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Economics 101: Is the Heavy Burden of Student Debt Worth It?

Student loans saddle graduates with debt deep into their working lives

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"We've looked at prior generations like our parents. They were able to come out of college, pay off their loans and be able to do things like buy a house, buy two cars, take family vacations, save for retirement. That doesn't seem possible for us," said Boise resident Sunrise Ayers, 31.

Ayers' dour outlook on the future comes from her student debt, which she accrued over four years at College of Idaho (class of 2003) and three years at the Northwestern School of Law at Lewis and Clark College.

At $89,000, it's a personal debt load she fears may take her the rest of her working life to pay, despite earning $38,500 a year as a lawyer with Idaho Legal Aid Services Inc.--a non-profit legal and education center--where she has worked for more than five years.

Guidance counselors and admissions representatives have told a generation of high school graduates that student loans are "good debt," affording them the education they need to compete in the workplace and credit scores that will later help them finance cars and homes.

For some, the formula has worked. For others, student debt is no longer a gateway to the American dream but a wall that denies them entry and raises questions about personal and collective financial responsibility.

Approximately 60 million Americans hold some amount of student debt. In Idaho, graduates are learning first-hand that going to college may come at the expense of other life goals.

Paying for education has become central to Ayers' family budget. Her husband owes $47,000 after earning a bachelor's degree in engineering from Boise State, and she co-signed a $10,000 loan for her brother to attend Apollo College. The grand total is somewhere just south of $150,000.

Debt has had a marked affect on Ayers' lifestyle and goals for the future.

"We still have all the furniture I bought when I was in college. We get our kids' clothes at secondhand stores. We live like college kids even though we both have jobs," Ayers said.

Undertaking her debt load was a Faustian pact that gave Ayers the tools to succeed but took from her the freedom to enjoy success. It's a bargain she said she made almost without thought, feeling bolstered in her resolve by the impression that college was a prerequisite for a fulfilling career and her lifestyle expectations.

"Back when I graduated, I had almost a 4.0 [grade point average]. It was assumed I would go to college, and the advice I got from every direction was to get a loan. It was 'good' debt. I just took out loans without a second thought to it," she said.

She'll be eligible for the Public Service Loan Forgiveness Program in 2018, which means that the balance of her remaining federal student loans will be forgiven after 10 years of working for a public service institution. Ayers is afraid, however, that Congress will defund the program, leaving her with tens of thousands of dollars of debt that would otherwise be disposable income.

Ayers' story isn't uncommon. More students are paying more for college and university educations than ever before: Between 1999 and 2009, college and university enrollment rose 38 percent, while in the last 30 years, the cost of education has risen 400 percent. But the student loan problem----the lovechild of the ballooning cost and demand of education----didn't make its debut in the public consciousness until total student debt in the United States topped credit card debt in 2010. This year, it topped $1 trillion.

For years, high school career counselors told graduating high school seniors like Ayers that education debt is good debt.

One counselor, Capital High School's Robbie Cupps, said that widespread chatter about the rising cost of education and the perils of student debt have begun to change the dialogue between students, their parents and career counselors.

"I believe there's enough talk out there that kids are hearing it and wondering," Cupps said.

Cupps may be a counselor, but she sees herself as an educator, informing students'--and their parents--higher education choices as early as possible.

"That whole conversation needs to be taking place sooner than senior year," she said.

Parents are taking a greater part in that conversation than ever. Cupps regularly fields phone calls and visits from parents concerned about how they'll pay for their graduating senior's college education. Many have a limited understanding about what acceptance into a college or university entails.

Almost always, financial aid packages contain student and PLUS loans--loans taken out by parents--that can take families by surprise, she said.

"Parents really need to become savvy about what's included in a financial aid package," Cupps said.

She recommends that parents talk to their children about their families' financial situation, what the future plans are and how they want to achieve their goals.

In some cases, a student's school of choice may be taken off the table.

"Parents aren't going to be able to send their kids to the schools their kids want to go to," she said. "Parents really have to sit down with their seniors and really discuss their budget and discuss how much it's going to be for them to send their child to this particular school."

Over the years, the tools at Cupps' disposal to educate students and their parents about the cost of college have become more sophisticated. Many colleges now offer tuition calculators that estimate the cost of attendance based on a variety of factors, from grade point averages to parents' annual incomes.

These e-tools, designed to lend the financial-aid process greater transparency, can still be deceiving. The amount of information potential applicants feed into the estimators varies from college to college, and frequently doesn't account for the rising cost of tuition and fees, which can be as high as 10 percent yearly. Cupps also pointed out that guessing at the cost of an education isn't the same as an offer of financial aid.

"It's not an in-stone thing. It's just an estimator," she said.

Politically, Idaho is a battleground in the national war over education's place in state budgets. While the state has no constitutional mandate to fund higher education, some lawmakers hold that the state has a moral obligation to do so, while others peg funding to an expected return on investment measured in jobs and revenue.

That's how Coeur d'Alene Republican Sen. John Goedde, who chairs the Senate's Education Committee, looks at it.

