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<b>by Randy Williams</b>
<p>
<font size="+1">
<b>
<font size="+2">A</font>RE
<font size="+2">C</font>OLLEGES
<font size="+2">T</font>HE
<font size="+2">U</font>LTIMATE
<font size="+2">S</font>CAM?
</font>
</b>
</font>
<br>
<p>
<p>First Published December 26, 1996<br><p>
<p>
<a href="/"><font size="+1">Previous columns</font></a>
<br>by Randy Williams
</td>
<td><font size="+1">
<p>
<p>
<font size="+2">P</font>eople often ask me why I moved to New England and came to work at Tripod less than two weeks after graduating from the University of Montevallo. Wouldn't I have preferred to travel, to see a bit of the world, to let my brain pop back to its normal size and shape after the frenetic hurdle-jumping of finals and commencement? Well, sure! I'll bet that an experience like that would have approached maximum grooviosity. But, I needed to start making some long green — <b>fast</b>.
<p>
<font size="+2">D</font>on't get me wrong: I dig my job, and I am proud to be part of the burgeoning Internet scene here in the Silicon Boonies. But the sad truth is that the most significant impetus for my mad rush to employment was the debt I ran up while in college.
<p>
<font size="+2">I</font> graduated with honors this past May; now the government expects me to do the honorable thing and repay my massive student loans. Unfortunately, those loans are only a small part of the equation — the student aid for which I was eligible barely covered tuition, books, and rent. I was not able to afford health insurance or other "luxury items" while I was attending college. Each time I had a medical crisis or needed a car repair, up went the balance on my credit cards. The banks were kind enough to keep approving credit cards in my name (despite a meager four figure income as a writing tutor) — and against my better judgement, I used them. I can't imagine how I would have handled emergencies without plastic — but it is disheartening to realize I am still paying off a case of killer flu I had in 1994.
<p>
</font>
<font size="+2">C</font>redit card companies and financial aid lenders apparently consider college students an acceptable risk; but, when one considers the dismal employment and economic climate awaiting recent grads, it is clear that the young women and men who represent "the future of our great nation" could easily end up being too crippled by debt to pursue careers for any reason beyond pure economic necessity. Senator Paul Wellstone (D-MN), one of the few congresspersons fighting against Republican-sponsored cuts to student aid programs, recently stated that "All children, and all people, must share in America's future...we should not be balancing the budget on the backs of our students."
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<font size="+2">Schools have nothing to lose by heavily promoting the availability of loans to prospective students.</font>
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<font size="+2">T</font>he truth of the matter is that we have been increasingly shifting the burden to those young backs for quite some time now. The Guaranteed Student Loan Program was created by President Lyndon Johnson way back in the dark ages of 1965; it was originally nothing but a tiny, limited operation which offered emergency cash to families from impoverished areas and enabled them to keep their sons and daughters in school. And so it remained until the middle of the 1970s.
<p>
<font size="+2">I</font>n the thick of the current fascination and nostalgia for all things '70s, the fact that those were extremely tough years for the economy in this country is often forgotten. OPEC had the U.S. literally over a barrel with their stranglehold on oil prices, and the resulting double-digit inflation meant that most middle-class households were having serious trouble covering basic expenses — much less sending the kids off to college. In an attempt to mollify voters, President Jimmy Carter championed the Middle Income Student Assistance Act, which allowed just about anybody to get a student loan.
