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The Age of the Loan Drones

(photo: Rose Mattrey)

At first glance, recent college graduate Dave Antonelli has it all. Nested in a cozy hamlet of rural-suburban Wheatfield, Antonelli, 23, and his fiancée Liz Baker, 28, live in a country home, cheerily stocked with symbols of the American dream.

Though it seems they’re only short a set of wind chimes and a couple of kids to round out their idea of the dream, their student loan bills tell a much different story. The cost of college has put the soon-to-be-weds $230,000 in the hole. Like many young Americans, Antonelli and Baker have been denied their slice of domestic bliss because higher education, though accessible, is no longer affordable for most degree-seekers.

With rising tuition rates, cutbacks in government aid, a job market that never fails to disappoint and an alarming display of fiscal irresponsibility among young Americans, more and more members of “Generation Debt” are accumulating debts of unmanageable proportions.

Costs of SUNY, not so puny

In New York State, 66 percent of students in 2006 graduated with student loans averaging $21,092, according to the Project on Student Debt. Nationally, over the past decade, the average student debt has risen from $9,250 to $19,200—a 58 percent increase factoring inflation.

Buffalo State economics professor Frederick Floss, who serves as vice president for academics for United University Professionals, says SUNY’s state funds are dismally inadequate.

“The real problem from my perspective is that we’re making it so expensive that a middle-class kid can’t go to a SUNY or a CUNY,” Floss says. “An affordable education is what we should be shooting for when you think of public policy, because that’s going to allow us to compete in the new, global economy. You’ll hear the SUNY president say that we’re no longer a ‘state system’ and that we’re just ‘state-supported.’ We’re essentially private colleges the way things are going, because the state isn’t giving us enough money to be able to say that this is a state institution.”

Even a “cheap” education isn’t so cheap anymore. While the debt rates of graduates from local colleges like Buffalo State and Daemen are lower than national and state averages, historically affordable schools such as UB still saw 63 percent of students leave with an average undergraduate debt of $16,700 in 2005.

Canisius, a comparatively cheap private school that also relies heavily on government funding, had 74 percent of its graduates leave with an average debt of $21,892. Based on her experience, Megan Andrews, a school counselor of seven years, estimates that 80 percent of the Canisius student body has financial concerns.

Higher (cost of) education

It wasn’t always this way.

As scores of veterans returned home after their service in WWII, the GI Bill made college more affordable than ever before. As one of that generation, John F. Kennedy sought to make higher education permanently accessible.

Kennedy said, “The human mind is our fundamental resource” and that “our progress as a nation can be no swifter than our progress in education.” In 1965, under the Johnson Administration, the Higher Education Act was passed in the spirit of Kennedy’s words, making college education available to millions of Americans just as the GI bill had done.

As the years have passed, however, the cost of education has climbed and government aid has been cut.

“What we’ve seen is a very dangerous thing,” says Floss. “In a time when everybody thinks we need to compete in the global economy against all these other countries, is exactly the time when we’re cutting back on higher education. That’s a really dumb thing.”

Last year the average price tag for a year’s education, including tuition, fees and room and board, was $12,796 and $30,367 at public and private institutions respectively, according to the College Board. In the past five years, tuition has risen an inflation-adjusted 35 percent—the largest five-year increase in three decades.

In 1976, recipients of the government-sponsored Pell Grant—given to the neediest students—provided 72 percent of funds for an undergraduate tuition at a public school according to The Pell Institute. In 2006, the College Board calculates that a Pell Grant pays only 33 percent.

At Niagara University—a private institution—19 percent of students received a Pell Grant and only 32 percent received subsidized loans in 2004-2005, despite the fact that 70 percent of students left with over $19,000 in debt.

Floss says SUNY schools and colleges in general have become less affordable because of a shift in priorities.

“What we’ve really seen since the 1970s as we look at budgeting in New York State is that there are certain mandated things that the state has to pay for,” says Floss. “One of the few things that isn’t mandated is higher education. So when there’s a budget crisis, one of the things that the state tends to do is cut back on higher education. And that’s true not just in New York State; it’s true all across the country. We’ve been pulling money out and all of a sudden we’ve seen the rest of the world catch up. They’re starting to educate their middle class and we’re making it much harder for our middle class to be educated.”

That money-grubbing Sallie Mae

While loans, in theory, make college accessible for lower- and middle-class Americans, many students are misinformed or naively expect to hit the jackpot after commencement.

Interest rates with private loan companies sometimes exceed 20 percent. To make things worse, predatory private lenders don’t hesitate to prey upon desperate and uninformed students. Recently, Sallie Mae (or the SLM) filed a New York Freedom of Information Law request in hopes of receiving names, phone numbers, mailing and email addresses of students enrolled in a community college within the SUNY system.

