“Money is a great servant but a terrible master” — Francis Bacon
What would you do if one day, long after you finished college, your university sued you? Facing not only student loan debt, but car payments and rent, you find that the place you called home for four years is bringing you to court because of defaulted payments.
In 2012, George Washington University sued nearly two dozen alumni over defaulted Perkins Loan payments. The story, which was covered by Al Jazeera, followed two of those students. According to January 2014 article, one of the students, David Acevedo ended up paying over $7,000 in order to cover the loan, interest, attorney fees, and court costs.
Stories like this one are becoming more and more common. In 2013, Bloomberg ran a story about other institutions suing alumni, including Yale and the University of Pennsylvania. In the story, Bloomberg News explained that Perkins loans are typically issued to families who demonstrate more financial need. The biggest difference between a typical loan and a Perkins loan is that Perkins loans are issued directly by the school, so when alumni stop paying, the actual schools are able to go after them. According to Bloomberg, in 2011, “students defaulted on $964 million in Perkins loans.”
Wage garnishment (when loan agencies collect money directly from borrowers accounts) and lawsuits like this one are becoming more common as students struggle to pay their student loans and begin to default.
According to the Department of Education, private debt collection agencies garnished over $176 million in Americans’ wages in the last year — a record-breaking amount.
This speaks to a bigger issue; the trend among borrowers is that they are taking out more money while having less of an ability to pay it back. Among the most widely used student loans, borrowers are given the option of deferring payment until six months after graduating. The Economic Policy Institute found in a recent study that economic trends show that college graduates sometimes go up to nine months after graduation without finding a job.
Furthermore, the Economic Policy Institute found that unemployment among college graduates is increasing. In 2007, 5.5 percent of college graduates were unemployed. Yet, in 2015 that number reached 7.2 percent. Underemployment, or when you work a job for which you’re overqualified, has also been on the rise: 9.9 percent in 2007 versus 14.9 percent in 2015.
The result of these factors is that students are stuck footing a bill that they simply can’t afford. This, combined with the fact that undergraduate degrees are beginning to mean less, forces students to pursue graduate degrees. This all comes with a steep price tag. It’s not uncommon for us to hear that friends or family members graduate with over $100,000 in debt.
In the last five years alone, college prices have seen an unprecedented increase in cost. According to NPR, college prices in Arizona, Georgia, and Washington state have gone up by more than 70 percent.
In 2014, GW made headlines when an article from The New York Times was released, exposing a for-profit college pricing model. According to the article, when GW raised its tuition and fees, “[t]he number of applicants surged from some 6,000 to 20,000, the average SAT score of students rose by nearly 200 points, and the endowment jumped from $200 million to almost $1 billion.”
These numbers speak to a trend that is spreading to universities across the country.
In 2008, GW shocked the nation when it became the most expensive university in the country with a sticker price of $40,437 for tuition and fees, according to Forbes. Tuition and fees for this year are at $51,950. Today, Columbia University in New York City claims the title for the most expensive school in the nation with a price tag of $55,056 for tuition and fees for the 2016–2017 academic year, according to U.S. News. In less than a decade, the price of the most expensive private university has increased by almost $15,000.
There has been a race to the top among universities. As universities become more expensive, applicants are more drawn to them since a university’s ranking is often associated with its value. This has contributed to the enormous increase in the cost of attendance for students and the loans that more and more people are forced to take out as a result.
When trying to understand why universities are becoming so expensive, one factor that is commonly cited is the construction of nearby luxury facilities with high costs. In 2014, Forbes published The College Amenities Arms Race, in which it chronicled universities’ building facilities with movie theaters, luxury restaurants, and multi-million dollar recreation facilities. According to Forbes, in 1995, universities across the US spent $9.1 billion on construction. Eleven years later, $15 billion was spent collectively. Consider our own District House, which cost $130 million dollars, or the $275 million Science and Engineering Hall.
Schools all over the country are trying to be more attractive to applicants by building shining facilities that attempt to create a more luxurious campus environment. “We found that the lower ability students and higher income students have a greater willingness to pay for these amenities,” said Brian Jacob, a researcher from the University of Michigan, in an interview with Forbes. “It’s kind of smart from the college’s perspective.”
In addition, high salaries among school staff and administration have bore some blame for the sky-rocketing price of tuition. In 2015, The New York Times published an article discussing the excessive salaries of Private College Presidents. The article said that “[d]espite pressure on institutions of higher learning to hold down costs, the compensation of private college presidents continues to climb, up 5.6 percent between 2012 and 2013.”
In 2013, the median salary for university presidents was $436,000. In 2013, GW’s president Steven Knapp made $741,496, and $1.108 million after bonuses. According to the Chronicle of Higher Education, Knapp’s been making at least $1 million after bonuses since 2009.
As the nation’s schools become more expensive, students are left only with the option of borrowing more money, so that they can actually attend them.
In 2011, student loan debt passed credit card debt and auto loans. The following year, total student loans passed the $1 trillion mark. The amount of student loan debt was half that in the beginning of 2007.
Economists are scrambling to figure out what the ramifications of such a high debt rate will be.
Signs are already emerging of what changes this could force in the American economy. It was found that between 2003 and 2012, homeownership by people with student debt fell by roughly 10 percent.
Furthermore, a CNBC study found that 71% of people with college debt said that it delayed them from buying a home. The study further noted that “Student debt is also keeping 4 in 10 graduates from moving out of a family member’s house.”
As Americans finish their education and begin to enter the “real world,” as we often call it, they face the risk of being held back by the tens of thousands of dollars they need to pay back.
The sobering reality is that our generation has an issue that no other has had. We are leaving college with more debt than ever before, and the consequences are dire. A study by LIMRA found that $30,000 of student debt can decrease retirement savings by up to $325,000.
The Federal Government makes public all information about colleges’ federal loans through the website College Score Card. The website offers information about how much students took out, how much they make after college, and how much they pay monthly after college.
Note that this information refers only to federal loans. Many students who take out loans take out non-federal loans as well.
According to the site, GW students graduated with an average of $25,350 in federal loans (not including private loans). The average graduate paid $260 dollars a month on those federal loans, and 40 percent of GW students received federal loans, which is above the national average of 68 percent.
The biggest problem with financial aid at universities is that students have no idea what all of the fine print means. For the most part, we’ll agree to the terms and conditions that come with our loan, unaware of how crippling such large amounts of debt will be upon graduation. Too often, we write it off as a problem for future us.
As it becomes more important to attain higher levels of education, we promise to pay backs hundreds of thousands of dollars in the hope that we might have a better life because of our educations.
This fall, millions of students will begin looking for the place that they’ll spend their next four years. As one class graduates and another replaces them, America is in the midst of a historic moment — as we seek to elect our next president, they’ll be given the monumental task of helping millions of college graduates make paying their educational expenses doable.
Our parents speak of their days in college with nostalgia. Many tell us that they were able to pay for their educations with their summer job earnings and then, upon graduation, embark on the rest of their lives with financial security. Though we’ve been dealt a more difficult circumstance, we aren’t wrong to hope that in the future, we will be better equipped to face the financial burden of our educations.
(Answers are appreciated as the results from this poll may be used in a future article. If you are interested in being interviewed about the financial burden of attending GW that you’ve experienced, please email email@example.com with the subject line, “Student Debt.”)
Originally published at gw.therival.news.