In too deep

Marisol Ybarra resisted the temptation as long as she could.

She resisted the vibrant, bold fliers promising fun and freedom, featuring beaming students blessedly released from the weight of financial burdens. She resisted the smiling coeds about the campus and their soundly convincing pitch: Just a quick signature on the dotted line and you'll never have to eat ramen noodles again!

But eventually, the twentysomething Ybarra was seduced.

And then she went a little crazy. At one point the cash-strapped Ybarra had almost 10 credit cards, with a combined debt of nearly $20,000. When her student loans didn't cover the cost of tuition, she charged it. When she couldn't afford books and supplies, she charged it. When she didn't have the cash for food, she charged it.

"They were giving them to me like candy," she recalls of the credit card companies, which first ensnared her in their grasp on the campus of Henry Ford Community College where she began her studies in 2000.

Now 31 and a senior at Wayne State (she's to graduate with a degree in sociology next May), Ybarra has managed to shave her credit card debt down to (a mere) $3,000 — but now must contend with the other debt looming over her head: more than $20,000 in student loans.

Despite working two jobs, sacrificing a social life and sleep, and renouncing her reckless spending days, it seems Ybarra just can't win — and she's not alone.

Generation Debt has arrived: According to one study, two-thirds of today's college graduates will pick up their diploma along with a load of student loan debt — the average amount is $20,000. At the same time, young people are racking up massive amounts of credit card debt. According to a study by the Nellie Mae Corp., a student loan company, in 2002 the average college senior had six credit cards, with a total balance of more than $3,200; one in five students had a credit card debt between $3,000 and $7,000. Often these charges are for basic living expenses like food and gas — and sometimes, tuition.

"We now require young people to go into debt to have a better future," says Tamara Draut, author of Strapped: Why America's 20-and-30-Somethings Can't Get Ahead. "We've gone from helping young people pay for college to helping them borrow."

Draut is one of the experts who claims the problem has reached "epidemic" proportions — yet the issue continues to worsen as more and more graduates and young people find themselves drowning in debt.

As more and more young people get in too deep, students, parents, educators and lawmakers are proposing solutions. The seeds of a grassroots activist movement against debt are being sown. But is it too little, too late?

Misery loves company

On July 1, parents and students across the country issued a collective groan of despair when the interest rate for Federal Stafford Loans — the basic student loan — rose from 5.3 percent to 7.14 percent. Meanwhile, tuition rates have continued their steady climb and show no signs of leveling off. Oakland University just hiked its rates by 7.9 percent, and last year Wayne State increased tuition by a whopping 18.5 percent. A study conducted by the nonprofit group Project on Student Debt found that tuition and fees at public universities have risen 57 percent in the past five years alone (after adjusting for inflation).

Some of the Project on Student Debt's other findings:

• At public, four-year institutions, 62.4 percent of seniors are graduating in debt — of those, half owe more than $15,000 in student loans.

• At private four-year schools, 73.9 percent of seniors graduate in debt; of those, 10 percent owe $40,000 or more.

• Overall, one-quarter of 2004 graduates borrowed more than $25,000 — a figure that excludes any additional loans taken out by parents.

• Some 66.4 percent of four-year college students (public and private) borrowed in 2004.

Meanwhile, young adults face what Demos, the advocacy group Draut works with, calls "paycheck paralysis." Stereotypes about "slackers" aside, the group says: "The reality is that young workers today are working multiple jobs and longer hours than the baby boomers did in their 20s and 30s. They're losing economic ground because their paychecks are not growing as rapidly as their basic living expenses."

Naturally, this leads to misgivings. In 1991, 31 percent of students said they would have borrowed less if they could go back in time. By 2002, that figure nearly doubled to 54 percent. In other words, more than half of today's students had major regrets about their education.

The Project on Student Debt (projectonstudentdebt.org) says that the give-and-take relationship between borrowing and education has spiraled wildly out of control. Founded last year, the group is dedicated to reducing the burden of debt across the board.