<p>
<font size="+2">W</font>ith one well-intentioned stroke of the pen, Carter created a feeding frenzy that sent the cost of higher education spiraling out of control. Because the funds were guaranteed by Uncle Sam, everybody won: The schools had nothing to lose by heavily promoting the availability of loans to prospective students; banks were free to recklessly dangle cash in front of teenagers with little or no real-world economic experience; and financially-strapped parents were able to shift the burden of tuition to their kids. Banks and universities developed close working relationships as they lined up side-by-side at the cash trough, and the promise of easy government subsidies led directly to obscene tuition rate hikes and shameful cuts in other types of funding. Consider these numbers:
<p>
<ul>
Since 1984, tuition has risen at twice the rate of inflation.<p>
The price of tuition at many state colleges has increased by more than 200 percent in the last fifteen years.<p>
During that same time period, both federal and state support for higher education has tapered off sharply. For example, Pell Grants have shrunk from 75 percent of federal college financing in the '70s to less than 34 percent — and school-sponsored scholarships for underprivileged applicants have fallen by the wayside at similar rates.<p>
In 1992, Congress reacted to the sticker shock experienced by potential students by making it even easier for middle income applicants to get loans. As a direct result, student borrowing under federal programs has risen by almost 60 percent in the four years since.<p>
It is estimated that the cumulative total of tuition loans since 1990 is well over $100 billion — and is continuing to grow at a rate of nearly $25 billion a year.</ul><p>
<font size="+2">T</font>o assuage the young people carrying this staggering debt, President Clinton enacted a "relief" bill on July 4, 1995 which allows students to pay back their loans over a 30-year period (the previous limit had been 10 years). This, of course, softens the blow of exorbitant monthly payments — but worsens the long-term problem by creating a debt (adjusted for interest) which is more than triple the original worth of the loan. Is that how <b>you</b> spell relief? How much comfort can young people be expected to take in the thought of paying for their college education until they are well into their 50s?<p>
<font size="+2">T</font>o make matters worse, the Congress has been flirting with legislation which would require students to pay back interest as it accrues — while they are STILL IN SCHOOL. Having just survived three years of creative financing, little or no sleep, two part-time jobs, and a diet consisting mainly of such gourmet items as ramen noodles (mmmmm — five packs for a buck), I can't imagine how I would have scraped together the interest payments. One thing is certain: If this legislation passes, students will feel trickle-down economics trickling all over them.
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<font size="+2">Catastrophic cost and devalued diplomas have left students leveraged up to their eyeballs with limited career options.</font>
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<font size="+2">M</font>eanwhile, colleges are reacting to the new age of austerity in government funding by slashing programs, reducing degree requirements, and using part-time adjunct professors to teach up to 50 percent of the classes offered. Wow — what a deal! Students get to pay twice as much for <b>less</b> education than their counterparts did 20 years ago. And, since corporate hiring of recent college grads has dropped by almost 30 percent in the last six years, catastrophic cost and devalued diplomas have left today's students leveraged up to their eyeballs — even as they face increasingly limited career options.
<p>
<font size="+2">L</font>ike all the other good little borrowers, I was required to visit the financial aid office a few weeks before graduation for a personal "exit interview." As part of this ritual, I was given a handbook published by the U.S. Department of Education. The book explains such concepts as capitalized interest and provides tables of typical repayment schedules, spreading these tidbits over 30 pages of dense gobbledy-gook and cute cartoon illustrations. It is worth noting that a student who has borrowed $100,000 (which is not an unrealistic figure for a student at a private school or for someone who has pursued graduate degrees) is facing monthly payments of $1,182 a month for 10 years under the "standard option." That means the total payback amount is $142,000. But wait — most folks can't afford that kind of monthly note. For them, the booklet suggests "extended payments" of a mere $694 a month or "graduated payments" of $631 a month — plans which result in a total payback of $250,000 and $263,888 respectively.
<p>
<font size="+2">A</font>s if that's not scary enough, the book goes to great lengths to inform the lucky graduate that he or she is personally responsible for the debt and to give some of the consequences of default. Here are a few of the rosy highlights:
<p>
<ul>
You will lose the right to make monthly payments.<p>
Your school academic transcripts may be withheld (which could block chances for employment).<p>
Your account may be turned over to a collection agency.<p>
Your account will be reported as delinquent to credit bureaus, which can damage your credit rating for up to 10 years after the debt is settled.<p>
You can lose federal employment opportunities.<p>
Many states will not allow you to work for the state or for any state or local agency.<p>
The federal government can take your federal tax refunds, increase your debt to cover collection costs, garnish your wages, repossess your car and other belongings and sell them to pay the loans — and it can sue you.</ul>
<p>
<font size="+2">W</font>elcome to the real world of grown-up debt, boys and girls. Hugs and kisses from Uncle Sam.