Dave Antonelli had no choice but to take out private loans. The sports fanatic, inspired by the movie Good Will Hunting, received his bachelor’s degree from SUNY Fredonia and his master’s in sports psychology from Argosy University in Phoenix. In the process, he racked up a baffling $150,000 in student loans. Unlike students in the doctoral program, he received very little aid—only in the form of Stafford loans—which failed to match the increase in tuition each semester.

Unable to find a job in the area befitting his rare choice of study, he resorted to working as a customer service rep for a medical equipment store in order to make his $500 monthly loan payment, which will grow to $600 next year.

Let me pose the question that’s on everyone’s mind: What the hell was he thinking?

“If I had someone explain to me how much it would actually cost me,” says Antonelli, “I definitely would have thought twice about going and I would have tried to get a psychology degree someplace else. I was always under the assumption that I was going to get my doctorate, and I didn’t choose to do that, and that kind of screwed me over.”

It’s hard to blame Antonelli for wanting to maximize his potential. From kindergarten on, young people are told they can be anything they want as long as they are willing to work for it. But will his dream to become a sports psychologist be worth paying student loans for the next 20 years of his life?

It may have been naïve for Dave to think there’d be a high-five-figure sports psychology job waiting for him in Western New York, but instead of leaving the region and his family, he’s opted to go down with the ship in hopes that some day a position will materialize here.

There’s a lot of pressure on young Americans to obtain a college education. In 2005, a typical high school graduate makes $16,300 less annually than someone with a bachelor’s degree, according to the NCES. Because 27 percent of the country holds a bachelor’s degree, it has become what a high school diploma once was. To climb the socio-economic ladder, higher education is absolutely necessary.

“When you’re going to school you’re worried about passing,” says Antonelli, “not about how much it’s costing you. Out of sight, out of mind. There are tons of purchases that I think, now, I wouldn’t have made. I mean I was just killing myself in terms of having to pay for it for the next couple of decades.”

Antonelli’s willful ignorance is no anomaly. Students commonly employ a defense mechanism that detaches themselves from the reality of their debt. Many of the debtors who I spoke with couldn’t estimate the size of their debt because they simply “didn’t want to know” and almost all of them had at some point put their debt in the back of their minds. While this may be useful for staving off stress until graduation, students who are uneducated about their responsibilities tend to fall deeper into debt.

iPhones equal more loans

There’s no question that the high cost of education is a challenging hurdle to overcome, but students are not making it any easier on themselves by squandering money on an Xbox 360 or a pair of designer jeans. Fiscal Responsibility 101 is not typically part of the curriculum, and it’s showing in students’ spending behavior.

Jill Norvilitis is an associate professor at Buffalo State. She got involved in student credit card debt research when she realized how pervasive the problem was among the people she taught.

“I got interested in student debt some years ago when I had a number of students telling me that they had to take time off of school or they had to cut back on the number of hours,” says Norvilitis. “They were in so much debt and they couldn’t study as much as they wanted because they had to work so many hours. I was really disturbed by that.”

The average credit card debt among undergrads was $2,169 in 2004, according to Nellie Mae, a provider of higher education loans. In 2006, 76 percent of undergrads had credit cards—compared to 92 percent of graduate students, who, on average, had an $8,612 balance.

While a chunk of college credit card debt may have gone towards food, books, gas and other essential costs, many students go on materialistic spending sprees and have little concept of fiscal responsibility.

“We find that students don’t know much about money,” says Norvilitis. “I’m finding that a lot of my students don’t know what interest rates are. They don’t know what the grace period is on their cards. They really don’t know what they’re getting into.”

Aside from falling prey to credit card scams, students enter college with little experience managing personal finances and are often totally ignorant of the projected debt that awaits them upon graduation. It’s been pounded into their heads not to save but to spend. They believe all their work will lead to some lucrative pie in the sky—a well-paying job with benefits that will erase their debts in a year or two, tops.

“In my most recent study, I ask students how much they think they’re going to earn when they leave college, and students tend to overestimate,” says Norvilitis. “I have a lot of psychology majors who tell me they’re going to earn over $40,000 a year with a bachelor’s degree. And I can tell you, they’re not going to earn that. Not most of them anyway. That can be quite a shock when they enter the workforce and they carry this burden that they need to pay off.”

Many debtors, including Antonelli, wish someone would have sat them down and explained how much school was going to cost and how unlikely finding a well-paying job is.

