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.

My eldest daughter and her friends are frantic about college. They talk about it ad infinitum: how to bulk up their curricula vitae to improve their chances of acceptance (a nationally ranked gymnast and a determined student, my girl has now powered into team sports, figuring she’ll make a more competitive candidate); where they plan to matriculate (Columbia, candles lit); what their majors will be (economics, math or some to-be-determined science—because, they say, “That’s the only way you can get a good job”); how they’re going to pay for tuition (launching a line of homemade organic bath and body products for kids within the year, concocted in my kitchen. Awesome.).

These girls are 11 years old.

Friends, Philadelphians, can I get a witness? When I was that age, I gave no more thought to getting into college than I did to what it would be like to undergo an emergency C-section. What triggered this craziness? The trickle-down news apparatus and its daily reporting of joblessness, college debt, and the primacy of an educated workforce? The oversharing about financial stress in our households since the recession hit us like an anti-personnel bomb? Whatever it is, my sparkly-eyed sixth-grader now embodies a clear-eyed, albeit dismaying, moxie.

I admire it. Even as I can’t bear to tell her how many obstacles are still in her way.

We don’t have a prayer of being able to swing a full ride for her, never mind her two siblings. Ergo, we’ll all incur debt—a lot of it. Since we’d rather sell our pancreases on the black market than deny our children a college education, my girls’ father, as well as my husband and I, will willingly empty our savings and 401(k) accounts (if we had any, which we don’t), take out loans we’ll need to mortgage our modest homes to the hilt to pay back, eat cat food to send them to college, especially if they get into eye-wateringly expensive top-tier schools. Thusly insolvent in our golden years, we’ll all have to move in with the kids. Who may wish we’d sold our pancreases instead.

If you’re like me—and I suspect you are—I know what you’re thinking: This is what state schools are for. Indeed, not that long ago, the state school was the true “safety net,” the perfectly fine, solid alternative for those of us who wished to keep our pancreases. But it turns out Pennsylvania can lay claim as one of the highest college debt capitals in the nation. Pennsylvania graduates carry, on average, the second-highest load of college debt in the entire country, after New Hampshire. Penn State and Temple students graduate with an average of about $33,000 of debt.

American college graduates currently carry more than one trillion dollars in outstanding student debt. That’s more than the national debt of Sweden. That’s more than the banking bailout of 2008. When colleges, the White House and the culture at large proclaim that there is no price tag on an educated citizenry, I’m not the only one who’s boiling over with this response: How the hell are we supposed to pay for it?

 [Click here to see the student-debt load for Philadelphia-area colleges]


Last fall, I had an experience that crystallized these questions. I was teaching an undergraduate class at Temple. Knowing how hard it is to earn a living as a journalist, I almost felt bad about training kids for a field that’s often soul-cru­shingly competitive and, moreover, morphs relentlessly into newfangled formats that pay ever more poorly. But I admire Temple, and in my experience, its students work hard, on and off campus. When I went there from 1987 to 1989, everyone I knew had a job to cover the yearly tuition (then about $3,500). I’d paid my way there by working as an 18-year-old cub reporter. In part because of that, it seemed to me that the only ethical way I could teach journalism was to encourage students not to wait until after graduation to publish, but to earn money writing now, deploying their edge: youth. After all, editors want to know what 18-to-21-year-olds think, and those who can masterfully articulate their own experiences and put them into well-reported, fact-checked, zeitgeist-y context have a good shot at getting work.

Sitting in the front row was a 20-year-old student named Brandon Baker, who was clearly down with that line of thinking. Intently taking notes, he was the first to speak up when I asked students to offer topics for story ideas. A self-possessed junior, he described working at four part-time jobs (two of them directly journalism-related) for living expenses and tuition not covered by loans and financial aid. He was, he said, already $23,000 in debt, and expected to owe $33,000 by the time he graduated. The classroom ricocheted with similar frustrations. Students said they had to rush to write papers and skip study time so they could get to work, only to receive less than stellar marks. When they showed up for work exhausted, bosses threatened that they weren’t performing adequately.

