A generation indebted
Julia works in a genetics lab on campus but lives in Puyallup with her parents to save money. She said she’s doing well with her loan payments but is worried about maintaining them once she moves out.
Julia works in a genetics lab on campus but lives in Puyallup with her parents to save money. She said she’s doing well with her loan payments but is worried about maintaining them once she moves out.Photo by Alisa Reznick
Growing up under the burden of student loans
Editor’s note: The main source’s name has been changed to Julia to protect her privacy.
Concerning economic trends are beginning to undermine access to higher education — America’s golden ticket to the middle class. The cost of college has vastly outpaced the growth of the economy; in 2012, the total debt from student loans exceeded both credit card and auto loans.
This generation is paying for college in unprecedented ways. Loans and debt have become the norm. And the idea that a college degree guarantees a middle-class job and financial security is “six feet under — it’s dead and gone,” UW alumna Julia said.
Julia graduated from the UW in 2012 with a degree in molecular, cellular, and developmental biology and $30,047 in student loans. To help keep her living costs down, she is living with her parents, who also took on $80,000 in loans to help their daughter pay for school.
Every weekday, Julia commutes an hour and a half from her home in Puyallup, Wash., to the UW. She works at the UW studying rhododendrons, the state flower of Washington. Julia pays more than $400 in loan payments every month.
When she first enrolled at the UW, the federal government offered her a Direct Subsidized Loan with a 3.4 percent interest rate and her parents a Direct PLUS Loan with a 7.9 percent interest rate.
“To be honest, I didn’t realize what it meant,” Julia said. “I just saw a bunch of numbers. [I thought,] ‘This is my ticket to college; let’s make it happen.’”
As a freshman, Julia used her loans to pay for her residence hall housing, meal plan, and textbooks. Before college, she never had a job, and never had to think about money.
She tried applying for numerous scholarships and grants, but her parents earned too much for her to qualify. Julia was also unable to enroll in a work-study program — once again, because of her families income.
Julia was surprised to learn that the federal government and scholarship organizations considered her family’s income high.
“I always shopped at the sale rack,” she said. “When I was in high school, I didn’t have my own car.”
At the end of her sophomore year, Julia began working in a genetic lab at the UW as a student researcher. But the impending burden of her loans started to become more apparent.
“I just realized what was going on,” Julia said. “At that point, I couldn’t stop … I just had to take on more [loans].”
Julia questions her decision to come to the UW immediately after high school.
“For the amount of money I’m spending, it should have been different. It just should have been different,” she repeated softly.
Julia’s story is not unique. Right now, 43 percent of 25-year-olds have outstanding student debt. In 2004, it was just more than 25 percent. According to new data from the Federal Reserve Bank of New York, the number of students around the country with loans grew 70 percent from 2004 to 2013.
But the problem is not just more people borrowing money to finance their education but also the amount of money students are borrowing. The average amount student borrowers owed in loans ballooned from $16,000 in 2005 to $25,000 today.
These two factors have contributed to the most significant rise in any type of household debt over the last nine years. From 2004 to 2013, the total amount of student-loan debt in the United States nearly quadrupled to $1 trillion.
Since 2008, all other forms of household debt — mortgages, auto loans, credit cards, and home-equity lines of credit — have declined. Student-loan debt is the only form of debt that has expanded after the stock market crash in late 2007.
UW professor of economics Eric Zivot said one of the largest contributors to the increase in student debt has simply been the rising cost of college.
Over the past 35 years, college tuition has grown over 1,100 percent, four times faster than family incomes and the cost of other goods in the economy.
To make up for the gap between college costs and income growth, students are forced to borrow, Zivot said.
“If your income goes down and you need to finance something, what do you do? You can put it on your credit card or take out a loan to pay for it,” he added. “And that’s what’s going on.”
Julia said she does consider herself luckier than some. She graduated from a prestigious institution with a science degree; she was able to convert her undergraduate research position into a full-time job, and her parents still allow her to live with them in Puyallup. But Julia foresees her loans continuing to hinder her.
“If I wanted to [live] by myself, I don’t think I could,” she said. “To live in Seattle, the lowest [rent] you’re going to find is $550. Stack that on top of student loans, hopefully a car payment, auto insurance, food — that’s looking at a huge amount of money.”
For now, Julia must continue to make payments on her loans. Currently 22, she said she expects to finish paying off her loans when she’s 30 years old. But she is considering going to graduate school for her Ph.D. in genetics, which would delay the day she finally completes her debt obligation.
“I think I’d like to bring the benefits of genetics to the public’s attention,” Julia said. “Everything you look at that’s alive has genetics in it. It can be studied and manipulated.”
However, while she remains passionate about genetics, she loves paleontology. Julia has participated in numerous excavations where she organized dig sites and examined prehistoric fossils.
“If I didn’t have debt, I’d probably go be a paleontologist,” she said. “But [paleontologists] make no money and they’re always competing for funding. That’s just not a life I want to live.”
Even into the distant future, Julia expects her student loans to interfere with her ability to save money, purchase a car, and settle down.
“I probably won’t settle down,” she said. “I really hate being in debt, especially after this experience, and I’m probably going to wait until that’s done to even try and buy a house.”
According to UW finance professor William Bradford, many young Americans with debt have arrived at the same conclusion as Julia. Many students, he said, have simply chosen not to “buy a house, buy a car, or use credit.”
Bradford said the loan payments that graduates with debt make draws from their spendable income.
“If you look into the future, the debt from the loans is going to be very inhibiting to them in order to make their standard life allocations,” he said.
A recent study from the Federal Reserve Bank of New York corroborated Bradford’s thoughts.
The study focused on how students who carry the burden of loans spend their money. It found that individuals under the age of 30 with student loans are less likely to have a mortgage, and therefore less likely to own a home. Similarly, those with student loans under the age of 25 are less likely to have auto loans.
Although college graduates have higher amounts of student debt, they are usually also better educated, have higher salaries, and have lower rates of unemployment than individuals with just a high-school degree.
But, like Bradford said, student loans often inhibit a graduate’s ability to make expected life investments: buying a home, settling down, and even raising kids.
The trend seemingly contradicts the notion that college affords graduates the luxuries of the middle class. And because of the nature of the economy, as student loans draw money away from spending, these loans impede economic growth.
“We need to properly manage the student loan part of our economy,” Bradford said. “Ultimately, the quality of the student loans — outstanding — will be felt by even those who don’t have student loans.”
But Bradford did propose some solutions to what he admitted was a “tough problem.”
He said universities need to ask themselves, “What can we do to minimize the cost [students] have to pay?”
But students will also need to commit to finding the best deal, Bradford said. They need to search for the best education at the cheapest price without being swayed by shiny bells and special amenities.
According to Zivot, state and federal governments will need to further their financing of higher education.
Julia, though, would like to see prospective undergraduates seriously consider the value of their college degrees and the weight of their loans.
“Know what you want to do before you even think about spending this much money on anything,” Julia said.
Reach Science Editor Sohrab Andaz at firstname.lastname@example.org. Twitter: @SohrabAndaz
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