“We as a society don’t do enough to educate students about their money,” says Norvilitis. “So here at Buff State we try and do workshops for students to come to in order to learn more about how to manage money. I would love to see parents talk more about money with their children before they go to college.”

Doctors in debt

While medical and dental students can actually count on finding a good job after school, they, like students in other fields, must count on paying back student loans for the early part of their careers. According to the American Medical Student Association, the median debt for med school grads is $119,000 and $150,000 at public and private institutions respectively. The average debt in 2003 was 4.5 times higher than in 1984, vastly exceeding the consumer price index.

Far from the caricature of the lazy, couch-surfing, compulsive-spender of his generation, Garrett Zoeller is the epitome of a responsible young adult. Reared in his hometown of Orchard Park, Zoeller idolized Matlock as a kid and had dreamed of defending the wrongly accused. After realizing that a career in law was nothing like the popular TV show, Zoeller decided to exchange the gavel for the scalpel and enrolled in UB’s medical school, where he studied to be a neurosurgeon. His family had the means, so they paid his way through Notre Dame, where he received his B.S., but Zoeller—the conscientious young man he was—wanted to foot his own medical school bills.

He left with $150,000 in student loans—a sum he calls “not that bad.” Zoeller, now residing in Miami, is currently undergoing a seven-year residency program that starts at a meager $40,000 and is considered by some medical students to be a form of modern-day indentured servitude. Zoeller once calculated, based on how many hours he worked in a week, that he was making less than minimum wage. He struggles to pay monthly payments now, as interest continually accrues, but is hopeful that the cost of med school will pay off when he becomes a full-fledged neurosurgeon.

Dave Antonelli’s fiancée, Liz—a pretty and charismatic elementary school counselor—was the valedictorian of her class at Niagara Wheatfield Senior High. She attended Cornell in hopes of using the school’s reputation as a springboard into medical school, but as her debts mounted, Liz decided that medical school wasn’t a good idea. She opted to enroll in a counseling program at the UB Graduate School, but even with scholarships and a part-time job, Liz couldn’t flag her rapidly growing debt, which peaked at $80,000.

Baker and Antonelli’s student loans will be a determining factor in forthcoming family and career decisions.

“It’s a 30-year loan,” says Baker. “And I’m going to be old and grey. It’s horrible. My kids are going to have kids probably by the time I’m done. How do you afford a kid when you have a mortgage and two peoples’ loans that equal more than the actual house? It’s going to affect the size of our family and I’m getting old. I would like to have them soon, but unfortunately we might have to wait.”

The other costs of debt

In the higher educational system, there has been the most unlikely of flip-flops. Nowadays a college education can seal shut the doors of opportunity instead of opening them. After graduation, many young people, at the crux of perhaps the most ambitious and imaginative period of their lives, are prevented from traveling, starting families and buying homes, or are forced to find work that’s unbefitting their education and character. Rites of passage associated with becoming an adult are either delayed or abandoned.

It can be inferred that debt plays a role in the makeup of our local economy and demographics. Doctors like Zoeller have to move out of the region and find higher-paying work elsewhere to service loan payments. Grads who care more about making a difference than making money can’t afford to work at low-paying, nonprofit organizations. Our economy is thus deprived of educated citizens who could otherwise bring their vitality and knowledge into the region. Nationally, bankruptcy cases are increasing.

But fear not, there is still hope.

What is to be done?

Douglas Koritz is an economics professor at Buffalo State and the assistant dean of the Intellectual Foundation. Having spent a year teaching in Belgium, where education is free, Koritz believes that such a system could improve how things work here.

“We could lower costs considerably by changing the way we finance it,” says Koritz. “Right now we have this enormous bureaucracy that we have to support that has to process student loan applications, financial aid applications and so forth. If tuition is free, you take a bunch of that off the table.”

A switch to the European model is highly unrealistic but there are tangible changes that can curtail student debt rates. The recently passed College Cost Reduction and Access Act is a start. It lowers Stafford Loan interest rates and increases the Pell Grant award, among other boons.

Students and parents can press campuses to prohibit credit card marketers from soliciting on campus. The five larger universities in the area—UB, Buff State, Daemen, Canisius, and Niagara—have already instituted a marketing ban policy.

More than anything else, parents must educate their children on fiscal responsibility. They need to calculate how much a four-year degree at their institution of choice actually will cost, and they need to understand that more than likely, there won’t be a high-paying job waiting for them after college.

“We should have the system much like we had where nobody has to worry about paying for college,” says Floss. “The old university model, where you may not be able to get into the college you want, but there’s a college for you. That’s going to be the best for the United States, because we’re going to use the best talent from all of our people and give them the best education, so that when they come out, they’re going to be the best workforce—the best citizens that we can have.”