Repaying student loans challenging in difficult economy

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    For Kelli Space, a college graduate from New Jersey, student loans grew into a mountain of debt she will be tunneling through for many years.

    In 2009 Space graduated from Northeastern University in Boston, with a degree in sociology and a grand total of $200,000 in student loan debt.

    “I decided to take out student loans because my family and I hadn’t saved for my college education,” Space said. “We did, however, place the utmost faith and importance in education, so after speaking with guidance counselors and financial advisers, it appeared loans (particularly private loans) were the way to go.”

    All across the country college seniors are graduating with a bachelor’s degree and an average of $24,000 in student loans.

    Space said she used loans to pay for tuition, books and room and board for four years, at about $40,000 per year.

    “My private loans total $163,400 and my federal loans are at about $20,000,” she said. “I’ve paid off just over $17,000 and now I’m on a sort of goal-oriented, rigorous plan to pay off $80,000 over the next 20 months. It certainly will not be easy, but will absolutely be worth it — and it’s definitely possible.”

    Space chooses to be optimistic about her situation even as she works 60 hours a week, as well as picking up babysitting or blogging jobs that come her way.

    While Space is an extreme example of student loan debt, according to the Project on Student Debt, all across the country college seniors are graduating with a bachelor’s degree and an average of $24,000 in student loans. Even at tithing-subsidized BYU, many students take out student loans. According to the National Center for Education Statistics, in the 2009-2010 school year, about 18 percent of BYU students used federal loans to pay for their education. These students received, in total, $34,676,378 – about $6,133 per student.

    If a student were to continue to take out that much every year until graduation, the student would owe $24,532. And if some of those loans were unsubsidized federal loans or from private lenders, interest would make that amount soar even higher. Many students and their parents consider educational loans to be “good debt,” and sign up without too much worry. However, with a weak economy and poor job market, student loan debt is adding up all over the country, and many are concerned this will be the next financial bubble to pop, similar to the mortgage crisis of a few years ago.

    Michael Jenkins, a BYU alumnus from Yuba, Calif., who went on to chiropractor school, will finally finish paying back his loans this April.

    “I think it will be, actual paying time, 20 years,” Jenkins said. “And I can almost guarantee that I doubled in interest the original amount.”

    Jenkins said while he was getting his undergraduate degree, he managed to keep from taking out any loans, but when he went to chiropractor school with a family that included his wife, three children and one on the way, loans became a necessity. To get through his program, he said, he took out about $45,000 in student loans.

    After establishing and running a practice for many years, Jenkins sustained a back injury that left him incapable of continuing his practice. Though he quit the profession and became a schoolteacher, the money borrowed for school still needed to be paid off.

    “You don’t know what’s going to happen,” Jenkins said. “And student loans are merciless when it comes to collection time. You can put them off for six months at a time for a few years if you need more time, but sooner or later you have to face it. And the interest keeps growing on them all that time.”

    It’s easy for students to borrow now and think about repayment later. Tara Daniel, a finance adviser for the University of Phoenix, sees this all the time.

    “Students request the maximum amount they can borrow every year,” Daniel said. “But you never want to request more than your salary will be when you graduate. Otherwise, it’s going to be really hard to make those payments, because your income isn’t matching what you borrowed.”

    Daniel said part of the student loan problem comes from the way students treat the loans.

    “People view student loans and grants as something they have a right to, which doesn’t make sense to me,” she said. “The government gives you the money to go to school, not because you’re a good human being. They want the money back.”

    She said she has dealt with many students who used their loans for expenses not related to school.

    “Somebody asked, ‘When am I going to get my refund, so I can get my laptop with the free Xbox before the deal runs out,’ ” Daniel said. “What are you supposed to say to that?”

    FinAid.org, a guide to student aid, says tuition rates rise twice as fast as inflation increases, and the cost of college doubles every nine years. At the rate college tuition rises, a child born today will have to pay three times the amount students pay today when he enters higher education.

    It also means students today are paying much more than their parents did for their education. The rising cost of college, a stagnant economy and poor job market means students are graduating with high debt and little means to pay it back. While this affects their ability to go out and make money, it will also affect their future.

    Space, with her $200,000 of debt, is one of the lucky ones who got a job after graduation, but how long her student loans will continue to affect her is still in question.

    “I still get pretty nervous about the future; my ability to save money is obviously impaired right now, which concerns me in terms of moving forward, getting married, having a family and being able to provide for the people I love,” she said. “However, I’ve proven to myself that I’m resourceful and really aware of my situation, so I think those are two important characteristics in digging myself out of this hole.”

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