Student loan debt stifling many

By Peter Svensson
Associated Press

NEW YORK — Brennan Taylor has a good job, but spending $200 on his daughter's seventh birthday seems like "an awful lot."

Brennan Taylor and his family, which includes daughter Dirdre, son Crispin and wife Krista White, live on a strict budget. He is paying off student loans and his wife is still in school and racking up debt. Mike Derer • Associated Press

Taylor's finances and credit are hobbled by student loans — a fifth of his income every month goes toward paying down that debt. Surging college costs have saddled many people like him with steep debt at the start of their professional lives.

A 2002 survey of recent graduates by student loan company Nellie Mae found that the average student loan burden for a bachelor's degree was $18,900, up 66 percent from five years earlier.

Thanks to low interest rates and increased initial salaries, the average amount recent graduates were spending on debt repayment was just 7 percent of their annual incomes. That number has been fairly unchanged for the last 10 years and is considered manageable.

But many graduates' debt burdens are well above average. And many who follow passions that aren't bankable, make a few financial missteps or are just plain unlucky can find their debts are out of control.

Cherise Fung, 30, put herself through Cornell University after her parents died during her freshman year. Because she took several leaves of absence, it took her 10 years to graduate. And she was already dealing with financial problems when she returned to school from her last leave.

"I still haven't recovered from that one semester. And that was in 2001," the Flanders, N.J., resident said.

Now, Fung is finding that her degree in anthropology isn't opening a lot of doors. Her expenses are hard to meet with the jobs she's been getting, mostly office work.

"There's times when I wonder if maybe I would have been better off getting a job and not bothering with college," she said.

Part of the problem is that bachelor's degrees alone don't always cut it in today's workplace.

"The bachelor's degree has become the new high school degree," said Tamara Draut at Demos, a New York-based think tank. A graduate degree is necessary to reach the top level of more and more professions.

Taylor got a graduate degree in Internet strategy management four years ago. It cost him $30,000 in loans, but has paid off with a job in Web publishing. Before that, he had "really crummy jobs."

Part of the reason he's still having trouble making ends meet is that his wife is working on a doctorate in anthropology and religion, a field where an advanced degree is practically necessary for work. She has racked up more than $100,000 in debt and has two more years to go.

"What I'm dreading is when my wife's going to be done, because that's going to be huge, and her income probably isn't going to help a lot," Taylor said.

Jacqueline King, director at the American Council on Education's Center for Policy Analysis, believes the picture for more recent graduates may be even bleaker because the job market has weakened.

Graduates can consolidate debt from so-called Stafford loans this year at rates as low as 3.375 percent. The rates are revised once a year based on Treasury bill yields. If current Treasury yields hold, the rates will be raised by about 1.2 percentage points in July.