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

March 23, 1995|By Kerry diGrazia | Kerry diGrazia,Contributing Writer

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.

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