Baby Boomers' War on Millennials: Student Loans
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| The author graduating in 2007, unaware that the Great Recession was months away. |
Let’s examine the facts:
Congress just let the subsidized loan rate of 3.4% double to 6.8%. This will add to the over $1 trillion dollars in outstanding student loan debt that my generation needs to pay off. And now for my personal experience. University of California tuition has increased from around $6,000 when I graduated in 2007 from UC Berkeley to approximately $13,000 per year in 2012. That’s over doubling the tuition in just 5 years! And I’m lucky to have graduated when I did--even though I landed in one of the toughest job markets in recent history.
After working an unpaid internship at McSweeney’s Publishing and a paid internship at Pearson Higher Ed, I went back to school to get a Master’s in English literature. I was fortunate to get a scholarship to cover my tuition in the United Kingdom, but I took out US Federal Stafford Subsidized and Unsubsidized student loans to help pay for living expenses of attending the University of Edinburgh in Scotland. I was fortunate that I got hired at Google when I was finishing up my Master’s thesis and was hired when I was still technically a student in early 2010. I didn’t have to go through the 1 to 2 years of job hunting many of my friends have gone through as Recession graduates.
However, even graduating under these ideal circumstances, I still had student loans from 6.5 years of higher education to pay off, including: 1 year at Boston College, 1 year at Diablo Valley College, 3 years at UC Berkeley, and 1.5 years at the University of Edinburgh. These loans totaled in the tens of thousands of dollars--but luckily not in the hundreds of thousands like some of my English major classmates who stayed at Boston College (with its $40K+ annual tuition) and went onto grad school.
Even under my auspicious circumstances, it’s been difficult to pay off the loans I incurred at a 5.5% fixed rate. Paying these off at the default 10-year rate, I would be paying tens of thousands of dollars in interest on top of the original amount that I borrowed. Because of this, I’ve been living as cheaply as possible for the last three years (sleeping on a bunk bed in a commuter house), paying a large percentage of my salary each month toward my student loan to accelerate my 10-year repayment timeline down to just a few years.
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| The author contemplating how he's going to pay off massive student loan debts. |
I can’t imagine a student graduating a UC today, with the tuition double what it was for me ($13K x 4 years = $52,00), and then having to deal with a 6.8% rate. There’s a 6-month grace period, but that hasn’t been enough time for many of my friends to find jobs. And then there’s the issue of underemployment, where candidates work at a job they're overqualified for, or for fewer hours than they'd like. Think of the law school grads working at Starbucks.
Here are the numbers:
When I was at UC Berkeley, the average annual tuition was $6K/year, multiplied by 4 years, equals $24K for your college education. Under the old student loan interest rate of 3.4% over 10 years, you’re paying back a total of $28K. But now, with UC tuition at $13K per year, multiplied by 4 years, you have to pay back $52K. Under the new student loan interest rate of 6.8%, over 10 years, you’re paying a total of $71K! And that’s just for tuition--not counting room and board. And that’s for in-state tuition at one of the more affordable state universities.
Private school costs much more. True, you can often get more financial aid at a private school, but imagine how difficult it is nowdays to work your way through school. Even working your way through attending a California community college is quite difficult. It cost just $11 per unit when I was attending Diablo Valley College in 2003, and it’s now $46 per unit! That’s over a 300% increase in less than a decade! It’s still one of the best deals for the price, but what used to be free for all California residents, and then reasonably priced when I attended, is now a difficult-to-pay-for education, especially when you factor in books, lab materials, and room and board.
I’ve been lucky to have landed an excellent job right out of grad school, and I’ve had great advice along the way on paying off student loans, from my siblings who attended UC Berkeley, and a financial advisor who also attended Cal. But even under these ideal circumstances, it’s been hard to pay off these loans on top of paying for living expenses in the Bay Area.
It’s hard to believe that a 17-year-old signing that promissory note to a UC today really understands what he’s getting himself into--locking himself into paying at least $71K through his adult years. And unlike the Mortgage Crisis--you can’t claim bankruptcy to get out of student loans. Recent grads who can’t find a job can claim hardship and request deferment or forbearance, or go into a 25-year Extended Repayment Plan. If you try to default on the loans, the government and collection agencies will go after you, and automatically deduct the amount you owe from your paycheck.
Imagine that a decision that you make at age 17 will be holding you down in debt until you’re 47 years old. This Student Loan Crisis, unlike the Mortgage Crisis won’t happen suddenly, but it won’t disappear in a decade, either. As other articles have pointed out, it can negatively impact Millennial’s major life decisions for years to come--from starting a business, buying a car, buying a house, getting married, and having kids.
Our student loan system needs to be fixed. Hopefully Congress will lower the rate before the school year begins, but this likely won’t change the long-term issues with this system. Is the solution to go the route of other developed countries like Australia and give loans at zero-percent interest? Or is there a better way we can fund higher education?
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My name is Matt Werner, and I am a student loan debt survivor. Have comments or student loan stories to share? Please email me at editor[at]thoughtpublishing.org
