Column: Who’s paying for college?Dreaming of college for your little loved ones? Let this column act as a clarion. I am standing on the edge of a deep fiscal cliff, waving a red flag and screaming at you, “Debt dead ahead!”
By: S.E. Livingston, For the Budgeteer News
Dreaming of college for your little loved ones? Let this column act as a clarion. I am standing on the edge of a deep fiscal cliff, waving a red flag and screaming at you, “Debt dead ahead!”
Last week my daughter graduated from high school. She has always been a scholar, and college has always been her dream. She’s been working at a local restaurant for the past two years for minimum wage and saving because her loving (but indebted themselves) parents told her they would not pay for college.
Today she is standing on the threshold of a public university with an annual complete price tag of $25,000. Her $6,000 savings from two years of part-time minimum-wage work is looking very meager, very insubstantial.
So I’m asking, who is paying for college? She is receiving work-study and she is receiving a scholarship, but there is still the matter of $15,000 a year yet to be paid. In my naiveté, the university slowly and eventually loudly, explained to me that that was for my daughter’s parents to cover.
But my daughter’s parents don’t have $15,000 this year, next year or in the next four years. In four years we’ll have more children in college.
My daughter feels that her college education is worth borrowing for. Statistics prove that a college degree is a financial advantage in the long run. However, my daughter can’t know what it will be like to launch into adult life with at least $60,000 hanging over her head.
According to Fidelity Investments, 70 percent of this year’s college graduating class will be carrying a debt of more than $35,000. The numbers going around right now are that the average student graduating in four years will have a load of $75,000 to $100,000 of debt!
Congress could slow this bus down. As of July 1, the current federally funded student loan interest rates will rise from the current 3.4 percent to 6.8 percent. If Congress were to inhibit the legislation, which would be the best case scenario for this generation of students, the $15,000 my daughter borrows this year could cost her $15,510.
If they do nothing that $15,000 will cost $16,200. If she borrowed $15,000 every year for four years and the new interest rate is put into action, she will be spending a total of $2,840 more dollars of interest on her loan.
But exactly who is losing the money if the interest rates aren’t raised to the 6.8 percent? Why, you are. This is money the federal government lends to students. If they aren’t paying back at that higher interest rate, then the federal government loses out on some cash. That means less money somewhere else down the line, possibly your Medicare or Social
It’s an unnatural circle we have jumped into. My husband and I had to borrow to pay for our college education. That put us into debt which meant we couldn’t save for our children’s education. Therefore they will need to borrow for their education and their children likewise. This is where middle-income America is living — it is the American Dream in reverse.
The difference is that back in the 1990s the average cost of tuition at a public university was roughly 1/7 of the average Minnesotan income. The cost of higher education has skyrocketed over the past twenty years and is now about 1/4 to 1/3 of the cost of the average Minnesotan income (according to the Minnesota Office of Higher Education.)
When I took out student loans I was borrowing $3,000 a year for undergraduate credits. Because the tuition rates have increased so dramatically my daughter will borrow five times more and, if Congress doesn’t do something, at double the interest rate.
The unfair part is that she won’t be earning five times more to pay back those loans. These loan repayments will be a far larger chunk of her income.
What is disconcerting is that our story is mirrored in every dorm room. Most of us are borrowing on the future.
Even the members of Congress themselves, who are responsible for funding or not funding higher education and raising or lowering the interest rates on student loans, owe somewhere between $1.8 million and $4.3 million in student loans.
Their decision on July 1 will determine how far into the debt-hole our children will follow them.
If our life were a Disney movie, I would turn to my daughter and sing, “Just Follow Your Dreams.”
But in the face of her new adult-indebtedness, I’m changing that to “Just Borrow Your Dreams.”
Monthly Budgeteer columnist S.E. Livingston is a wife, mother and teacher who writes for family and education newsletters in northern Minnesota (and lives in Duluth). E-mail her at firstname.lastname@example.org.