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Sunday, October 17, 2004 - Page updated at 12:00 A.M.
College debt rising faster than tuition, fee increases
By Sharon Pian Chan
She's barely staying afloat. Khachatourians, 23, graduated from Seattle University last year, and her debt tally is $60,000 in education loans, plus $4,500 on four credit cards. After consolidating her federal loans, her education payments are $300 a month.
"I eat a lot of bread," she says. "It's cheap."
Her predicament reflects that of many college graduates: Students are leaving college owing more and more, and that swelling debt is outpacing the rise in other higher-education costs.
"It means the most educated individuals in our society, who would go out and do the best financially, are also the ones entering their careers with the heaviest debt we've ever asked our graduates to carry," said Douglas Breithaupt, president of the College Planning Network, a Seattle nonprofit.
Average debt: $18,900
Nationally, the average debt load for undergraduates had reached $18,900 in 2002, according to the most recent survey by lender Nellie Mae.
"The rising cost of higher education is partially driving it," says Jim White, director of financial aid at Seattle University.
Prices have gone up at public and private four-year colleges across the country, albeit more slowly than debt levels. While debt was rising 66 percent between 1997 and 2002, the average tuition increased by 22.5 percent nationally at four-year public colleges, according to the College Board.
The University of Washington's in-state tuition went up 11.7 percent in the same period. At a private university like Seattle U., tuition has risen as much as 6 percent each year.
But tuition increases aren't the only reason behind the rise in student debt, White says.
Maximum loan amounts under federal programs have not changed in the past 14 years. As a result, students are turning to private lenders to finance their education.
Western Washington University estimates that its students received $517,708 from private lenders in the 1999-2000 school year. That number increased to $2.1 million in the school year that ended this summer.
Many students, like Khachatourians, feel the loans are worth what they got out of college.
She knows it was her choice to attend and pay the price of a private university. Seattle University's tuition runs $21,285 a year.
She grew up in Las Vegas, where the two state universities didn't offer the quality of education she wanted. Attending a public university in another state would have cost as much in out-of-state tuition as at a private school, so she chose the latter, pursuing an English major and minoring in criminal justice.
Parents couldn't help pay
Her parents couldn't help pay her tuition. She applied for the available federal loans, the Stafford and the Perkins. Those loans didn't cover her tuition, so she went to private lenders Sallie Mae and American Education Services.
During the school year, she took a work-study job and worked the maximum 20 hours a week for about $8 an hour.
She worked during the summers in Seattle, but said that the money she made covered only her rent and living expenses. She felt like she could never make enough to save up for tuition.
"It wasn't giving me the capacity to save up," she said. "It's just a Catch-22."
In her job at SU, Khachatourians takes home a paycheck of $1,600 a month after taxes. She keeps her rent and utilities at $450 by sharing a house in Ballard with three roommates. The payment for her 2003 Ford Focus is $355 a month, insuring it costs $190 a month. She goes grocery shopping once a month and tries to keep the bill around $100. Just making the minimum payment on her credit cards was costing her $150. Throw in the $300 loan payments, and her expenses totaled about $1,550.
In April, she took the job at Lovers Package, thinking it would help her pay down her credit cards, but it's just keeping her level. Now she can make her minimum payments, pay her bills on time, buy food and "live comfortably," she said.
But she jokes about faking her own death. "It would be really easy to jump off a cruise ship," she says, but she can't afford a cruise.
Cassandra Russell graduated from Pacific Lutheran University in Tacoma this summer and owes about $70,000.
"I'm paying $18,000 [a year] more than someone going to a state-run university," she said. "But the quality of education and what was available to me was incredible."
Plans to live at home
She loved her professors, and the school offered free counseling services when her father passed away and then her mother and sister became seriously ill.
And although the job hunt has been competitive because of the tight market, she feels optimistic about finding something in public relations. She plans to live at home with her mother while she pays down her student loan and starts saving up for a house.
Graduates in high-demand fields also are less concerned. Herb LeBeau transferred from Seattle Central Community College to Seattle University and majored in engineering. He owes about $20,000, but he's not worried.
"I should be able to make pretty good money once I start working," he said.
Lower interest rates
Martha Holler, a spokeswoman for lender Sallie Mae, points out that compared to car loans, home mortgages and credit cards, education loans offer lower interest rates. Currently the interest rate is about 3.4 percent, she said.
She also points out that students have a lot of flexibility in repayment compared with other types of loans. Graduates can defer repayment if they can't find a job. If they opt for automatic payments each month, the lender can shave a bit off the interest rates. Graduates also can choose different repayment plans to adjust their monthly payments.
Overall, higher education remains an attractive investment. According to Postsecondary Education Opportunity, the median income for a college graduate in 2003 was $48,896, compared to $29,800 for a high-school graduate.
Khachatourians doesn't think a four-year degree guarantees a well-paying job. So she's starting a part-time master's-degree program in public administration at Seattle University in January. The school will pay for some of the credits because she works there.
She's going to be taking $13,000 in loans to pay for the first two quarters.
Sharon Pian Chan: 206-464-2958 or firstname.lastname@example.org.
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