Art by Cindy Klumb
It's that time of year again, when deans across the country wear out their palms like chronic masturbators, shaking the hands of glee-eyed diploma recipients. Collegians of America are aiming high; the class of 2014 has helped push total student debt in the United States to over a trillion dollars.
A person could make it more than a fourth of the way to the moon traversing the tower of cash that would arise if all those loan dollars were stacked up one on top of the other—all $1,181,622,000,000-plus of them. It would make a great dare for pledge week, but unfortunately many of this year's graduates will be crushed beneath their debt rather than surmount it.
“If I had to do it all over again, I would have just gone to work in a factory,” Cindy Klumb, who borrowed $30,000 to attain graduates degree in art and design at Pratt Institute in Brooklyn in 1992, reflected.
After consolidating and re-financing her loans over the years, Cindy owes $87,000 on the principal and $42,000 worth of accumulated interest. She is four years away from retirement and her social security will likely be going into the hands of Ed Financial, who took over her loan from the federal government. Cindy is one of 40 million Americans strapped with student debt, many of whom will never be able to pay off their loans.
“College is a bad investment that only pays off if you don't have to go into debt to get your degree,” she said. “Borrowing to get an education guarantees you will never get anywhere or have even the most basic aspects of the so-called 'American Dream.'”
With the cost of higher education currently at 27 percent above the rate of inflation and continuing to rise, students are being forced to take out greater sums, which often double, triple, or even quadruple over the years as interest adds up. Meanwhile, school administrators are lining their pockets. A report from the Public Policy Institute this month correlated school executive pay to student debt. Examining the top 25 priciest state universities, Public Policy notes that the “student debt crisis is worse at state schools with the highest-paid presidents,” where administrative costs have dwarfed funds spent on scholarships by more than two to one.
Meanwhile, the job market has dwindled, meaning students are going to have an even shittier time paying back their debts. According an April study by the National Employment Law Project, middle-income jobs accounted for 37 percent of job losses due to the financial crash, while lower-income employment has made up for 44 percent of job growth.
“Most of my professors have already told me how worthless my degree is in this economy,” said Joan Donovan who is slated to graduate in 2015 with a PhD in sociology from the University of California at San Diego.
Joan took out a $60,000 with her parents as an undergraduate in 1996 to attend school at Northeastern University. When her parents divorced a year later, their assets were frozen and the loan became due instantly. It wound up taking her nine years to finish school as a result since she had to work full time to pay off her debt.
Joan, like many of the people I interviewed, can't even remember who her original lender was. But that hardly matters now, since her loan is in the hands of a collection agency. To make payments on the original $60,000 she borrowed, she had to take out multiple other loans.“Loans for loans, so meta,” she said, estimating that her education will end up costing her $200,000 over the next 30 years.
Incidentally, it is unlikely Joan, and millions like her, will ever qualify for a mortgage either—a little fact that has the financial industry, which has it's hands in both the student loan and the housing markets, worried.
“This is a huge issue for us,” David Stevens, who heads the Mortgage Bankers Association told the Washington Post. “Student debt trumps all other consumer debt. It’s going to have an extraordinary dampening effect on young peoples’ ability to borrow for a home, and that’s going to impact the housing market and the economy at large.”
Julian Guerrero. All photos by Peter Rugh
Congress lowered interest rates in 2013 to 3.86 percent for federal undergraduate student loans and 5.41 percent for graduate loans—down from the 6.8 percent rate it stood at before. The changes won't be retroactive and will benefit only those who have received loans after July, 2013. Senator Elizabeth Warren of Massachusetts has tried to go a step beyond, proposing legislation that would allow students to borrow at the same .75 percent interest rate commercial banks receive at what the New York Federal Reserve refers to as its “Discount Window.” Yet, with Sallie Mae, which holds approximately one fourth of America's student loans, having made $7,034,721 in campaign contributions to standing members of Congress, it's unlikely there will be any real relief in the near future.
“Congress has done virtually nothing to help out my generation,” said millennial Julian Guerrero. “We need debt forgiveness.”
