Generation X students learn hard lessons in finances as college loans come due PAYBACK TIME

THE BALTIMORE SUN

When Sarah Greensfelder graduates from Goucher College this year, she'll take with her two things: a degree in elementary education and more than $20,000 in student loan debt. Ms. Greensfelder has wanted to be a teacher since she was a child. Knowing she will begin her career so heavily in debt does not deter her.

"I never considered anything else," says Ms. Greensfelder, 21, of Baltimore.

Ms. Greensfelder hopes to teach for the Baltimore school system, where the starting salary is in the mid-20s. In order to pay off a comfortable portion of the debt, she plans to move back in with her parents and live modestly for a few years.

"If I didn't have that option, I don't know how I'd make it," she says.

Students have always struggled to pay for college. What's different today is that more students are financing it with the buy-now-pay-later method.

Like Ms. Greensfelder, many of these students live more simply than they imagined they would out of school, moving back home and putting off the luxuries that are likely rewards for a college-educated professional: their own place, new cars, and maybe that vacation or trip abroad they never took during school.

When Adam Luysterborghs, 20, an economics major at American University, graduates next year, he'll be $45,000 in debt. He is the first in his Connecticut family to be so steeped in debt so young.

"They think I'm crazy," he says, "for not going to a cheaper college closer to home. But even if I went to UConn [University of Connecticut] or Southern Connecticut, I'd leave in debt. The difference is, the debt, and the opportunities during and after school, would be smaller. It's a gamble, but I think things will pay off."

When he graduates, Mr. Luysterborghs hopes to find a job that, first of all, will allow him to manage his loans. "The cars, the vacations and the first house will have to wait," he says. "And a family will be out of the picture for a long time."

Like Mr. Luysterborghs, many students burdened with the highest debt are basing some of life's more critical decisions -- where to work, when to buy a home, whether to start a family -- around their student debt. These students are most likely graduates of private colleges, where tuition can be as high as a year.

Students with graduate and professional degrees carry the most debt out of school. These students -- future doctors and lawyers -- pay a lot more for school and are likely shouldering their living expenses as well. After a few years, their student loans can resemble a small mortgage, but, in the long run, these professionals go on to make comfortable salaries.

Stephanie Arellano, president of the U.S. Student Association, says the problem today is the inevitability of student loans for the middle-class students.

"Regular, middle-class students have been priced out of attending normal schools -- the University of Wisconsin, Milwaukee, UMass, Cal.-Davis," she says. As a result, "we have a new generation of middle-class students taking out enormous loans."

The average size of federal loans for one year in school has risen 28 percent, from $2,491 for 1992-1993 to $3,180 for 1993-1994, according to a recent report by the American Council on Education. These figures do not include personal loans or credit card bills familiar to many students.

Money borrowed by students in Maryland jumped from $133 million for the 1992-1993 school year to $194 million for 1993-1994 -- a 46 percent increase, according to the Maryland Higher Education Loan Corp.

The dramatic rise in the number and size of loans alarms some experts on higher education.

"We've never seen numbers like this," says David Merkowitz, a spokesman for the American Council on Education, which represents more than 1,600 colleges and universities. "We're concerned about the increased percentage of students graduating with loan burdens that are too high."

'Generation of debtors'

The surge in loans has created a "generation of debtors," Mr. Merko- witz says. "These students begin their careers heavily in debt. There could be significant social and economic consequences."

What's happened? As any student, or parent of one, knows, tuition has been surging at a breakneck pace. At some schools, average tuition and fees have risen more than 100 percent in the past five years, compared with an inflation rate of 18.3 percent for the same period.

Congress' response to escalating tuition has been to expand federal loan programs. The 1992 Higher Education Amendments have raised borrowing limits and excused parents from having to report equity in homes or small businesses in determining their eligibility for aid.

Student loan debt reaches uncomfortable proportions once payments exceed 10 percent of take- home pay, according to the education council . Many students today are paying 15 percent, 20 percent or more of their income to pay off loans.

Three years out of graduate school, Amy Natalini is a second grade public school teacher in Washington -- the school system that is enforcing a two-week furlough and considering pay cuts for teachers next year. Her undergraduate loans from Dickinson College exceed $15,000, and she pays $150 a month toward them, "a healthy proportion of my take-home pay."

No chance to save

"After rent, a car payment and a check for the loans," there isn't much left, says Ms. Natalini, 27. "Saving up for that nest egg or for a rainy day is out of the question."

