About a year ago I wrote a series of posts about various issues surrounding the economics of higher education. I first wrote about college as an investment and then about why college costs so much. Finally, I blogged about professors’ modest salaries. Today I attended another workshop about the student debt crisis and in an attempt to bridge those prior posts I am borrowing the language of studentdebtcrisis.org: this is my coming out story.
I started college at the ripe age of 17 years and 5 weeks. At that point I had $0 in debt and was bright eyed and full of hopes and dreams. I was going to be a journalist! Or a social worker! Or an infectious disease doctor. Well, I was attending an Ivy League college in any event.
On June 11th, 2006 I walked across the stage at the slightly older age of 20 years 11 months and with $25,000 of student loan debt. Even then I knew I’d come out on top because my best friend was graduating with around $70k and many others were approaching $100k. I was fortunate enough to only have $25k because my father took out approximately $40k on my behalf (which actually is only a fraction of the $210k price tag of the total undergraduate experience). In addition to my father’s willingness to be poor forever, my final two years of tuition were paid for by an anonymous alum. I’d also qualified for work study which I quickly learned was a way to have money for books, plane tickets home, and the occasional salad at a restaurant, not a way to fund your education.
I spent the summer between undergrad and graduate school teaching in a residential gifted and talented program for middle schoolers at Northwestern University. At the end of the summer I checked my bank account, and after 4 years of working at least 2 work study jobs and having paid employment every summer, I’d saved a whopping $4000. This was actually a job well done seeing as how I’d had to spend a lot of money on the secret fees associated with college attendance (recreation fees, for example) and on very pricy textbooks until I was wise enough to just not buy the texts (but that’s another story).
I was headed to Tennessee to start a PhD program and I needed a car. I went to Carmax where I purchased a 2002 Oldsmobile Alero. Sticker price was around $10k, but with taxes and fees the total was closer to $12.5k. I needed to get the monthly payments as low as possible given that I was about to be a graduate student with a monthly stipend of around $2k which after taxes was about $1600. I emptied out my savings and put the entire $4000 toward a down payment on the car. My father was nice enough to give me another $500. My monthly payments were $161. I had a car!
Then my mother and I drove to Nashville to secure an apartment for me. We visited a few places and were happily surprised to hear that because of my good financial record and good credit score (especially for a 21 year old) I didn’t need to put down a deposit on my utilities. My apartment application fee and last month’s rent were also waived. I only needed to come up with a deposit and first month’s rent. I used my summer earnings for this.
I needed furniture. My parents—who are nowhere near wealthy, but are firmly middle class—decided to give me graduation presents. We went to Goodwill and got a sofa and recliner, totaling $28. Then, we went to a locally owned furniture factory warehouse where I got a bedroom suite, mattress and dinette set for around $400. Delivery was free. My 1 bedroom apartment was about 650sq ft and had a laundry room. So my mom went to Lowes and used her Lowes credit card to buy me a washer and dryer. This was the most expensive graduation gift I received and I was extremely grateful to my parents.
They left and I started graduate school. After the first semester I realized that I needed a part time job. With medical bills for a chronic illness, I didn’t have enough money for food and had lost about 15lbs by the time I came home for Christmas. I also realized that my car loan had an interest rate of 9% (or maybe it was 12%) and that I could get an education loan with an interest rate of 6.8%. That was actually a smart move. I took out $9k in education loans to pay off my car. My total loan debt was now $34k. But my loans were in deferment because I was enrolled full time in school.
Over the next 5 years I did private tutoring and worked at two learning centers. This extra income was enough for me to buy groceries, pay medical bills, and go out to dinner every now and then. I was doing okay.
Fast forward a few years. I am now an Assistant Professor at a private liberal arts college. I make a decent salary, but after the 6 month grace period, my first loan payments were due. The minimum loan payments were around $320 a month across all three of my lenders. Paying the minimum would keep me in debt for the next 15-20 years of my life. I decided against that. I made the choice to pay one of the loans—the one with the highest interest rate of 6.8%—aggressively. I was putting $729 a month toward that loan and paying about $15 over the required payments on the remaining two loans for a total of $1000 a month.
After one and half years of that, I paid off the 9k loan in full. After two years, I’ve also paid about 2k of the other two loans. At present, at the start of my third year as an income earning professional, I am $22k in debt.
And I am single.
Being in a one-income household means that all financial responsibilities fall to me. All debt falls to me. All financial emergencies fall to me. All financial decisions fall to me.
Having educational debt hanging over your head makes it hard to move forward in life. I would like to buy a house, but my education loans plus my car loan (I had to buy a new car about 5 months ago) are definite negatives on my loan application. Granted, I do not have to be so aggressive in my loan repayment. I technically only have to pay $250 a month in loans and if I did that, I’d be much more comfortable taking on a mortgage. I haven’t decided on that front.
I would like to have children one day, but to do that alone is incredibly expensive. The childcare center at my institution charges over $800 a month that is automatically deducted from your paycheck. What about baby medical bills? Clothing? Food? Diapers? Furniture? It just doesn’t seem feasible right now.
I would also like to continue to save. In a good month I can save 25% of my income. I have a good month like 4 times a year. Most months other expenses arise. Christmas, medical bills, vet bills, mechanic bills, annual renters insurance payment, birthday gifts. All of these things come out of my budget and result in only saving about 10% of my monthly income. At that rate, I will never be able to come up with a decent down payment for a house.
I only owe $22k yet I feel trapped in life. The American Dream is a carrot dangling right in front of me as my colleagues with spouses and partners and two-income households buy homes and have children. I feel a bit of shame about not being able to contribute to the economy through home ownership or even ridiculous spending on frivolous things at locally owned businesses. I have to make financial choices every day about prioritizing my spending. Should I adopt the mindset of ‘live for today because tomorrow isn’t promised’ and take my mother on a trip to Ireland? Should I be a responsible adult and never go out to eat and instead dedicate that money to paying off my credit card balance in full? Do I choose to save aggressively or pay down my loans aggressively? Doing a little of each does not feel like progress and in fact is not progress when you calculate loan interest rates.
I have no answers. I am not an expert on higher education and I am even further from being an expert on economics. My time in college was the best 4 years of my life and I would undoubtedly do it again even with the hefty price tag. But I struggle with how to advise high school students and their parents. Not every parent can or should assume $40k of debt for their child’s education. Not every student will get a PhD or MD or JD or MBA and have a shot in hell at paying back their debt. Not every student will enjoy their college experience so much they are willing to spend the next 20 years paying for it.
I can’t tell anyone else what to do. I can only share my story and frame it in the context of me and what I came away with after 9 years of higher education. I came out with $34k of debt. I came out with 4 degrees. I came out with a few publications and a job. I came out happy. I came out proud. I came out an academic.