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‘Nothing is Free’: College students and their debt

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A few months ago, my dad sent me an email.

“RE: loans - i hope you understand your loans,” he wrote. The body of the email consisted only of a Bloomberg article titled, “Student Borrowers Lack Understanding of Loan Terms, Study Shows.” I didn’t respond to his email (I know, I know) and here’s why: I don’t really understand my loans. In fact, I was on the phone with my university’s financial aid office just the other day talking about consolidating my student loans, Perkins and Stafford, subsidized and non. The counselor was trying to explain to me when I would have to begin making payments when I interrupted her to ask, “To whom?”

While my dad will likely be aghast upon hearing this story, New York Times correspondent Andrew Martin would not be surprised. Martin is the one of the lead authors of Degrees of Debt, an ongoing Times series about student loans and the debt load graduates are left with afterward. Most students have around $23,000 – about what I have – but it’s easy to find students with between $40,000 and $50,000 in debt, Martin says. Fully two-thirds of today’s undergraduates borrowed money in order to afford their education, but Martin says he still found plenty who feel like no one warned them about what they were getting themselves into.

The question is, who is supposed to be responsible for making sure students understand what they’re signing? My dad, who pays my tuition and guided me through the loan process, is in finance, so I assumed it was his job. Not once did I stop and think about what I would actually owe when I graduated.

When it comes to figuring out how we ended up with $1 trillion in outstanding student loans, Martin points a finger at the marketers. Universities are raising tuition costs much faster than wages are increasing and states are spending less on students, but its the loan providers – the banks and the federal government – that intentionally make student loans seem high on benefit and low on risk. “For-profits get beaten up for their marketing, but public schools aren’t that different,” Martin told WBEZ. “The idea that no one pays the sticker price has become a slogan for marketers.”

My dad, who loves to haggle, would be among the first to tell you that some people do end up paying the asking price.

When the housing market crashed in 2007, many people were angry with homeowners who took out loans they knew they couldn’t afford to keep up with. For their ignorant risk-taking, the entire global economy would suffer. As with the mortgage crisis, some are unsympathetic to students who say they can’t afford to repay their loans.

Martin, however, is cautious about a comparison of student debt and homeowner debt on the national level. The majority of student loans are held by the government, so they could never have the domino effect that mortgages did. Martin does say, however, that the scenarios are similar in that credit was easily available – maybe too easily – to people who were being told by marketers that the loans were low risk.

When the next Degrees of Debt installment comes out, myself and my fellow graduates will be six weeks closer to the day when we have to start writing checks. When the day comes, some of us will defer the payments due to unemployment, others will get loan forgiveness through government programs, and the lucky ones with jobs will begin making payments.

Most of my peers, though, aren’t resentful. “As many economists and many parents say,” Martin writes, “the only thing worse than graduating with lots of debt is not going to college at all."

Caroline O'Donovan is the Eight Forty-Eight intern. She graduates from the University of Chicago in June.

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