"As you earn more income, you pay more taxes--as long as we can keep those people with degrees working within the state," he said. "We need to recruit businesses to Idaho so we can provide the workforce for them."

Providing employers with a pool of applicants encourages businesses to move to Idaho, initiating a snowball effect that Goedde said will improve commerce and the state's balance sheet.

Among the most important issues he sees in the coming legislative session is the issue of transparency at Idaho's public universities.

"There's been some effort on a federal level to make for-profit institutions more transparent. I think that would also be good for our public institutions," he said.

His concerns are that not enough scrutiny is given to professors' and administrators' salaries--though he concedes that those salaries need to be competitive in the Northwest--and that Idaho's universities need to publish employment and salary data by topic of study.

"Some of the degrees that are conferred make it very difficult to pay off the debt service," Goedde said.

Goedde's colleague on the Education Committee, Boise Democratic Sen. John Andreason, believes in the primacy of Idaho's commitment to its university system. The problem with Idaho's system, he said, is simple.

"We need to decrease the amount of student tuition and we need to hire more teachers--more professors--and other employees," Andreason said.

The solution: "We need to redo the tax structure to do that."

Between 2009 and 2011, Idaho's higher education budget decreased by $75 million, or 26.4 percent, during tense legislative sessions that pitted advocates against budget hawks. And as finding new revenue streams for education has become a contentious issue, the value of a university education, as measured by the costs and benefits of receiving one, has decreased.

Since 2007, the average tuition in Idaho has increased by 44.3 percent while wages increased by about 5 percent. And though state funding between fiscal years 2012 and 2013 increased by 8.7 percent, it will remain down 6.4 percent from 2007 levels. Meanwhile, Idaho's grant and scholarship programs remain stable. Between fiscal years 2012 and 2013, funds that directly reduce the impact of tuition on students stayed put at $6,663,300.

Despite stabilizing scholarship and grant funds, the portion of students graduating with debt remains high. In 2010, 66 percent of Idaho's graduating class had debt upon graduation, and the average graduate's debt load was $24,178.

And while the rising number of charter schools for Idaho's children has been hailed as a victory for choice in education, the financial viability of sending a student to his or her university of choice is becoming tenuous--particularly if that university is out-of-state.

The question of who should pay in-state and out-of-state tuition challenges everyone from legislators to universities to students as they--and their money--frequently cross state lines in the interests of academic exchange. As Goedde pointed out, University of Idaho is seven miles from his own alma mater, Washington State University in Pullman, Wash.

Beyond the interests of academia, leaving one's home state for college adds a geographical dimension to the separation between the dependency of his or her high school years and a newfound feeling of independence. Joel Wayne left his hometown of Pendleton, Ore., in 2001 for the University of Montana in Missoula to seek new frontiers.

"I wanted to go somewhere else and experience a new location," he said. "There's an appeal about going somewhere new."

At the time, out-of-state tuition at the University of Montana was roughly $12,500 per year. Wayne offset his expenses through a Cal Murphy Gold scholarship worth $4,800 for out-of-state students, but the requirements of that scholarship, including a provision that recipients must live in the university dorms, ultimately cost Wayne more money than he saved.

"It was a good scholarship, but it had a lot of stipulations on it," he said. "In the end, it made a lot more sense for me to become a resident and get a job."

Taking that job meant Wayne could only attend school part-time. In the end, it added a year to the length of his college education.

Leaving college came with hardship. When he graduated with a bachelor's degree in English and a minor in media arts in 2006, Wayne held $13,500 in student loans. After moving to Portland, Ore., with his wife, he was barely able to make the $70 monthly payments on his loans while working what he described as a "non-career job."

"We were just scraping by there. I was just paying the minimum amount because I couldn't pay more," he said.

His fortunes changed after working with AmeriCorps for a year, which reduced his debt load by about one-third and freed him to move to Boise, where he now works as a copywriter at CLM Marketing and Advertising. He said he makes enough there to increase his student loan payments to the point that he will have the remainder of his debt paid in the next two years.

Wayne considers himself fortunate. Though student debt has marked his life, he said he made choices and took actions that minimized his financial exposure; and he began a career ahead of a recession that has affected graduating seniors' job prospects for the last four years.

"I was lucky out of the gate," he said.

Less lucky were those who incurred education expenses after 2008, when legislatures responded to shrinking revenues by cutting budgets for colleges and universities, which passed the buck along to their students.

Don Burnett, dean of the University of Idaho College of Law, has seen this process first-hand.

"Fee increases and tuition partly compensate for decreases of public support of higher education institutions," he said. "There's a shift going on."

The other factor that contributes to the rising cost of educations is the growing volume of material students must learn. From free speech on the Internet to international trade agreements, the body of law for which law school graduates are responsible grows every day.

"The whole content of the law has been increasing greatly. There's more law to be taught and more faculty to be hired," Burnett said.

