Debt and Despair: Pennsylvania Students and Our Broken College Loan System

With Pennsylvania students leaving school with the second-highest debt in America thanks to runaway tuition, it’s time to call our college loan system what it is: morally bankrupt.

I’m not the brightest bulb on the marquee. Still, I do okay: I’m reasonably well informed, and I can navigate my way through a spreadsheet. But rummaging through all the financial aid options that college students and their families face left me feeling like I’d been stuck in the brain with a fork. If you don’t believe me, take a gander at what you need to go through to fill out an application for the federal need-based Pell Grant. This one doesn’t have to be paid back, but it maxes out at $5,500.

There are also numerous federal college loans, such as the subsidized Stafford loan, one of the options for families in need. Like the Pell Grant, the subsidized Stafford has a cap: Freshmen can receive a maximum of $3,500, sophomores $4,500, and juniors and seniors $5,500. Fixed interest rates will stay at 3.4 percent for subsidized Stafford loans issued on or after July 1, 2012; the government will cover the interest as long as students are in school. Stafford loans issued in 2012 to 2014 will start racking up interest during a six-month “grace period” post-graduation. Now, if you go for the unsubsidized Stafford loan, which isn’t need-based, you’re on the hook for interest all the time you’re in school, and that interest is 6.8 percent. And Congress may raise all Stafford loans to 6.8 percent soon.

Huh?

Suffice it to say, I’d need help—a lot of it—to figure out just what all that means. That is, I, like many parents, would be at the mercy of college financial aid officers to help me make the most sensible decisions. According to many college financial aid websites and sundry reports, I’d likely be advised to apply for something called Parent PLUS. This, so far as I understand it, is a federal loan designed to help parents do the borrowing for tuition costs and fees their children can’t cover via other grants or loans. All you need to qualify is a credit check, and there are no borrowing caps: Take out as much as you need. Sounds great—where do I sign?

It turns out that I could be signing myself into debtors’ prison. Financial aid co­unselors—and, while we’re at it, the federal government—often don’t examine families’ outstanding debts, income level, number of dependents, and other factors that gravely impede someone’s ability to pay back these loans. But you will pay. The latest interest rate on Parent PLUS loans is 7.9 percent. If you default on payments, the government can seize your tax refunds and garnish both your wages and Social Security. Furthermore, qualifying for income-based repayment programs—which make monthly bills more affordable—is much harder than with other federal student loans. In other words, the government makes money on default claims. Kind of like how banks do when you don’t pay off your debt on time.

Perhaps it’s too much to call it a scam. Perhaps it’s a bungling, broken system that needs fixing. But whatever you call it, this much seems pretty clear: Colleges and lenders all benefit from students and their families taking out loans they can’t pay back. And that’s certainly enough to conclude that many of the same institutions that tell you that there is “no price tag on an educated citizenry” are operating on seriously questionable ethical grounds.

In other words, it’s wrong.

I had to leave my teaching post at Temple: An ongoing family emergency suddenly took an urgent hairpin turn, and I was forced to work from home. I encouraged students to stay in touch; I’d help them develop and edit stories and write pitch letters, and make editorial introductions where possible. Brandon took me up on it. He wrote me an email that began with his struggles, how impossible it all seemed. But he ended with this sentence: “I want to be Gay Talese, chasing leads for a profile just because I have an intuitively good feeling about a subject; I want to be David Sedaris, humoring others with self-deprecation while subtly expressing moral values; and most importantly, I want to be the most honest version of myself in my writing that I’m capable of being.”

The curse we labor under now is the collapse of the social contract that once existed between government and public un­iversities—that with sufficient government appropriations and some sweat, kids who worked hard could earn a co­llege degree without committing financial suicide. The curse now isn’t only lack of money. It’s lack of institutional support for a college education, and post-graduate unemployment and underemployment. The curse is despair.

To leaven such encumbrances, more ­standard consumer protections for student loans must be put in place. Congress, the Department of Education and colleges must demand them—and so should we. There are also serious institutional discussions emerging about fixing the broken model. Perhaps a greater degree of distance learning, for example, can help curb rising tuition costs (though how to measure DOE requirements such as “seat time” is just the beginning of the miasma of sorting out online academia). I can only hope that by the time my kids apply for college, the crushing curse of s­tudent debt will have lifted somewhat. After all, even the housing market is beginning to look up.

The other day, my younger daughter revealed her career goal: to be a quantum physicist who discovers the dimension where souls are located. My God. Somebody get out the organic shea butter and start whipping up body-care products for children. Because trust me—this girl is going to college.

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  • Karen

    Susan – Thank you for shedding light on exploding college tuition costs. My husband and I are about to feel the crushing burden of college loan debt with our oldest son who begins his undergraduate studies at Temple this fall. My brother and I attended college in Philadelphia in the ’80’s. We graduated debt free and my parents were able to afford college on one salary, no loans. Both alma mater schools – Temple and Chestnut Hill College have seen tuition rates balloon to 5 and 6 x the amount today over rates in the late ’80’s. It’s unthinkable My husband works 2 jobs and I had the 3rd job before being laid off 4 months ago (still unemployed); even with a small college savings plan for our son, we’re still looking at student loans and possibly parent plus loan or do we borrow against our 401K or our home’s equity. $1.2 trillion in student loan debt in the country with Pennsylvania an embarrassing # 2 in student loan debt; 1120% increase in college tuition since 1978, 68% of students at our public universities not graduating because they run our of money. This is unconscionable. I’d like to talk more about this issue. I have already reached out to my State Senator who also serves on Temple’s Board and requested they NOT increase tuition another 3-5% and look at increasing the state’s contribution to higher education. As a community organizer, this is an issue that I believe needs to be front and center in this year’s gubernatorial election. How best could I reach you? BTW, Ivory Tower documentary hits theaters Friday, June 13th and spotlights the broken higher ed system and student loan debt crisis. Thank you, Karen Lash, Philadelphia, Pa.