<p>
<font size="+2">M</font>ost loan applications are in the students' names rather than the parents' — despite the fact that those parents most likely had their own, much less expensive educations paid for by <b>their</b> parents (or by now-vanished grants and scholarships). Previous generations also had at least some assurance of a stable career at the end of the academic treadmill; today's graduates are thrust into a post-permanent employment job market where a degree and a fist full of loan documents may guarantee nothing more than decades of financial hardship.
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<font size="+2">Financial planning seems ludicrous to unemployed or underpaid young people who have tens of thousands of dollars in student debt.</font>
</td>
<td>
<font size="+2">M</font>ost of my fellow members of the class of '96 would laugh in my face if I asked them when they expect to plan a wedding, start a family, make a down-payment on a car or a home, or begin saving for retirement (yes, retirement — very few companies have pension funds any more, and today's workers need to start building a sizable nest egg by the time they are in their early 30s). These concerns seem ludicrous to young people who have racked up tens of thousands of dollars in debt while earning degrees which are perceived to be the bare minimum for employment, and which often do not produce the expected results in terms of financial and career security. Worse, this "college is necessary" mantra has been pounded into young heads by a generation that actually benefitted from the privilege of a university education.
<p>
<font size="+2">I</font> was fortunate enough to qualify for scholarships and work/study programs that significantly reduced the amount I had to borrow. And yet, I am still facing a huge debt, and I have already had major difficulty making my first few loan installments. Which brings up the bigger questions that haunt my sleep: Are colleges and lenders perpetuating a scam? Are most students really "bettering themselves" or creating a more secure future this way? And most importantly, is a college degree really necessary?
<p>
<font size="+2">C</font>onsider this: Some of the most educated people I know are working in coffee shops and bookstores, or working multiple jobs, or burning the proverbial midnight oil on freelance and temp projects — all to pay back those damned loans. And some of the most successful people I know never finished college.
<p>
<font size="+2">I</font>'m not convinced that my own college education had much to do with landing this gig. I was already a published writer and experienced editor before I went back to school. I taught myself HTML and began self-publishing Web columns in my hard-won spare time while I was a senior. And, ultimately, those new skills and recent articles probably had more to do with my success in the job market than the degree itself. Had I spent more time learning programming and less on diagramming sentences or dissecting Spenserian stanza, maybe now I'd be making the big bucks.
<p>
<font size="+2">A</font>nd you <b>can</b> teach yourself marketable skills. In fact, all but a few top universities are far behind the technology curve, so aspiring geeks may be better served by avoiding the tuition trap and investing in a computer and some up-to-date manuals. That's a pricey proposition, but considerably less dear than four or five years of college and related living expenses.
<p>
<font size="+2">I</font>n an interview conducted this past summer, Tripod's personal finance columnist Ken Kurson warned of the staggering cost of so-called financial aid. "It's not a popular opinion these days, but I think that college has to be subjected to cost-benefit analysis just like anything else," Kurson said. "Nobody subjects college or graduate school to those kinds of criteria. [Many college students are] extending a womb period far beyond its usefulness and wrecking any chances of enjoying the rest of their life because they're so deeply in debt."
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<font size="-1"><b>Related information on Tripod:</b><p>
<a href="../../../../www_subdomain/money/interviews/960621kurson.html">Interview with Ken Kurson</a>
</font>
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<td>
<font size="+2">K</font>en Kurson is a pretty successful guy: He writes for Worth magazine, has regular segments on CNNfn, edits a critically-lauded zine called Green, and has landed a fat contract for a kick-ass personal finance book.
<p>
<font size="+2">K</font>en never finished college. Instead of piling on debt as I did by learning "how to be successful in the world" at a university that can't balance its own budget, Ken just went out there and made it happen for himself. Which may at least partly explain how he can afford a swanky house in Jersey and I'm still eating those friggin' ramen noodles.
<p>
<hr>
<p>
<p><a href="/">Randy Williams</a> is an editor and columnist at Tripod. Despite rumors to the contrary, he is not related to Southern Gothic playwright Tennessee Williams. He does, however, burn with a desire to ride streetcars and has often relied on the kindness of strangers.
<p>
<font size="-1">© 1996 Randall L. Williams. All rights reserved.
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