studies, roughly $33,000, will accrue additional interest of about $12,000 over the course of the loan. That means for the next decade I will be responsible for a monthly payment of approximately $375, in addition to covering all my other costs of living. That’s about equal to a month of groceries, a monthly car payment, or a health insurance premium. I am certainly not the worst off – and I am not alone.

Even more troubling is the additional cost to me as a woman. The gender pay gap complicates the equity women strive for in choosing to purchase an education. I might be stuck paying off my student loan debt longer than the men sitting next to me in class, due to the lower pay women receive for the same work as men. Women typically earn 79 cents for every dollar a man is paid.

Paying my loan back over a longer period means compounding interest, and a higher total cost.

Several bills in congress have the potential to change the nature of student loans and the student debt crisis. Let your representatives and fellow constituents hear your voice.

One recent notable action by President Barack Obama includes changes to rules regarding financial aid applications. These new rules allow students to apply earlier in an aim to increase Pell grant eligibility, which may decrease the total amount needed for loan borrowers. It’s a small step, but in the right direction.

If I could reach back in time to my former self I would tell her to know the key terms when reading your promissory notes, map out a plan that is best for you, and talk to your congressional representatives about legislation that will work toward solving the student debt crisis. We can make this a better world for students and higher education.

This is my story, share yours at DeclareYourDebt

The Alliance for a Just Society has written a series of reports on the effects of student loan debt which include personal narratives of students who raced to the challenge of higher education and will continue to pay the price tag for years to come.

Winning on Student Loan Reform … From CT to MT

Across the country, student loan borrowers and their allies have been organizing to make college more affordable and push for state-level reforms that address the mountain of student debt that’s weighing down students and families. And they’re winning… all the way from Connecticut to Montana.

In Connecticut, where the 2015 legislative session ended at midnight on June 3rd, Alliance affiliate Connecticut Citizen Action Group (CCAG) co-convened and provided staff support for the Higher Ed, Not Debt – CT coalition, a coalition of community and labor allies that formed last fall and championed affordable higher ed and student loan reforms in the legislature this year.

CCAG’s work with the coalition – including releasing the Connecticut version of the Alliance’s A Mountain of Debt report last fall, mobilizing its grassroots membership through public events and calls to action, and driving under-the-dome engagement at the legislature – helped push some breakthrough wins on student loans before the session gaveled out.

The Alliance congratulates the Higher Ed, Not Debt – CT coalition for these exciting wins, including:

Passing a Student Loan Bill of Rights that gives borrowers somewhere to turn for help and gives the banking commissioner the authority to investigate and take action against bad-acting loan servicers. This bill of rights creates a dedicated student loan ombudsman position in the state Banking Department to review and act on borrower complaints, to compile and publicize complaint data, and to educate borrowers and the public about student loan issues. It establishes licensure requirements and standards of conduct for student loan servicers. And it authorizes the banking commissioner to conduct investigations and examinations and take enforcement action against servicers who violate licensing provisions.

Passing in-state tuition for DREAMERS – immigrant students who attend high school in Connecticut but, despite having residency in the state, have been barred from paying in-state tuition because of immigration status. With out-of-state tuition often coming in at triple in-state rates, this made the costs of higher education prohibitive for many. Passing in-state tuition is an important step toward justice and educational opportunity for immigrant students.

Passing a landmark student loan refinancing bill. This bill allows the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to refinance qualifying student loans. Crucially, the bill gives CHESLA the authority to refinance private student loans (which often come with punitive interest rates) into public CHESLA loans with lower rates and better protections. This bill also reforms CHESLA’s lending practices to ensure that it provides more aid to low-income students who have the greatest financial need.

This progress in Connecticut is exciting. So is the news from Montana, where the Montana Organizing Project (MOP) has been collecting stories and organizing around student debt issues, too (MOP released the Montana edition of A Mountain of Debt last fall). This year, MOP took on a longshot fight in the legislature to roll back the criminalization of student debt – and won!

The criminalization of student debt has been a troubling – and growing – trend nationwide. Going into this year, 22 states (including Montana) had laws on the books that allow the state to revoke a state-issued professional license (like a nursing license) if a borrower defaults on student loans.

But Montana went even further: under a statute passed in 1997, the state could suspend a driver’s license indefinitely if a borrower failed to pay back student loans.

In a sprawling state like Montana where public transportation infrastructure is poor and driving is a practical necessity to get to work, members of the Montana Organizing Project concluded this law was just plain kicking people when they’re down… so they kicked into action to do something about it.

MOP engaged the state Department of Justice around the issue, analyzed the Montana Code to develop a fix, and worked to build support both inside and outside the legislature to reverse this punitive law. The resulting bill, HB 363, passed the Montana House and Senate with bi-partisan support and was signed into law by Montana Governor Steve Bullock – a promising victory for efforts to roll back the criminalization of student debt.

