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Costly diplomas: Student loan debt at all-time high

$130,000 in student loan debt. 88 jobs applications. Six months to find a job.

For a recent Belmont graduate, these numbers represent the reality of his current financial situation.

After four and a half years, the business administration major, who asked that his name not be used, left Belmont with a diploma that cost more than he bargained for.

“I’ve got roughly $130,000 in student debt [after accounting for interest]. Most of that is under the unsubsidized loans,” he said. His parents are willing to shoulder $60,000, but the rest is his responsibility.

And in May, he has to start paying it back, whether or not he has found employment.

He is not alone.

Students all across the nation are taking on more student debt than before. The average student loan debt for graduates of 2010 was $25,250, a 5 percent increase compared to the class of 2009, according the to College Access & Success Project on student debt. Belmont’s is slightly higher at $29,207.

The report also stated that the average would be much higher without the increase in government financial aid.

According the to the Federal Reserve Bank of New York and the U.S. Department of Education, Americans now have outstanding student loan debt that exceeds $1 trillion, which is, for the first time ever, more than the total credit card debt.

A poor economy has played a major factor in the growing gap between rising tuition and what students and parents can actually afford.

Average student loan amount

Average student loan debt

Universities have steadily increased costs. Belmont’s tuition for the 2011-2012 school year is $23,770, an increase of $620 a semester and a 5.5 percent increase from 2010-2011. Those figures don’t include housing, meal plans or textbooks.

The recent business grad said the economic downturn was key in the massive amount of debt he accumulated.

“At the time [of applying to Belmont] my family standings were decent but my dad lost his job halfway through my time at school,” the source said. “He had to cash out his 401K and pension to just pay off the mortgage on the house. Before that, my parents did what they could to help me out, but with their finances I was pretty much on my own.”

Because of his family’s financial standing when he was entering his freshman year, he received only the federal loans information in his financial aid packet.

Sophomore year was the only year he received a scholarship: a non-renewable scholarship for $4,000.

Current sophomore Katie Gleerup, a nursing major, said a small financial aid package led to the accumulation of a large amount of student debt for tuition and other expenses.

“I don’t know the exact number off the top of my head. … After this semester at $32,000 a year, I would assume it’s close to $64,000,” Gleerup said.

“Even though I had good grades in high school, I don’t receive any merit scholarships from here and I guess my need wasn’t great enough for any need-based funds,” Gleerup said.

Patricia Smedley, director of Student Financial Services, explained the process for awarding financial aid packages to the Vision via email.

“Admitted freshmen are considered for merit- and need-based scholarships based on their overall application file in the context of the overall pool of admitted freshmen,” Smedley said.

Need-based financial aid is determined by the U.S. Department of Education after the Free Application for Student Aid is submitted.

“Belmont remains committed to supporting students in financing their education,” Smedley said in her email response.

During his first two years at Belmont, the grad who asked not to be identified didn’t have a job to help alleviate the costs, forcing all living expenses to be included in the loans.

His first year alone put him $35,000 in the red.

Prior to applying for the loans each year, he said he sat down with his family and calculated food, gas, utilities and other living expenses.

When his parents cashed out the 401K following his dad’s job loss, their income rose — when they reported it on paper. Because of the family’s perceived income increase, he was unable to successfully petition for a hardship reduction on tuition.

He said he thought he would have to transfer, but thanks to a new job for his father, he was able to find a way to finish at Belmont.

“When my dad got a new job in Birmingham, the income showed more positively which meant we could apply for a parent plus,” the source said. “It was a last resort. This was the only way I could get through Belmont.”

He had worked out a payment plan with his parents prior to starting school. His parents would pay for four years of in-state tuition and expenses or two years out of state, reducing his obligation to $70,000.

As far as the time frame for repaying the loans, he said he is taking things one step at a time. But ready or not, students must begin repaying student loans six months after graduation.

“I haven’t looked too much into the time it will take me to pay it off,” he said. “The APR stuff is scary, too much to handle while I’m trying to find a job.”

The high interest rates have some students looking for an alternative.

“I’ve been considering lots of things. One of them is there are programs for nursing major that if you go in for teaching, they’ll pay off your loans once you start teaching,” Gleerup said.

The overall unemployment rate for the class of 2010 is 9.1 percent, the highest yet, compared to the 2009 when the rate was 8.7 percent.

“That’s the fun part about coming out of college in the worst job market since the ‘70s,” the source who wanted to remain anonymous said.

For now, he’s working at a part-time job that allows him to work as many hours as he can and still have time to keep searching for full-time work, preferably in the field he prepared for.

Even students like senior Rachel Kesselem, who has no debt to shoulder, are nervous about the job market and is hedging her bets by heading back to her parents’ house for a while.

“I’ll move back to Cleveland, Ohio. Yeah, I know, ‘Oh boy, the basement,’” Kesselem said. “It’s the next right move with the economy the way it is.”

For Kesselem, this is just a temporary stop before she moves ahead with her career.

“I’ll be able to save up a nest egg, plus the arrangements won’t be forever. One or two years tops,” she said. “I do recognize how awesome it is to be graduating without debt … don’t want to waste it.”

The business grad too, is prepping for his future, but for now it seems his options are all shaped by his student loan debt.

“Current plans are to get a job and pay my loans back. That’s the first thing I say when people ask me what I’m going to do,” he said.

The source eventually plans to take the LSAT and the GMAT and would like to get a Ph.D. in finance.

Student loan chart

Student loan chart

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