Affecting law schools in general is the growing perception that they lack transparency regarding the rate at which their graduates find law-related work. Dozens of law schools, including Albany Law School, California Western School of Law and Southwestern Law School have been slapped with class action lawsuits for providing misleading information about the job prospects of their graduates.

Burnett said that at some embattled law schools, transparency is only part of the problem of how they present their post-graduation employment rates. Many graduates find work in traditional legal jobs at firms and prosecutors' offices; but about 30 percent use their degrees to pursue non-traditional legal jobs in areas like the Drug Enforcement Agency, politics and human resources.

"The part that I think is the fault of some law schools is that they have not broken out all the categories of employment," he said.

Tuition at the University of Idaho College of Law is just less than $15,000 per year for Idaho residents, but has been growing between 5 and 7 percent per year. Add to that the cost of living, books and the dedicated Law School fee, and the University of Idaho estimates that the cost of attendance approaches $31,264.

After three years, the average indebtedness of a U of I Law School graduate is close to the national average for law students attending state law schools, and at $81,429, it's low compared to private law schools, where students rack up an average of $124,900 in debt before passing the bar exam.

It's a debt some don't want to face. As Jane Gordon sat in Pengilly's Saloon on a recent night, she came away with a Booze Clues trivia prize emblematic of the law school rat race--it was stamped with the face of a man wearing a manic expression with "Congratulations!" printed beneath.

Gordon rolled into University of Idaho Law School after a brief life of politics, during which she worked at the International Republican Institute and the Leadership Institute; but law school has caused her to rethink her ambitions. After three years of wrangling with studies and planning ahead for her career, she's now worried about the duration of her education, as though the diploma she will receive will be symbolic of the time she spent studying when she could have been doing other things.

"I'm worried about the time it took," she said.

Gordon is cultivating her employment options in Boise, and rather than putting her degree to use in the political sphere, she plans to deploy her skills at a local legal practice.

"I'd rather work for a smaller firm and have a life," she said.

A native of Boise, Gordon said she would like to settle back into Boise life. A graduate of Boise High School, she left for the University of Massachusetts Amherst, and briefly lived in France and Washington, D.C., but said that despite national trends of law students struggling to find work, Boise has a job market for people with her skill set--if they know where to look.

"There's enough opportunity that if you reach out enough you'll probably be OK," she said.

Gordon is optimistic about her job prospects, and said that the University of Idaho has been forthright about the likelihood of her finding work.

"The U of I has been really good about that, honestly," she said.

Lurking beneath her optimism, though, is the feeling of unease about her debt load. Though a scholarship paid her full tuition during her first year and further scholarships halved her tuition during her second and third years, by the time she graduates in 2013, Gordon will have accumulated $67,000 in debt, much of which will have paid for law school fees and living expenses.

She said the full realization of the cost of her education hasn't hit her yet.

"This is me right now," she said, indicating her calm expression. Next year, she said she'll be in tears when the loan payments start.

The larger paychecks that come with professions that require a degree can lure college graduates into graduate programs that carry price tags just as hefty as their undergraduate educations. Undertaking massive debt in pursuit of a professional career can raise doubts about a chosen career path--and in some cases, double student debt load, as it did for Andrew Ellestad.

Every month, Ellestad signs four checks for student loans totaling between $2,800 and $2,900--almost three-times his mortgage payment. Though he and his wife have a home and professional careers, "we know all-too-well what debt is like," Ellestad said.

"I've got a good job, and my wife has an excellent job as an RN. If one of us lost our jobs, we'd be toast. It'd be over pretty quick," he said.

Finance has long held a place in Ellestad's life. He majored in business and received a master's degree in business administration at Northwest Nazarene University. He now works at QuickBank.com as a client business development manager. Before that, he was a personal banker at Wells Fargo Bank for more than two years.

Ellestad didn't anticipate that receiving a set of degrees that would make him competitive for banking and finance jobs--and landing one right out of graduate school--would come at such a high price, even before graduation.

Besides $10,000 his parents contributed, Ellestad paid for nearly his entire education through loans, maxing out the federally subsidized Stafford Loans each year he attended and paying the remainder with private loans. By the time he graduated, his loans had already accumulated $8,000 in interest.

After graduation, Ellestad and his wife moved in with his parents for nearly a year. Even after they had the money to move into their own home, they struggled to pay their student loan bills.

"For the first three years out of college, it was extremely tight," Ellestad said.

The years of hardship that followed his graduation came for Ellestad as a kind of betrayal. For as long as Ellestad can remember, he'd been told that education was the key to his success, and that student debt was a qualitatively better kind of debt than others. So when NNU accepted his application without offering him scholarships or grants, he wasn't deterred.

"I was groomed. I was told that if you get good grades and you graduate, you set yourself up for life," he said.

Ellestad's personal total student debt is $100,000. His wife's is $60,000. Reflecting on that figure now, he said he should have foreseen his present position as a working family man with a mortgage.

"NNU is a great school and I'm proud to have gone there, but it's really dependent on having a job and making payments," he said.

"If I could go back, I'd think a little harder about making the choices that I did."

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