Brandon lingered after class, and I asked him how he felt about being a journalism major. He said, frankly but without self-pity, that he felt “deceived.” Looking back on it, he said, when he’d visited Temple as a high-school senior from Waynesboro, financing tuition never came up: “It was more like an open house with a realtor,” he said, with guides showcasing the campus facilities and academic programs. He received no financial advice other than that of his high-school guidance counselor, who suggested he go to community college. But Brandon wanted to be a journalist: “I knew that if I was going to have a shot at it, I had to be in the city,” he said. “Because of my family’s financial situation, I also had to go to a public university, and that meant Temple.”

He went on to say that the financial aid forms made little sense to him at 17 years old, nor to his parents—an electrician and a human resources staffer, neither of whom graduated from college. He filled them out anyway and received a government loan, to add to a few small scholarships from hometown businesses. But when his parents dipped into their savings and refinanced their mortgage to squeeze out a contribution, he cried, he said—“partly because I never knew they believed in me so much, but also because that’s a huge amount of money for them, and I feel terrible about it.”

But he also feels terrible that the career options he’d been told were open to him as a journalism major weren’t squaring with the realities he now confronted. “I remember going into my first class and hearing about all the opportunities that would be available to me, hearing success stories from guest lecturers,” he said. Three years later, Brandon hasn’t been able to afford to take on as many “opportunities,” like unpaid magazine and newspaper internships, as he would have wanted. But he hustled and secured paid work in the field: copy-editing for the Temple News and writing news briefs for a regional business magazine, as well as content for various websites. “I’m very grateful to start my career while I’m still a student, but I wish I’d understood more about debt and career choices earlier,” he said. “I’m also realizing that this may be as good as it gets—and that I’m earning a degree in a field that might not ever earn me enough money to pay off all this debt.”

He faced what almost every college student in the United States does now. And it smacks of a deep absence of ethics.

Let’s acknowledge a blunt reality: Ea­rning a B.A. or B.S. buys you more earning potential than a high-school diploma—a great deal more. According to a 2011 Pew Research Ce­nter study, over the course of a 40-year career, college grads earn $550,000 more than those who call it quits after high school. You need a college degree. But college is expensive. By one oft-cited estimate, college tuition rates have increased 498 percent since 1985. By contrast, in those same two and a half decades, the general cost of living in this country has increased 115 percent.

What’s going on?

Theories abound. Some have argued that the very abundance of student loans encourages colleges to raise tuition. Many schools argue that they need to boost tuition because of inflation: Fuel and labor, they point out, cost a lot more than they used to. Moreover, many reputable colleges and universities have intimated, on and off the record, that to survive fiscally in the global economy, they must behave like savvy corporations. To compete with other schools, they have to rehab facilities or build anew, and keep technology in laboratories and libraries state-of-the-art, particularly at big research universities. And of course there are athletics. But there’s also high-priced talent recruiting. Colleges and universities fight for the best presidents, scientists, engineers, professors and coaches from around the world, often offering them CEO-style compensation packages to win.

Let’s put aside for the moment the fact that most reputable, accredited colleges and universities aren’t corporations, but rather nonprofits, and thus don’t pay any corporate taxes. Let’s get back to the ethics question.

To understand why student debt is so high at the public-university level, I went to see Temple’s acting president, Richard M. Englert, and Anthony Wagner, the university’s CFO and executive vice president for financial affairs. Englert emphasized that Temple froze tuition fees for this school year to help students, and also pointed to a $100 million fund-raising campaign launched this past fall to reduce student debt. When I mentioned the stories I’d heard about long lines in the financial aid office, and the trouble families were having sorting through complex loan and grant options—such as Brandon Baker’s story—Englert challenged me to find another university that did a better job of financially counseling its students.

