Thousands of college students have received degrees recently, but their education may be costing them more than they bargained for.
The outlook on the job front is far from rosy, and many students are struggling to get out from underneath a mound of loan debt.
Last fall, college students hit an important though problematic milestone. Student loan debt outpaced credit card debt for the first time. Part of the reason has to do with more people attending college than ever before, but rising tuition costs are influencing the growth as well.
In 2008, almost two-thirds of undergraduate students graduated with a bachelor’s degree and debt. The average student loan debt is $23,186 and 83 percent of students take out loans, according to finaid.org.
With the economy still in a tenuous state, students are having a hard time finding jobs with salaries that help pay back their sizable debts. The state default rate was 7 percent in 2008. Indiana University Northwest’s default rate matched that, while Purdue University Calumet had a 7.7 percent default rate.
Ball State University nursing student Danie Hoffmann recently finished her second year at the school, and she’s already racked up more than $9,000 in debt. That’s in addition to working part-time and getting financial assistance from her parents.
“Every time I open the envelope, the number kind of scares me,” Hoffmann, a Valparaiso native, said. “I will for sure graduate in four years and I’m trying to see if I can graduate in 3-1/2 years, which would save on tuition and rent.”
Hoffmann said all the costs involved in pursuing her chosen career can be stressful.
“This fall I was in my first semester in the nursing program and all of the fees started to get to me,” Hoffmann said. “I had to buy a $26 stethoscope and then a bag. I broke down crying with my mom on the phone saying, ‘I don’t know how I’m going to afford this.’ I can’t imagine what it’s going to be like at the end of the four years.”
Hoffmann chose nursing as a career because it appealed to her, but she hopes that she’ll be able to get a job in the field after graduation without too much trouble.
High demand for nurses helped Schererville resident Megan Krumm in her job search. Krumm received a full-time nursing job at Community Hospital in Munster on the day she graduated from Indiana University Northwest. Krumm worked part-time at the hospital over the past two years, so she felt lucky to capture one of two open positions.
“I’ll work midnights in the rehab department,” Krumm said. “And hopefully, I’ll get to work in critical care down the road.”
She did have to take out loans for her five-year program, but her family contributed as well. Krumm is confident she won’t have much trouble paying off the loans.
“My loans are still being paid for,” Krumm said. “My part-time work wasn’t able to completely pay back the loans. I think my new job will make me better able to pay them off.”
Was college worth the cost?
Even students in graduate-level programs are feeling the pinch. Hobart resident Benjamin Cirino racked up nearly $60,000 in debt while completing his master’s degree in computer networking at the Keller Graduate School of Management.
“One of the reasons that I went for a master’s is the job market wasn’t good when I graduated (from Purdue University Calumet in 2007),” Cirino said.
When the loans came due, Cirino received a six-month deferment. He eventually had to work out a payment plan based on his salary as a banker. He whittled the $800 per month payments down to $53 per month, but his loan now has a much longer term.
“Hopefully, I won’t be paying this off forever,” Cirino said. “Right now, I regret all of college. I enjoyed my master’s program a lot, but I regret how much it cost.”
As student debt grows, colleges are being more proactive at explaining the financial realities of pursuing college. Joyce Hall is the executive director of the Purdue University Division of Financial Aid. She said the office provides meetings for parents when they drop off students on campus, as well as sending students regular updates about their debt obligations. The division’s website links to several online resources. Hall encourages students to take CashCourse, which is a free online money management course offered by the National Endowment for Financial Education.
In 2009, more than half (53.3 percent) of graduates from Purdue’s West Lafayette campus had debt, usually averaging around $29,000.
Hall said students can get a good idea of how much they will pay based on this rule of thumb: a $10,000 loan will likely amount to $115 monthly payment.
“It’s going to depend on what they bring home with their paycheck,” Hall said. “When students figure out their budget, they need to think of paying debt first. I always try to encourage any student I meet to sign up for electronic payment.”
Students who sign up for electronic payment can sometimes receive a discounted loan interest rate, and it helps prevent late payment fees.
Hall said the economic recession did impact financial aid decisions for many students.
More than 1,000 students appealed their financial awards in the 2009-2010 school year — a 75 percent jump from the previous year.
“The situation arises where a student has received an award letter, but then a parent lost a job,” Hall said. “We re-estimate the amount of aid that they qualify for.”
State budget cuts have decreased the size of certain state scholarship awards.
“The state is continuing to pump a lot of money in the program, but more students are eligible because of the economic situation,” Hall said.