Hats off to the teams in Connecticut and Montana for winning these fights, and putting forward models that can inspire action and catalyze new campaigns for affordable higher education and student loan reform across the country.

If Germany Can be Tuition Free, Why Not Us?

There was some very exciting news coming out of Germany this week, when the country announced that it is scrapping tuition and fees for its universities. Organizing is widely credited with building the public will and political momentum for free college. In fact, Dorothee Stapelfeldt, of the Hamburg Parliament, told reporters this week, “Tuition fees are socially unjust.”

Free or low-cost higher education is typical in most of Europe.

In Germany, tuition is a mere fraction of what American students pay. But with Germany, which has been taking heat for pushing austerity measures that have unnecessarily constrained the economy, leading on this important issue it, brings hope that we can keep building the momentum in the U.S.

And it’s beginning. In Connecticut, Gov. Dannel Malloy has unveiled a plan that will help folks who are already burdened with student debt. His plan calls for state tax breaks for interest on student loans, but more importantly, it would create an authority in the state that would allow students to refinance their debt at market interest rates. Additionally, he’s working to create the Connecticut Financial Aid Pledge, which would offer assistance to help qualifying Connecticut students graduate without debt.

This is a step in the right direction, but the U.S. is still miles away from the free college tuition. Students, teachers unions, and communities have been working for nearly ten years in Germany to win free schooling. Here in the states it’s just recently risen to be part of the national conversation.

Nascent coalitions like the Higher Ed Not Debt that the Alliance works alongside, will continue to push for fully funded education, and to ensure that our young people don’t enter the workforce carrying student debt. We need other states to step up to the table to match and beat this proposal.

Because, as the Minister for Science and Culture in Lower Saxony said this week, “We got rid of tuition because we don’t want higher education which depends on the wealth of the parents.”

High Student Debt and Low Wages Don’t Mix

Students and graduates throughout the country continue to bear the burden of the high cost of education by taking out student loans. For those in states with high average student debt and lower median incomes, the weight of student loans combined with low incomes can mean a lifetime of debt.

The Alliance for a Just Society has released two new “A Mountain of Debt” reports, one last Thursday in Maine, and another today in Montana.  The state-specific reports highlight the difficulty of paying for school and paying off loans after graduation in states with predominantly lower wages. When comparing student debt to median household income, Maine has the 11th highest student debt-to-median income ratio in the country. Montanans fare even worse with the 6th highest ratio.

With half or fewer job openings paying a living wage for a single adult, average student loan debts after college graduation of over $27,000 in Montana and over $29,000 in Maine leave graduates without the means to pay off their loans in a timely matter – if they can afford to make payments at all.

As a single mother with significant student loan debt, Kimberly Hammill of Levant, Maine finds that her loans keep her from financial stability.

“Not only did I go to school to better myself and enter a rewarding career, but I also wanted to improve both my daughter’s and my quality of life. My student loans funded my education, but today they keep me in the same state of economic dependence I was experiencing before school. I still have to rely on social services to get by,” said Hammill.

Adam Bland of Presque Isle, Maine says his student loans keep him from saving for the future and living the life he wants today.

“My loan payments take up a little more than 20 percent of my monthly take home pay,” Bland said. “If I didn’t have to make these payments, I would be investing in a 401K, setting money aside for emergencies, and definitely doing a little bit of traveling, but the high interest payments mean I can’t.”

Jan Siemers of Helena, Montana doesn’t have student debt of her own, but she has seen her grown children struggle with their student debt.

“We want our children to be successful and are often told that a college education is the best path, but today I am witnessing firsthand how the resulting student debt is destroying economic opportunities for young people,” Siemers said.

Graduates like Clementine Lindley in Billings, Montana wonder whether student loans are worth it.

“My experience in college has meant so much to me, and has shaped who I am today,” she said. “Sadly though, I am not sure I would make the same decision if given the chance to go back and do it again. While the experiences were invaluable, the $90,000 price tag has been extremely difficult to handle.”

States need to reinvest in higher education, explore innovative solutions to address rising tuition and fees, allow students and graduates to refinance their loans, and increase wages so that graduates can actually afford to pay off their loans. Students and graduates in Maine and Montana deserve to have their hard work pay off, without seeing their dreams crushed by student debt.

Graduates Struggle Under a Mountain of Debt

College is supposed to be the pathway to a better job and a better life, but for students across the country college is also the pathway to a life of debt.

Since 2008, states across the country have decreased their investment in higher education, with every state except for Alaska and North Dakota providing less per student in 2014 than in 2008. These cuts have led colleges and universities to increase tuition to make up for the lost funding, shifting that burden onto students and their families.

“A Mountain of Debt,” released this week in Washington and Connecticut, show clearly that when students face increased tuition and low wages, many must turn to student loans to cover costs. In fact, nationwide 70 percent of students graduate with student loans. The average amount of debt at graduation is $29,000.