In fact, many top-tier schools in the Philadelphia area do an excellent job of aid counseling. Some, like Princeton, even have no-loan policies for the express purpose of keeping students out of debt. Indeed, according to the Project on Student Debt, a division of the independent, nonprofit Institute for College Access & Success, top-tier private colleges and universities in general have done a far better job of reducing students’ debt, and even eliminating it, than public institutions. “Almost nobody pays the full sticker price at the top-tier privates,” says CAS vice president Pauline Abernathy.

Of course, not everyone can get into a top-tier private college. According to U.S. News & World Report, a little more than 15 years ago, in 1997, the acceptance rates at top-tier schools—we’re talking Yale, Penn, MIT, the University of Chicago—typically fell between 18 and 60 percent. Not anymore. In 2012, Harvard accepted only 5.9 percent of kids who applied; Yale took 6.8 percent. Stanford accepted 6.6 percent; Northwestern took just 15.3 percent. While the shot at Columbia was a little better in 2012 than the year before, its acceptance rate was still under 10 percent. At Penn State’s main campus, however, about half of applicants are accepted. Temple? Sixty-seven percent. Many students, like Brandon, rule out top-tier privates to opt for what they have been told is the more reasonable route: a good, affordable public education. Only to discover it isn’t reasonable at all.

Indeed, in terms of net cost, many of the top-tier private colleges in the Philadelphia area have far lower student debt averages than the publics. Haverford, Swarthmore, Penn—the mi­nority of students who graduate from these schools carry debt.

So first things first. Elite liberal arts colleges have big (and in some cases huge) endowments. They also enroll a lot more students whose parents can afford to pay the full ride. Look closer, and you’ll also note that these same colleges have restructured their financial aid policies and counseling procedures to reduce college debt. In December 2007, the Swarthmore College Board of Managers replaced all loans in financial aid awards with scholarships, effective with the 2008-’09 academic year. The decision extended loan-free aid awards to all students with demonstrated need. Where was Temple with restructuring its financial aid policies?

Wagner, the CFO, was frank. First of all, he said, Philadelphia is among the few major U.S. cities without a public hospital—Temple is it, and it costs a lot of money to care for people with no health insurance. Moreover, Wagner admitted, “The last decade has been just lousy.” Since 2008, Temple, as a public university, has lost about $41 million from state appropriations. In the 1970s, 60 percent of its total budget was covered by the state; today, it’s 12.7 percent. Moreover, the relationship between the Commonwealth and the federal government has meant that appropriations are “gobbled up,” he said, by Medicaid, pensions and more, leaving less state money for higher education. Wagner acknowledged that Temple needs to—and actively plans to—bulk up administrative infrastructure, such as its financial aid counseling. Still, he said, the bottom line is pretty clear. “What it costs to educate kids hasn’t gone up,” he sighed. “It’s a question of who’s paying for it. And the kids are paying for it.”

And kids are paying much more at non-top-tier private colleges and universities in Pennsylvania, like Widener, La Salle and St. Joe’s. So, what are we really looking at here? Kids who don’t get into top schools—those who, arguably, need the most help affording college tuition—may be paying the highest net college costs, are graduating with the most debt, and may thus be doomed to live out their adult lives in a kind of collegiate indentured servitude.

Time to get back to ethics.

We’ve all been in a Starbucks littered with vacant-eyed baristas who earned English and poli-sci degrees. We’ve read about NYU grads who majored in women’s studies, amassing college loan debt into six figures, whose only steady source of income, years after graduation, is the bartending tip jar.

You don’t have to look far to find such examples; they’re everywhere. My friend Kathie’s three kids overlapped in college; in addition to receiving government loans and small scholarships, they got help from Kathie and her husband, who co-signed for private loans to foot the tuitions. “I’m going to have to work to my grave to pay off that debt,” she says—this from a woman who works 12-hour days, six days a week, in real estate, and whose husband’s salary was cut several years ago.

Her youngest child, Kilah, graduated in 2011 from Catholic University in D.C. with a bachelor’s degree in psychology, taking time off to intern at the Dana-Farber Institute in Boston—a résumé-builder that should have helped her secure an entry-level job. But after a six-month search post-graduation, and nearing six figures in co­llege debt, she took a nannying job to pay the bills. She owes $430 a month in student debt payments alone.