In today's job market, the once-popular assumption that school debt will be manageable once a job is secured could be a big miscalculation. Recent college graduates' real earnings -- that is, pay, adjusted for inflation -- fell 2.6 percent from 1987 to 1991, according to an education council survey.

"Debt levels have gone up while income levels" have not, Mr. Merkowitz says. "Students are paying a very high percentage of their income toward" school loans.

Amy Myers will soon begin paying $300 a month toward the $45,000 borrowed for the law degree she received from the University of Maryland at Baltimore in May. For several years, she expects to pay about 25 percent of her income to loan agencies.

"The lenders came in during school and made it all seem so easy," she says. " 'Sign here and have a Stafford, a Perkins, a Law Access [loan].' I've got them all, and I never imagined the stress."

To save money, Ms. Myers, 26, moved back in with her Atlanta family after graduation. Her parents, who paid for her four years at the University of Maryland and who helped pay her way through law school, worry that she has taken on more debt than she can manage.

"My parents have been so supportive," says Ms. Myers, who took the Georgia state bar exam this winter. "But they can't believe how much the whole thing costs."

Most loan agencies give students six months after graduation before the first payment is due. Ms. Myers asked for a second extension so she could find a job at an advocacy agency, such as the Children's Defense Fund, where she interned last summer.

Because of the low salaries in public-interest law -- likely to be around $30,000 -- she cannot pay the $700 or $800 monthly she would need to erase her debt in the next decade. So she switched from a 10-year, graduated-payment schedule to a new method that extends her single loan up to 30 years.

"My goal now is to pay the loans before I'm old and gray," she says. "Loans shouldn't rule your life. The real crime is the amount of money it takes to go to a public school these days."

Goodbye to ideals?

Susan Hansen, vice president of the National Association of Colleges and Employers, has set up a bulletin board on the Internet to find out how loans are affecting career paths.

The most common concern among education professionals, she says, is that students with the highest debt -- $20,000 or more -- may forgo their ideals.

"There is concern these students won't pursue lower-paying -- and possibly more fulfilling -- jobs, they won't risk changing career paths, or they'll put off decisions to go to grad school," she says.

Others are not so sure that salaries have become the decisive factor in how students with loans choose careers. Ed Duggan, director of financial aid for Goucher College in Baltimore County, believes students will follow career dreams, whatever the cost.

"There is no question that students with heavy loan obligations have more anxiety," he says. "But as loan obligations have changed, career paths haven't."

Mr. Duggan says that about the same proportions of Goucher students are majoring in social sciences and humanities as were 10 years ago. Despite rising tuition and loans, "there has been no massive shift."

"Reports about the payoff of a college education are cyclical. In the '50s and '60s, it was 'worth it.' In the '70s it wasn't. In the '80s, payoffs were 'big,' and now, in the '90s, it's started again.

"What needs to be taken into account is how a college education pays off over a lifetime. Options for people with college degrees are more profound, and then there are the statistics on the increased level of education" with income.

College loans have not dissuaded Stephanie Jackson of Bowie State from pursuing a career as a school guidance counselor. A graduate student, she helps pay for her education by working in the school's financial aid office.

"It's the price you have to pay," says Ms. Jackson, who will owe more than $5,000 when she finishes college.

Feeling the pressure

But most administrators suggest that loan burdens can be unnerving to college students at a pivotal time in their lives.

"Students with heavy loan obligations are under a tremendous amount of pressure," says Sam Hall, director of financial aid for Howard University. "I see a lot of anxiety, a lot of stress."

Most Howard students are on some kind of financial aid. Many work during school to supplement the private college's costs.

"It's got to be tough," Mr. Hall says, "struggling to get through only to face $20,000 staring at you. I can't imagine this not being detrimental to quality of a graduate's life."

Rising tuition is not the only fear among students. Republicans in Congress have proposed eliminating an in-school subsidy on federal student loans -- a proposal that sparked a demonstration by student leaders from around the country at the Capitol Monday.

Under this plan, interest would accrue on loans while a student attends school, adding 20 percent to 30 percent to the payback total, according to Mr. Merkowitz. That means that a student who borrows $18,000 over four years could face an additional $4,000 in accrued interest upon repayment.

"Never mind private schools," says Ms. Arellano of the U.S. Student Association. Congressional cuts in school aid, she says, "have taken away the affordability of regular public schools for middle-class students. The students who decide to borrow the money to go can't even consider service professions, and they put off plans for graduate school, homes and families.

"Huge monthly payments," she says, "become the major consideration."

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