Julian, a Queens native, took out a $40,000 loan from Sallie Mae to study video game design at Full Sail University in Florida after graduating in 2004. Full Sail is a for-profit college run by a private equity firm called TA Associates. It has won accolades from Mitt Romney who, during his 2012 presidential campaign, praised the school for holding “down the cost of education” by making the scholastic market more competitive. Mitt, neglected to mention that Kevin Landry, Chairman of TA Associates, had given his super-PAC $45,000 or that the school's chief executive, Bill Heavener, co-chaired his fundraising committee in Florida.
Julian signed up for an accelerated program at Full Sail, requiring 40 hours a week of class work. Unable to pay his rent, buy groceries, and study at the same time—Full Sail costs $80,000 semester—Julian did what 86 percents of the classmates enrolled in his program have habitually done, he dropped out.
Back applying for school once again in 2007, this time to pursue a bachelor’s in sociology from Hunter College in Manhattan, Julian was shocked to learn from his guidance councilor that not a single one of the 18 credits he'd earned at Full Sail were transferable. He had received a regional accreditation, he was informed, invalid outside of Florida.
Julian was forced to start at square one at Hunter, while working, in his words, “a shitty-ass restaurant job.” Unable to make the $895 monthly payment on the loans or to even make interest payments of $600, Julian dropped out of school. Today he tells me he owes “something like $135,000” to the collection agency that purchased his debt from Sallie Mae and is working two full-time jobs.
Exactly how many people out there are trapped beneath America's colossal student debt mountain is difficult to gauge. The Department of Education's National Student Loan Data System breaks down how many borrowers are either in school, in a grace period, in deferment, forbearance, or default. But, in a recent white paper, the nonprofit outfit American Student Assistance (ASA), which advocates for responsible lending, contends that it is “difficult to argue that someone who is 269 days behind on payment is really 'repaying' their loan.” The Department of Education doesn't publish those figures, but ASA estimates that just 40 percent of borrowers are actually making on time payments.
Of all the students and former students I spoke with I only met two people who weren't underwater, one works on the Wall Street, the other was freestyle rapping for spare change.
Smoking a cigarette near the New York Stock Exchange, Jeff Hunter dished out words of wisdom. “People always say, 'two things in life are guaranteed: death and taxes,'” he said. “They ought to add student loans in there.”
Jeff has his finances about as in line as the greased down strands of hair in his Gordon Gekko cut. He helped pay for his Business Finance degree at Susquehanna University by playing poker while he was in school. He finished his studies in the hole, but his steady Wall Street income (he didn't want to mention what firm he works for) provides enough for him to make direct payments on the $30,000 loan. Still, he concedes it all could backfire. “The housing market is going to crash in the next five years,” he estimates and the last time the housing market collapsed, back in 2007, it brought down Wall Street with it. If there is another financial meltdown, Jeff's luck might just run out. No more direct deposits on his student loans.
You don't have to work on Wall Street, however, to be debt free. Over on 8th Street by New York University I came upon Te-DeVan who was carrying a sign that read, “6'7 Jew will rap for you.”
Teddy has been sleeping on streets and couches for 13 years since he graduated from Michigan State with a degree in psychology. Some might consider his life rough but Teddy said he was happy, traveling around the country, rhyming for folks. He won't be invited to deliver any commencement addresses anytime soon, but he did bust out some lyrics for the class of 2014.
“Student debt/got the lips of the devil wet,” he said in a freestyle rap. “We're trying to find a treat. We're trying to find something sweet; the American dream, but the American Dream's falling apart at the seams. . . They stack the deck. So I [said] to myself what the heck. I went on my own trek.”
Teddy insists that formal education is irrelevant to the pursuit of happiness, but that is easy for him to say: He never went into debt to pay for school since his parents were well off. For the rest of us sans-culottes, born without the luxury of choosing to be poor, our options are few and far between. Perhaps we'll all wind up joining Teddy in carving out our own personal versions of the American Dream, performing for spare quarters on the sidewalk. After all, as they say, America's got talent.
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