An expensive future: loan debt continues to grow for students

Originally Posted on Emerald Media via UWIRE

University of Oregon alumna Madison Simmons doesn’t look at her debt total when she makes her monthly student loan payment. She says the number is depressing.

“I’m just factoring these loans in as a fixed expense for my foreseeable future,” Simmons said.

The words “I’m going to graduate with no student debt” are rarely uttered by a student anymore. Instead, you hear “I want to buy a new car / buy a house / get married, but I can’t because of my student loans.”

This bleak outlook has become common among college students, and the burden of signing one’s life and credit score away to get a college education is the M.O. The student loan debt crisis isn’t just harming students, it could harm the U.S. economy. At its growing rate, it could slow economic growth, Federal Reserve Chairman Jerome Powell told CNBC in March.

Students are struggling with the weight of this responsibility, but what is being done about it at university, state or national levels?

America’s student loan debt crisis

National student loan debt is currently over $1.4 trillion and growing every second. U.S. Sen. Ron Wyden of Oregon, a Democrat, said student debt is becoming like the housing debt crisis that the U.S. experienced 10 years ago.

“If we continue to keep racking up all this debt, we could be talking about a bubble which will affect the American economy, and at some point, it just blows up,” Wyden said in an interview with the Emerald. “It also will really hurt our ability to compete in global markets.”  

UO undergraduates’ average debt grew almost 2 percent last year, from $25,542 in 2015-16 to $26,164 in 2016-17, according to UO’s Financial Aid office.

Sixty-three percent of Oregon students graduated in 2015 with debt, which averaged $27,697, according to the Department of Justice. The averages in different states vary from just under $20,000 to over $36,000, according to The Institute for College Access and Success, with Oregon falling around the median, which is about $27,500.

Jim Brooks, the assistant vice president and director of UO’s Financial Aid office, said less than half of UO graduates borrow money. But those who do take out loans borrow more than the university is comfortable with, he added.

“It climbs a little every year, which goes along with what we’re seeing at the state and the national levels. Our debt at graduation is lower than the federal and lower than the state figures,” Brooks said. “Would we rather they not be borrowing as much as they are? Sure. But it’s the nature of where we are right now.”

Brooks said lower- and middle-income students who are not getting large scholarships borrow more than other students.

“[They’re] the ones whose parents don’t have the ability to just write a check and pay their tuition or pay their expenses,” Brooks said.

And tuition consistently rises. In the last 10 years, resident undergraduate tuition increased 87.9 percent.

The University of Oregon’s rising price tag

The UO Board of Trustees approved another undergraduate tuition increase this year — $6 per credit hour for in-state students, $18 for out-of-state.

For an in-state student taking a full course load, that’s an overall increase of $270 annually, or 2.84 percent. Out-of-state students are looking at a price tag of $810, or 2.49 percent more annually.

Former students like Simmons are struggling to pay debt. She graduated from UO’s Law School and owes just under $100,000 in student loans and $3,500 for a private loan she took out after graduation when she was studying for the bar exam.

“I am the first lawyer in my family, and before law school, I always thought that being a lawyer was a ticket straight to riches,” Simmons said. “After I got to know more attorneys, I realized that a lot of us — especially folks on the 10-year, standard repayment plan — are paying a lot more in loans than they’re taking home.”

Simmons wants to work for the government, which would qualify her for loan forgiveness. She and her partner collectively pay $1,000 a month in student loans.

The Board of Trustees sets the tuition rate each year. ASUO President Amy Schenk advocates for student affordability and her biggest concern is that marginalized and lower-income students won’t be able to come to UO if tuition continues to rise. She said some administrators don’t recognize the burden that even a small increase could put on students.  

“I want them to recognize this is an increase on top of the 6 percent last year, on top of the percentage before that,” Schenk said. “For some it could mean getting priced out of the university, and for some students it could mean they can’t afford groceries.”  

Oregon’s part in student loans

Ben Cannon is the executive director of the Higher Education Coordinating Commission, or HECC. The commission oversees 24 Oregon colleges and their tuition increases. Cannon said the HECC has seen significant increases in the cost of tuition, textbooks and other students’ expenses in recent years.

“They’ve been rising pretty steeply for over a decade,” Cannon said. “The long-term forecast I would expect annual increases that are going to average somewhere in the 4 to 5 percent range.”

The HECC approved a 10.6 percent tuition increase for UO last year but it was reduced to 6.56 percent after an increase in state funding.

“The most common strategy that students use to manage the tuition increase is to borrow more,” Cannon said. “That could be their ticket to stay in school, but it also means when they complete they’ll have a larger debt to repay, and it may affect the type of career choices that they make.”

Portland State University alumna Sarah Culbertson said her $28,000 student loan debt has grown to $32,000 since she graduated in 2012. Culbertson says seeing the total loan size increase is distressing.

“I have definitely sacrificed a lot to be able to make payments, like having the wedding I want and living in a nicer place,” Culbertson said. “My husband also has student loans, so it’s something we face trying to pay down together. It took us over two years to save for a honeymoon after getting married because we just didn’t have much to put away each paycheck.”  

But Cannon says the state is taking some steps to reduce college costs.

“As a state, we’ve made significant investments in need-based financial aid,” Cannon said. “So there’s certainly a number of efforts underway.”

Senator Ron Wyden, the PROSPER Act, and an uncertain future

In 2017, Republicans in the House of Representatives proposed a new higher education bill titled the “Promoting Real Opportunity, Success and Prosperity through Education Reform”, or the PROSPER Act, which is a renewal and reform of the 1965 Higher Education Act. Federal aid would change to a “one loan, one grant” system, eliminating subsidized loans that don’t accrue interest while students are in college.  It also reduces the nine loan repayment options to just two, eliminates public service loan forgiveness and changes borrowing limits for students and their families.

The PROSPER Act reduces federal aid to students by nearly $15 billion over 10 years, according to the Congressional Budget Office estimate.

Congress is divided on the act. Republicans see the bill as a step toward fixing the national student loan debt through reforming almost everything about lending.

Democrats see the bill as an attack on student aid because of its impact on former President Barack Obama’s student loan forgiveness initiative, which forgives loans after 20 to 25 years. If a student had a job in public service, their debt would be forgiven after 10 years. Under the bill, future loan borrowers wouldn’t have these options.

Wyden says he and others in the Senate have proposed multiple bills in the works that address the many facets of student loan debt.

Along with Oregon Sen. Jeff Merkley, Wyden introduced the PARTNERSHIPS Act, which gives states the incentive to fund higher education. It would help to end tuition hikes with incentives from the federal government to help cover costs.

Wyden and Merkley have also introduced the AFFORD Act, which aims to make income-based repayment plans available to all students.

Along with Republican Sen. Marco Rubio, Wyden has introduced a bipartisan bill called the “Student Right to Know Before You Go” Act, which will not only protect the privacy of prospective students, but also increases competition by making university data like graduation rates and average debt readily available to them.

“Right now, schools can charge what they want because nobody ever gets any information about what anybody else is doing, so there’s no competition,” Wyden said.

Wyden attended the University of Oregon Law School in 1974, and sees a difference in the student loan environment today.

“For students, it kind of throws out the window the notion that you work hard and you play by the rules, there’s a clear path to get ahead in life,” Wyden said. “Now you work hard and play by the rules and your path to get ahead is littered with hurdles and obstacles accumulated by all of these debts.”

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