Friday, August 10, 2012

Debt Sentence: “10-15 years if I’m Lucky…”

Jeff Parker Cartoon for 06/10/2009

Debt Sentence: “10-15 years if I’m Lucky…”

By Uloma Chiakpo

Two weeks from now I will be returning to school to finish my last semester of college.  Too many times I’ve faced the dreaded question of, “so what next,” if not from myself, then from my colleagues and cohorts.  Answer: “Hopefully stable employment, graduate school in a couple years, but otherwise I’m not sure.” Like so many undergraduates, I have found the last five years to be both humbling and demanding. Yes, five years.  I dare to say that I am a part of a growing demographic of students who require more than four years to complete their undergraduate studies.  

Going to college is rapidly becoming the only path to a job that pays a wage sufficient to support a family.  But starting college is no guarantee of graduation.   Nationwide, the 2010 graduation rate for public four-year institutions was 31.3 percent (for completing a degree in 4 years) and 24.7 percent (for completing a degree in four to six years).[1]  Graduation rates for Colorado’s four-year public colleges mirror the national average-- 31.5 percent of all graduates complete their degrees within four years and another 21.8 percent finish between four and six years.[2]  For students at Colorado for profit schools, the rates are significantly lower. The graduation rates for Colorado students at private for-profit, four-year colleges were 21.3 percent in four years with another 6 percent receiving degrees in four to six years.[3]  These statistics also match national rates for similar institutions. Nationally, 20.3 percent of for-profit students graduate within 4 years and  7.9 percent take between four to six years.[4]

Even if you graduate with a bachelor’s degree, the independent life is not guaranteed.  Nationwide, 53 percent of 18- to 24-year olds either currently live or have moved back home with their parents at least once in the last few years.[5]   According to the Census Bureau and the Department of Labor roughly 54 percent of college graduates under the age of 25 are either jobless or underemployed.[6]

The prospect of not getting a job is particularly daunting since so many students rely on loans to pay for their four, five or six years in college.  Those of us who started college in 2007 pay an interest rate on our Federal Stafford loan of 6.8 percent, an egregious increase from the 2006 in-school rate of 1.79 percent and repayment rate of 2.39 percent.[7]  Even though I attend college in Washington, D.C., something tells me my peers in Colorado also struggle, not only to make it to the podium, but also to find gainful employment and create a wholesome identity for themselves post-undergrad.

With four or more years of undergraduate education, the average Coloradan graduate joins the labor force with $22,017 in debt.[8]  In fact, 55 percent of all students who graduated from a Colorado public or private non-profit, four-year university in 2010 incurred some debt[9].  Truthfully, I expected this statistic to be higher because student financial aid packages, now more than ever, offer loan options more frequently than they offer grant and scholarship funding. And for students who require more than four years to graduate, this potentially means five or six years of loan debt, instead of four.  Colorado ranks 33rd (excluding the District of Columbia) in the proportion of college students who graduate with debt.[10] In this case Colorado falls toward the far end of the curve, a positive for us.

But let’s say I’m graduating from a four-year public or private institution in Colorado after five years with a loan balance of $22,017 and a fixed-interest rate of 6.8 percent.  Those five years of undergrad will cost me 120 payments of $250 from my monthly paycheck for the next decade.[11] In 10 years I would pay approximately $8,400 in interest, an additional 38 percent of the original loan.  Theoretically, if I earned $30,000 annually, lived in my parents’ basement for a year with housing, meals, and toiletries free of charge, biked to work every day, evaded taxes, and observed a 12-month hiatus from, I could pay off at least $20,000 in one year.  Don’t believe me? Do the math for yourself. Visit  and input your loan sum and interest rate. In your case I pray it’s a lot less than $22,017.

True, post-college offers a new lease on life. Just borrow wisely now, so that life after college won’t prove too costly.   Like many prospective graduates, I envision a bright future for myself, but accepting some of these loan packages feels more like a death sentence than an opportunity at a better life.  Of course, I’m grateful that I could take out a loan instead of withdrawing from school when grants and scholarships ran dry, but I’m not thrilled about my new found indebtedness.  And, I have yet to meet anyone who doesn’t glance at their accruing loan fees with slight trepidation.  Yes, as an economics major I’m taught to regard society through the lens of opportunity costs. But the idea that the opportunity of higher education comes with the cost of years of indebtedness, before you purchase a car, sign a mortgage, or get married, just seems counterintuitive.  Should we really be leveraging our future on credit, on the principle that our forthcoming earnings will suffice to pay for our past and provide for our future?

Uloma Chiakpo was an intern at the Colorado Center on Law and Policy/Colorado Fiscal Policy Institute for the summer of 2012.  Uloma is a student at Howard University in Washington DC.  Uloma’s internship at CCLP/COFPI is supported by the Economic Analysis and Research Network.

(Disclaimer: Evading taxes is not only frowned upon but illegal. This statement does not reflect the views of the author or COFPI.)

[1]The Chronicle of Higher Education, 2010 Graduation Rates for Colorado public colleges (4-year), (Aug. 8, 2012).
[2] Ibid.
[3] Ibid, 2010 Graduation Rates for Colorado for-profit-colleges (4-year), / (Aug. 8, 2012).
[4] Ibid.
[5] Huffington Post, “Moving Home: When College Grads Face Uncertain Futures”, (Aug. 6, 2012).
[6]Jordan Weissmann, “53% of Recent College Grads are Jobless or Underemployed- How?”, The Atlantic /(Aug. 7, 2012).
[7] Mark Kantrowitz, “Education Loan Interest Rate”, FinAid: The Smart Guide to Financial Aid (Aug. 8, 2012).
[8] College Insight, Colorado’s Public 4-year Institutions and Private Non-Profit 4-year Institutions, The Institute for College Access and Success, (Aug 8, 2012).
[9] Ibid.
[11] Mark Kantrowitz,, “Education Loan Interest Rate”, FinAid: The Smart Guide to Financial Aid (Aug. 8, 2012).

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