Students in states like Washington and Connecticut find themselves unable to get by without loans for college, and unable to easily pay them off after graduation.

“I was working 80 hours a week to pay for school and living expenses. My average day would include working multiple fast food jobs sporadically thrown between classes, working one job until 8:30 at night, working 10 p.m. until 4 a.m. loading trucks in a factory, then getting up for class at 8 a.m. and doing it all over again,” said Alex Katz, a student at the University of Connecticut.

Christina Hoadley, a student at Central Connecticut State University, works two jobs to help pay for college, but still is worried about the prospect of paying off her loans. “After grad school, I anticipate walking away with a loan amount to the tune of $40,000. I’ll have to begin paying on all that within 6 to 8 months after completing school. It’s a lot of stress knowing the huge weight of debt that lies ahead.”

In Washington, Roxana Pardo Garcia loves the work that she has found since graduation, but she does not earn enough to make paying off her student loans easy. “My current student loan debt load is $19,000, and my loan payments take about 20 percent of my monthly take-home pay. I just wish I could help my mom out more. After all, she is the reason I went to school: to lift us out of the cycle of poverty.”

Bernadette Binalangbang of Tukwila, Washington has had to take a job outside of her field just so she can work to pay off her student loans. “I really love to bake and making pastries is my passion, [but] I’m currently employed full-time at a medical lab. It’s a complete shift from what I’d like to be doing, but it pays my bills and keeps me afloat — just barely. My student debt payments take up more than 30 percent of my monthly income.”

Disinvestment by states has left students and graduates like Alex, Christina, Roxana, and Bernadette in an uphill battle against the mountain of debt they’ve accumulated. States like Washington and Connecticut need to reinvest in higher education, or even more students will find themselves with no choice but to take out loans that they will repay for years to come.

Corinthian College: Preying on Students’ Dreams

Education is supposed to be a ticket to a better future. Every day, people see ads from for-profit colleges offering programs that promise to lead to a career as a dental assistant, respiratory therapist, auto mechanic, and more. Seeking a better life for themselves and their families, many people enroll in these schools – only to find out the graduation and job placement rates were greatly overstated – and now they are burdened with expensive loans.

Instead of building a career, many students are deeper in debt, and still without a job.

One of the strongest examples of these tactics is also one of the largest for-profit universities in the country, Corinthian Colleges, based in Orange County, California. After years of facing down lawsuits over the quality of its courses and inflated employment rates for recent graduates, Corinthian Colleges was shut down by the U.S. Department of Education at the end of June.

Many of the schools operated by Corinthian have familiar names: Bryman School, Everest, Heald College and many other throughout the country.

In addition to the lawsuits, Corinthian students also have one of the highest loan-default rates in the country. While Corinthian Is one of the most notorious, they are not unique in the for-profit college industry.

Students graduating from for-profit schools leave with more debt, yet make less money and are less likely to have a job than students at non-profit and public institutions. Most don’t even make it to graduation – the average time spent enrolled at a for-profit school is just 4 months.

Yet, 96 percent of for-profit college students take out loans to finance their education, compared to about half of those attending a public or non-profit college. Dropping out leaves many students even worse off than before – with no degree, but stuck with loans to pay off.

For-profit college students are only 13 percent of all students enrolled in higher education, however, they make up half of student loan defaults.

For-profit colleges also heavily recruit exactly the people who perhaps wouldn’t pursue higher education, particularly low-income, minority, and first-generation students. Internal documents from Corinthian Colleges described their target students as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.”

When enrolling, students are regularly misled by inaccurately high employment and graduation rates. For-profits also charge a lot more than similar public or community colleges for the same programs. This lets the college profit off both the loans the student takes out and the huge amounts of federal aid available for low-income students. Again, even though they only enroll 13 percent of students, they’re receiving 32 percent of federal Pell grants for low-income students.

Lawsuits accusing for-profit colleges of lies and fraud pop up over and over again, but almost every time the companies manage to settle out of court. This allows them to claim that legally, they haven’t been found in the wrong, and they can keep raking in money from students and taxpayers. Corinthian Colleges was sued in 2007 by the State of California, but settled out of court – and continued with the exact same illegal, misleading tactics for another seven years.

Students nationwide are struggling with the ever-increasing cost of college at public and private nonprofit schools. The financial aid that’s currently being funneled from the federal government to the pockets of CEOs and shareholders could instead be spent on supporting students in programs that provide a decent education.

The Obama administration is working to prevent colleges that aren’t producing good outcomes for their students from receiving federal aid money, something the for-profit college industry is fighting aggressively – lobbying against new, improved regulation.

Stronger regulations on which programs get federal aid money would be a better use of scarce financial aid dollars and would produce better outcomes for students and communities. Let’s hope stronger regulations go into effect soon – before more students get swindled.