Senior Melissa Walther was determined to pay for college entirely on her own. At Portland State University her freshman year, she saved rent by living with her parents in Scappoose – a 45-minute commute each way – and worked 40 hours per week. On top of her work schedule, she took a full course load and danced on the PSU cheerleading squad.
About halfway through the year, her grades slipping, Walther knew she didn’t want to continue trying to work so much. She was faced with the decision college students around the nation must grapple with each year – is continuing an education worth going tens of thousands of dollars into debt?
As students at the University prepare for next weekend’s graduation ceremonies, many are leaving the University with more than a diploma and good memories – in 2006, the average University undergraduate who borrowed money left with $18,813 in federal student loan debt, not including parent loans.
Director of Financial Aid Elizabeth Bickford said that in 2005-06, 72 percent of University students borrowed at least some money to pay for their education and 58.8 percent graduated with debt.
Some take out small loans but others borrow tens of thousands. The financial aid office’s calculation does not take into account students in the “mid-range” – those who take out between $14,000 and $18,000 total.
“We have not looked at that,” Bickford said. “That’s actually – It would be more meaningful.”
Nine years ago, in the 1997-98 school year, the average amount borrowed was $14,531. It has steadily risen since as the price of tuition and the costs of living continue to rise.
“Along with that, over the last five or so years, the federal government and in Oregon, the state financial aid hasn’t really been increased to keep pace with those increases,” Bickford said.
The costs of attendance have risen while the number of grants available has stayed the same, but the amount an undergraduate may borrow each year also remained the same. Some students are forced to take fewer courses per year because of these limits, so they attend longer, making their total indebtedness higher, Bickford said.
“It isn’t just the tuition and fees – it’s your room and board, and you can’t afford more and you have to work part-time – there are all these choices that factor into how fast you can get through school,” Bickford said.
After her freshman year at PSU, Walther’s parents sat her down to discuss the possibility of her taking out loans and said they would be willing to help out with her expenses.
“They said ‘this is ridiculous, you’re going to kill yourself,’” Walther said.
Although she was “academically inclined” in high school, Walther was in the middle of her class grade-wise and did not think she would qualify for scholarships, so she did not apply for any.
Unhappy at PSU, Walther decided to transfer to the University. Although her parents had expressed a willingness to help her, they were apprehensive about giving their information during the aid application process.
Walther eventually borrowed what she could to continue her education, while her parents took out a loan her first year at the University, which seemed strange to her.
“It was nice, because I didn’t have to work and I could just live in the dorms and do whatever but at the same time I felt like a total freeloader,” she said.
Walther continued to have some problems because her parents did not want to provide their information on her FAFSA forms, leading her to borrow what she needed – but no more – to complete her education. She now has around $30,000 in federal and private student loan debt.
Working as a Resident Assistant during her second and third years at the University helped Walther with the costs of room and board, but she was unable to earn enough money through work to make a dent in the size of her loan debt because RAs are not allowed to work more than 10 hours per week in other jobs.
Walther said she only recently considered what it would mean to graduate tens of thousands of dollars in debt.
“Honestly, I didn’t start thinking about that until a few months ago,” she said. “It was one of those things I just put out of my head. This is just what has to be done. You are getting your education. It’s too damned expensive for you to just do it, even for an upper-middle class family like mine. It’s really unrealistic to ask that of anybody.”
This year, Walther ended up borrowing even more money before she could register for school.
“They don’t give you enough in federal loans to actually cover tuition,” she said. “I couldn’t register for fall classes because I actually owed about $6,000. That was ugly.”
“Last year, when my parents were again saying they didn’t want to give me their information, I spoke to a counselor who looked at my transcript, knowing I had one year left, and told me I should take time off and work,” Walther said. “I just broke down. I was like, ‘you’ve got to be kidding me. I have one year left and you’re dispensing this kind of advice?’”
Eventually, Walther was able to borrow money to pay the last $6,000 and paid for this school year with a private loan through Sallie Mae. That loan, which does have a higher interest rate than her federal loans, paid all her tuition and fees for the year.
Walther said she never considered the interest rates on her loans because she was focused on finishing school.
After graduation, the time eventually comes to begin paying off loans. The best way to go about this is different for everyone, but the financial aid office recommends attending one of its loan consolidation workshops, Bickford said.