Associate Director Lauren Asher says students are forced to make tough choices that affect both their education and their overall quality of life.

"There's been a shift in the way we pay for higher education in this country," Asher says. "Our system assumes that student loans can and will meet the gap — and that's no longer the case."

Asher says students' growing need to work invariably will affect their success rate in school:

"Eighty percent of college students work; 23 percent of fulltime students and 53 percent of part-time students work 35 hours or more a week.

"Our system says, 'Invest in an education, it's worth it — and if you need to borrow, borrow.' But on the other hand, it's saying, 'If you borrow and have trouble paying it back, your life can be ruined forever.' Those are very mixed signals, and they're both true.

"That doesn't mean student loans are inherently bad, but we could and should rethink our loan repayment system, so people can make manageable payments and know there's a light at the end of the tunnel."

The hidden cost of debt

Stress, bad credit, even potential bankruptcy — these are all the obvious results of debt. But student debt can mean delaying important life decisions.

"When young people are saddled with debt, they can't buy a house, take entrepreneurial risks, take low-paying but necessary jobs," Asher says.

Or they may even reconsider their chosen career. The traditional rationale for student debt mirrors the adage "You gotta spend money to make money." Though a student may have to pay a lot for a degree, the degree will ensure a better-paying job after graduation. But the adage doesn't ring true anymore — particularly for graduates entering traditionally low-paying fields, such as teaching or social work.

"The burden of student debt makes these already underpopulated fields even less appealing," Asher says.

Earlier this year, the Public Interest Research Group examined how rising debt would affect graduates pursuing public service careers. The study found that 23 percent of public college and 38 percent of private college graduates would have unmanageable debt as starting teachers; 37 percent of public and 55 percent of private college graduates would have unmanageable debt as starting social workers.

In other words, the debt accumulated to obtain a degree couldn't be repaid based on the pay teachers and social workers receive.

The thought has crossed Ybarra's mind; she's pursuing a degree in sociology and hopes to one day teach. While she's planning to attend graduate school, she worries about adding even more debt. "I wonder, by the time I'm done, how much will I owe then?"

But she'll continue with her studies, despite the low pay of her chosen career.

"It is worrisome, but I'm not stopping now."

Student loan payments are deferred until six months after graduation; as a result, some students "drag their heels" with their studies. Others deliberately peel back on courses, because they simply can't afford to pay for a full load.

Michael McGuiness is a senior at Oakland, and has been employing the "slowly but surely" method in his education, making certain he never borrows too much and can pay it off each semester. By diligently working (at one point he was working four jobs — "I'll be honest, I'm lucky if I have time to study," he says) and taking on a small class load, he's been successful — up until this last semester. He now has a $4,000 outstanding balance, which he'll have to take out a private loan to pay for — and the school won't allow him to enroll for new classes until the outstanding balance is paid.

"I'm all tapped out," he says. "I made it my personal commitment that I wouldn't do this with [private] loans, and I have to now. And I'm pissed-off."

McGuiness is also president of Oakland's student government association, and chair of the Association of Michigan Universities, an alliance of student governing bodies that addresses student issues. He's seen endless cases of students' lives uprooted and even destroyed by debt, and is frustrated and angry with the way the growing problem is being addressed.

"The approach and philosophy is not student-centered. Time and again, decision-makers in Lansing, on campus and in D.C. are not thinking about educating college students in an affordable way. That is not the focus when they make their decisions."

In McGuiness' eyes, lawmakers are biting the hands that should one day feed them.

"Obviously, the economic situation in Michigan is bad," he says, "and the best way to invest in it is through education. Google was interested in Ann Arbor because of U-M and the area's highly educated work force. The main way to entice businesses and growth in the area is by using education as an enticement. That's intensely important."

Mark and Sara Nichols met in 2001 in a Detroit nightclub, drawn together by their shared passion for music. Then 24, Sara was just starting out as a CPA and DJ'd by night. Mark, 27, was a producer for BBDO Detroit and an electronic musician. They were young, in love — and massively in debt.

