A Debtor's Education
$17,000 in student loans, and all I got was this lousy bowling shirt
I made my first major purchase when I was 18 years old. I had no money. No collateral. No full-time job. And, most significant, no idea what I was doing. As with countless others, my first major purchase was my college education. When I graduated in 1999, about 65 percent of my classmates, like me, had paid for their education with student loans. And why not? The federal variety (about 96 percent of all student loans) carries low interest rates and is far easier for college kids to acquire than a decent-paying job.
At my alma mater, the University of Nebraska, student loans were as commonplace as antipathy toward Oklahoma. The only time I gave mine any thought at all was once a semester when the check came. I paid off my tuition and took the rest to O Street, a snare of restaurants, shops, taverns, and clubs a block off campus. No slacker, I worked as a telemarketer, line cook, and college journalist. But I counted on my loan not just to pay for tuition but to help finance my college lifestyle, including books, beer, food, music, and a too-small bowling shirt with a Pabst Blue Ribbon logo on the back.
Fantastic plastic. I loved my student loan. Still do. But it hasn't all been a party. In fact, part of the problem is exactly what makes student loans great. They're so easy to obtain and so encouraged as an investment in your future that you can forget to take them seriously--especially when you're a teenager. What's more, the type of loan you get has little to do with you and your career plans and much to do with your parents, specifically their income and number of dependents. Students from families with greater need qualify for subsidized loans, on which the interest is waived while the student is in college. I got the worst of both worlds: My family was not deemed in need (despite the fact that my dad buys T-shirts with motor oil box tops), and I ended up a reporter, not the most lucrative of careers. By graduation, I owed about $17,000, including mounting interest; the average for my class was some $19,000. But that wasn't all. I had also racked up $3,000 on a credit card, thanks to an interest rate almost triple that of my student loans.
After college, I tried to be more responsible with money. Almost immediately, I consolidated my loan, as was recommended at the time, and locked myself into a 7.25 percent interest rate. Bad move. Last year, rates dropped as low as 3.37 percent. (Now that interest rates are climbing again, consolidating as soon as possible makes sense, experts say.) And I used the six-month postgraduation deferment on my student loan to pay back MasterCard. Meantime, interest on my student loan was capitalizing. Now, almost six years have passed since I left Lincoln, Neb., and I find that I have made little progress on my student loan.
Although I'm putting more money than ever into repaying the federal government, I honestly can't say I think much about it. Even now. And I know I'm not alone. Lots of my buddies have taken a leisurely approach to their student loans while they pay off other debt, buy cars or homes, or travel the world. One friend, who is admittedly no financial whiz, has been paying the minimum on his student loan for years while tackling credit card debt and car payments. Because no one cosigned the loan, he reasons, it dies with him. It helps that the government is so flexible in payment plans. Of course, the interest keeps accruing.
Without a doubt, federal student loans are a wonderful way to pay for college. And despite having paid $17,000 for an English literature degree from a school more famous for dominating in football than in the liberal arts, I wouldn't have it any other way. Except for one thing: I wish the seriousness and responsibility of my loan had been impressed upon me as a young college student. If I had fully understood that I faced a decade or more of debt, I might have blown less on ski trips to Colorado and concerts in Kansas City. But in truth, my student loan hasn't affected me financially nearly as much as my choice of career. Will my student loan debt prevent me from buying a house someday? Not if my credit is good. Will my modest salary in Washington, D.C., one of the most expensive real-estate markets in the country? It sure has so far. At the very least, I can take solace in my Pabst Blue Ribbon bowling shirt. That, as they say, is priceless.
This story appears in the September 5, 2005 print edition of U.S. News & World Report.
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