“We’re not selling a product, we’re just explaining what happens and what are things to consider, whether consolidation would work for an individual student or not,” she said.
Bickford was quick to point out that while the financial aid office does sponsor these workshops, outside companies sometimes come to campus to present their own plans. These workshops are not sanctioned by the University, she said.
Bickford said she would advise students to look very carefully at the product they are being offered and should always bring any questions about consolidation to the University financial aid office.
There are no more workshops this year, but students can still go to the financial aid office with questions about consolidation, Bickford said.
The large amount of debt people have can affect them even after they decide whether to consolidate loans, Bickford said, because the amount of debt does get reported to credit bureaus.
“That’s one of the conversations that’s happening nation-wide regarding debt,” she said. “The education debt is delaying people being able to purchase homes and purchase cars. That is a concern we are trying to approach with individualized counseling.”
Robert Mullins, a representative of Consumer Credit Counseling for the state of Oregon, said while student loans have the potential to have a negative affect on one part of a person’s credit score, the debt is not that high if students have enough income to manage the debt.
Mullins said the keys to preventing student loans from having a negative impact on a credit score are to look into consolidating at a low interest rate, managing money in a way that allows you to pay the debt, and always paying the bill on time.
People with large student loan payments should avoid taking out much more debt, Mullins said. Credit counselors recommend that no more than 20 percent of a person’s net income should go toward credit (this does not include mortgage or rent payments).
“Let’s say your take-home pay is $2,000 a month,” Mullins said. “You’ve got $150 in student loan debt and you go out and buy a car and have a payment of $250. Add those together and there’s no room for anything else.”
Bickford said learning how to manage money is a learning process that doesn’t happen right away for all students. She
said “financial literacy” is a concern on the campus.
“When we’re all worried about money, or a lack of money, it can affect everyone,” Bickford said.
Walther said the University should provide personal finance classes for all students, so people enter the real world with an understanding of what student loans and other types of debt mean. She said she knows a lot of people who take out extra loans and use them for non-education expenses, but they don’t consider the future implications. Walther said she never borrowed more than absolutely necessary and has spent her time in college paying for school books and gas for her car with Christmas and birthday money. Now that she is facing the world outside of college, Walther said she is determined not to let the loan debt be a burden. An English and theater major, she is hoping to find a job that will allow her to make large payments on the debt while still “living in a way I’ve become accustomed to.”
“It’s just looking at knowing that I have to have a good enough job that I can pay rent, that I can hopefully eat something better than ramen and I can pay back my student loans faster than they expect me to,” she said.
She paused to grab her ringing cell phone and checked the number on the screen.
“I’m waiting to hear back about a fellowship,” she said.
Walther wants to work as a “dramaturge” – a person who researches the historical aspects of play or movie scripts to ensure accuracy.
She said she may want to work in Hollywood and cited the Leonardo DiCaprio film “The Gangs of New York” as a “horrible” example of inaccuracy with language.
“The way they cursed at each other wasn’t historically accurate,” she said, grimacing and making a fist. “That kind of stuff has always killed me.”
Walther said that although she is in the top three candidates of the fellowship she has applied for – at CENTERSTAGE in Baltimore, Md., she is unsure if the small stipend she would receive would allow her to manage her loan payments.
Although her loan debt is far higher than the average amount borrowed, Walther said she would like to pay off her loans in a few years, hopefully before she begins graduate school. She said she does not regret taking out loans for her education because the knowledge that it was her money made it more important to her. She said her one regret is that she did not have the confidence to apply for scholarships.
She said she has memories of a middle-aged teacher saying he was still paying student loans.
“I refuse to be that,” she said. “I don’t know how I will get there, scrimping, saving, doing whatever I have to do. I have too much I want to get done to sit at home and pay back my student loans.”
Walther said she would advise younger students to always be aware that loans are financing “your education.”
“You’ll only get out of it what you put into it,” she said. “With the absurd amount of money that we’re forced to pay around here – it disgusts me how much education costs in this country. If you are even at a place where you can consider coming to a University, you are in a place of privilege and you should be thankful for every little bit of knowledge you can suck up, and it’s sad to watch people throw that away.”
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