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.

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?