“I feel stuck,” Kilah tells me, cradling her four-month-old charge one afternoon. “I realize now that I can’t get the kind of job I’d actually like without an advanced degree, but I’ll never have the money to go to graduate school. I feel like the only jobs I can take are the ones that are going to help me pay back my loans.”

My friend Carolina has a son whose girlfriend owes close to a hundred grand in student debt. She told me the girl, Lauren, cries herself to sleep worrying about finding a job that will allow her to pay off her $1,000-a-month debts. Lauren, who graduated four years ago from Rider with a double major in education and English, confirms this. “If someone in financial aid had explained to me how much I was actually going to owe and what all of these loans meant, my life would be much different now,” she says. “I never would have chosen my major, for one, because I can’t find a job that financially supports me with all my debt.” She now works in an outpatient drug and behavioral rehabilitation center for adolescents, but can’t afford to move out of her parents’ house. And like Kilah, she now realizes she’ll need to go to grad school to get anywhere in her career, but has no way to pay for it.

I was at a fashion show in Philly recently where I met Kristen, a 21-year-old anthropology major at Drexel who models to help pay tuition. She told me she counts herself lucky that she’ll graduate with “only $40,000 of student debt.” She confided that she’s praying her Quebecois boyfriend will marry her so she can affordably earn her doctorate at McGill; failing that, she’ll probably have to wait tables to pay back loans for a B.A. in a field that typically employs only PhDs.

The college debt crisis has flattened so many families’ finances, steamrolled so many college graduates’ shots at launching careers—or even moving out of their parents’ houses or affording health insurance—that it has become tempting, and trendy, to draw parallels between it and the sub-prime mortgage debacle. There are good reasons for this.

Here’s the housing-bubble scenario: In the early-to-mid-2000s, with banks offering sub-prime loans, people bought houses they couldn’t afford at wildly inflated prices, and then—once the bubble burst—couldn’t sell, forcing them into massive debt, foreclosure and, in many cases, bankruptcy. Here’s the college debt crisis: With student loans so readily available, colleges hiked tuition rates, and students and families took out massive loans that they can’t pay back. Moreover, there’s a growing concern that college degrees themselves have been purchased at overinflated prices—that they no longer provide the customary return on investment. Simply put, having a college degree no longer guarantees you’ll find a decent job in your field. Or any job, for that matter.

Some experts are pushing back on all of this. In a Georgetown Public Policy Institute report published in August, researchers showed that the financial benefits of college still outstrip the drawbacks, in spite of the economic downturn. Unemployment rates for college graduates rose during the recession, the report admits, but never topped 6.3 percent; those for high-school grads, on the other hand, peaked at 13.4 percent in 2010 before settling at the current 9.4.

But what kind of employment did college degrees buy those kids? Think of the ph­ilosophy B.A. now steaming milk at St­arbucks—which in economic terms is ­characterized as “underemployment.” And yet the Georgetown study claims encouraging news on this front, too.

The underemployment rate for four-year college graduates was at 8.4 percent in May 2012, it reports, while for high-school graduates it was more than twice that—17.3 percent. It’s a safe bet that unless you’re a trust-fund kid or a Kardashian, one of your primary goals in earning a college degree is to avoid working dead-end jobs for m­inimum wage. The message from the Georgetown study seems to be: Good move studying Kierkegaard, dude. At least you have a job.

Which brings us back to ethics—and why, in the end, comparing the college debt crisis and the housing bubble is like comparing horses and bananas. Simply put, home ownership and earning a college degree aren’t the same. Buying residential real estate represents a weighty milestone on the journey to realizing the American Dream, but you don’t need to buy a house to support yourself or a family. You do need a college degree, period. Moreover, since student loans aren’t necessarily covered by standard consumer protections—including bankruptcy—the question of ethics boils down to this one: Do colleges do a responsible job of helping students and their families make good financial decisions to cover tuition and expenses?

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.


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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