Sara had three credit cards to the tune of $15,000, and Mark had two, totaling about $20,000.

While they managed to avoid student loans, they maxed out their cards with what debt expert Draut refers to as "survival debt." Sara charged her books, supplies and food, and later used her cards to help her make her off-campus apartment livable. Mark's debt was of the entrepreneurial nature, charging expensive equipment he needed for his music, and his self-released first album.

When the couple married in 2003, they didn't register at Target or Marshall Field's. They asked for cash — so they could realize their dream of buying a home.

Buckling down, they managed to pay off about $10,000 in two years, and bought a home in Ferndale. Sara drops about $400 a month on her credit card bills, Mark about $500. While both do well in their respective jobs, the monthly payment is still a big hit for them financially.

"We never use the cards for anything unless it's an emergency," says Sara. "We try to be really strict about making larger-than-the-minimum-required payments, even if it means living paycheck-to-paycheck until the debt is gone."

According to Draut's book, the average 25-to-34-year-old spends nearly 25 cents of every income dollar on debt payments — more than double what people the same age spent in 1989. She says more and more young people are relying on "the plastic safety net."

"When there's nothing left over, nothing to tuck away in savings, you rely on credit cards," she says. "When you get a cavity, or the car breaks down, those expenses get charged. If you lose your job, credit cards become the way to keep the lights on and food on the table."

And it's tough for college kids to resist the lure of the plastic safety net; the college demographic has been the target of a very aggressive marketing onslaught on campuses.

Howard Dvorkin, founder of the nonprofit debt consolidation company Consolidated Credit Counseling Services, acknowledges that college students are a primary target of credit card companies.

"I've sat in meetings with marketing executives, and this one guy, well, I envisioned him eating his young. I could practically see fangs hanging out of his mouth when I mentioned college credit cards," Dvorkin says.

Given the massive lobbying power of lending companies, Dvorkin doesn't see the government hopping in to save the day. He mentions a bill proposed by Sen. Christopher Dodd (D-Conn.) that would require credit card companies to disclose in plain English how long it would take to pay off the total debt when making only minimum payments.

"It's really good legislation," Dvorkin says, "but it will never see the light of day. The American Bankers Association is one of the strongest lobbyist groups in the country."

From USA Today to Time, the story is familiar: A bright young person has just reached one of the happiest days of their life — graduation — yet the moment is soured by the knowledge that they'll be paying for it for the next five to 20 years.

When Larry Gladieux read those reports, a thought struck him: What about the students who never got the golden egg?

"All the media coverage and most of the policy focus is on students in debt who graduated — and those are the students we least need to worry about. What about those who didn't make it?"

Gladieux and Laura Perna co-authored the study "Borrowers who drop out: a neglected aspect of the college student loan trend," for the National Center for Public Policy and Higher Education. Data from the U.S. Department of Education showed that more than 20 percent of student borrowers who were enrolled in 1995-1996 dropped out by 2001. That means 350,000 students were in debt with no degree to show for their troubles. The study also found that students who didn't complete their degrees are 10 times as likely to default on their loans, and twice as likely to be unemployed as those who completed their degrees.

"Many low-income students are in a double bind — they're working too much to focus on their studies, or they're borrowing beyond their means," Gladieux says. "Obviously, we need to do better in preparing students — educationally and financially — and making sure they have the resources to make it."

When students fall so far behind they can no longer make payments on their loans, they're considered "defaulted." And that spells trouble not just for the student, but also for the institution that offered loans.

Sharon Pearl, financial aid manager of Henry Ford Community College, explains that the federal government keeps track of repayments under the Federal Stafford Student Loan Program, and calculates a "Cohort Default Rate" based on the number of borrowers who are in default from each school.

"The lower the CDR, the better for both borrowers and institutions," says Pearl. "Schools strive to keep their rates well below 10 percent, and if the rate is too high they can lose their institutional eligibility to participate in the federal loan programs."

Most of metro Detroit area's major universities have a CDR of less than 5 percent, although Washtenaw Community College's default rate for 2003 was 11.8 percent.

Pearl is on the board of the newly formed Default Prevention Task Force of Michigan, which consists of educators, lenders and state government officials; they hope to develop strategies to lower default rate in Michigan.

Not everyone feels sympathy for these students and their financial plights. In his review of books on youth debt, including Draut's, Slate writer Daniel Gross refers to the subjects as "The It-Sucks-To-Be-Me Generation" and "Twentysomethings who can't stop whining about how the economy is screwing them."

But in a March 13 article about student debt in The Nation, columnist Nicholas von Hoffman was clearly bothered by the impact of college loan debt on young people. He lamented the 29-year-old public interest lawyer who expects to finally pay off her loans by the time she's in her mid-50s, and the 28-year-old social worker with a $33,000-a-year job and $55,000 in school debt. "Many of them are going to go childless," he speculated, or will have fewer children, starting later than they otherwise would have.

Von Hoffman goes as far as to question whether there would have been a civil rights movement if an earlier generation of young people had been saddled with so much debt.

"Burdened with debt and desperate to have and keep a job, there is no way they can take a wild year off and certainly no time for protesting, organizing or causing the kind of social and political trouble young people cause from time to time."

He then goes on to plea, "Will somebody get angry and start yelling?"

They are. Among them: Project on Student Debt, Commission on the Future of Higher Education, studentdebthelp.org, studentdebtalert.org, and campus-specific groups and protests.

While Oakland's McGuiness acknowledges that a free college education for everyone simply isn't possible, he thinks the system is excluding far too many.

"Education is a right, not a privilege. And now only those who are privileged have access to higher education, and student debt is a big part of that. When so many students are afflicted, then, yes, it will be a call to activism and action."

Some progress is being made: Many colleges have cracked down on credit card companies' solicitation on campus. Officials at Wayne State University, Eastern Michigan University and Henry Ford Community College all say the practice has been banned within the past few years.

Groups like Project Student Debt are nonpartisan, but they do look to politics for a solution.

U. S. Sen. Richard Durbin, D-Ill., and U.S. Rep. George Miller, D-Calif., have introduced legislation that would halve the interest rate on new college loans. According to the nonprofit group Campaign for America's Future, this legislation would save the average student borrower in Michigan $4,218 annually.

In a press release, the group writes, "Despite the positive impact this change would have on families struggling to pay for college, the Republican majority has refused to take action on either bill.

"While President Bush and his allies in Congress have given lip service to the importance of a college education, they have cut $12 billion from the student loan program, turning a blind eye to rising tuition and interest rates."

Draut recommends going back to a system where more college aid is in the form of grants, which don't need to be repaid. Many groups are calling for Congress to increase the maximum amount allowed in the Pell grant, the most common grant award to low- and middle-income students. Draut says the Pell has "completely lost its purchasing power."

Debt consolidation consultant Dvorkin would like to see a mandatory fiscal education class at the high school level, covering everything from the working of credit cards to student loans.

"Truthfully, if you catch them early enough, you can avoid the problem," he says.

Ybarra agrees that educating young people better about the perils of credit could help in the long run.

"I think a lot of people are uneducated about credit cards, and got into trouble, and that's what happened to me," she says.

Meanwhile, she'll keep plugging along.

"I considered taking a year off and working, but I'm 31, and I've waited long enough. I just want to get going and get through it."

And amazingly, she even manages to find a silver lining to her situation:

"I look at other people who are doing same thing I am — working two jobs and taking classes full time — and they have children on top of that. So I guess I really don't have much to complain about."

Draut believes that hardworking students like Ybarra shouldn't have to struggle alone.

"There's so much frustration and misunderstanding about what's happening to young people," she says. "There's this idea that everyone who's in debt is in debt because of frivolous spending, but there's a growing chunk of people financing their lives on credit as a way to make ends meet."

She believes our government and financial institutions need to step up, and at least meet students halfway.

"Personal responsibility is an issue," she says, "but that needs to be matched by social responsibility."