If his job search takes longer than expected, Pfister plans to move back in with his parents in Tipp City and look for a job as a waiter.
Pfister isn’t alone. Data shows college often pays off in the long run, leading to jobs that pay nearly double those that do not require a college degree. But newly minted graduates also face an increased debt burden and, depending on their field of study, a tight job market.
“It has been worrying me more lately,” Pfister said of his loans. “The jobs I have applied for, the starting salaries are quite low, especially for ones in the bigger cities. I think, ‘How am I going to pay all my bills and try to repay my loans?’ ”
Huge bounty
Even when graduates land jobs in their field, high monthly loan payments make it harder to reach benchmarks that traditionally come with a college degree.
“They’re starting their lives with this huge bounty on their head. It delays their ability to buy a home, buy a car, it certainly impacts their credit ratings,” said state Sen. Shannon Jones, R-Springboro, who a year ago introduced legislation that would give Ohioans more incentive to save for college.
The issue also has attracted the attention of Congress. Sen. Sherrod Brown, D-Ohio, is pushing his Refinancing Education Funding to Invest in the Future Act, which would make it easier to refinance private student loans.
“People have been taken advantage of, and college is too expensive,” Brown said. “You throw that in with what happens with for-profit colleges and so many people don’t graduate and have huge debt. We all can do better.”
Sixty-nine percent of college seniors in the class of 2013 had student loan debt and owed an average of $28,400, compared to $18,550 in 2004, according to the Institute for College Access and Success (ICAS), a California-based non-profit college affordability advocacy group.
Total outstanding college loan debt nationwide totals more than $1 trillion.
College students might not think much about debt when they’re freshmen, but that changes with age, as illustrated by an informal poll in one of Pfister’s recent senior-dominated business classes.
“Student loans and debt were the top things on people’s minds,” said Pfister, a marketing major who makes $8.25 an hour at Saxbys.
Ohio ranks 11th
A college education used to make it more likely that a person could walk into a job and immediately afford to buy a home or car. But by 2012, people with college debt were less likely to have a car loan, and thus less likely to own a nice car. And in an era of tight credit, student loans debts can impact homeownership as well. Thirty-year-olds with a history of student debt are less likely than 30-year-old non-debtors to own a home, according to a 2013 report by researchers at the Federal Reserve Bank of New York.
And delinquent student loan borrowers “are extremely unlikely to originate new mortgages,” the report said.
“While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace,” the authors wrote.
Ohio ranked 11th highest among states for student load debt averages, a slight improvement over last year, according to the ICAS study released last week. The average debt for graduates of reporting universities in Ohio was $29,090, up slightly from the previous year.
The report found that 68 percent of Ohio students had loan debt.
New Hampshire college graduates had the highest debt — $32,795 — and New Mexico had the lowest at $18,656. Ohio’s neighbors — Pennsylvania and Michigan — ranked third and eighth respectively, according to the report.
The area college with the highest average debt for the class of 2013 was the University of Dayton, with $37,551. Wright State debt ranked second, followed by Wittenberg University at $30,748.
Borrowing less
Sen. Rob Portman, R-Ohio, said debt is a problem, “especially at a time when the job market is so weak for new graduates.” He and House Speaker John Boehner, R-West Chester Twp., both point to their support for the 2013 bipartisan law that stopped a planned doubling of federal loan interest rates.
“Making post-secondary education more accessible and affordable is, without a doubt, one of the most important things we can do to support hardworking families and fuel economic growth,” Boehner said.
Cilla Shindell, UD director of media relations, said concern over the debt burden led to a restructuring of the school’s tuition plan, giving students a guarantee of what they would pay the entire four years of college and providing grant aid to cover any tuition increases.
The plan appears to be working, she said. UD statistics show that students who began college in the fall of 2013 borrowed 13 percent less than the previous year’s freshmen.
“We are very concerned about the level of debt that our students are leaving school with,” Shindell said.
Debbie Cochrane, ICAS research director, said college costs nationally have gone up faster than inflation. Debt at graduation went up 2 percent for the class of 2013 after rising about 6 percent a year between 2008 and 2012.
“We appear slowly to be coming out of a recession, which has been effectively a triple whammy on students’ ability to pay for college,” she said.
Cochrane said students who already struggled to pay for college were hit with rising college costs, stagnating family incomes, and college grant aid that for years has lagged college cost increases.
“Over recent years we’ve really seen increases in borrowing related to all of those,” she said.
The report did include some good news for graduates.
“The unemployment rate for young high school graduates was 16.5 percent in 2013, more than double the rate for young college graduates,” the report says.
Many don’t report
The ICAS data includes both federal and private student loans voluntarily reported by about 57 percent of the 1,957 public and private nonprofit colleges and universities that awarded bachelor’s degrees last year.
It does not include loans taken out by parents, or any debt students incurred prior to attending the colleges from which they graduated. The institutions reporting data comprised 83 percent of the class of 2013 graduates.
While nonprofit private colleges generally had higher costs than public schools, many factors influenced the debt levels, including endowment resources and financial aid policies, student demographics, cost of living and state policies, the report found.
The institute report called for mandated reporting of debt by all colleges — including private, for-profit colleges — more grant aid and state funding of higher education, better financial aid counseling by colleges, help for those having trouble repaying loans, and punishment of colleges with high college loan default rates.
“We need to call attention to rising student debt throughout the country and the variation in student debt among states and colleges,” Cochrane said. “We need to get more information, better information out there, get it more accessible to students and families who need to make decisions about where to go to college.”
Debt follows transfers
Amy Barnhart, director of financial aid at Wright State, said the school’s high rate of incoming transfers — who bring debt with them — adds to WSU’s average and has led to an upswing in defaults. She said 40 percent of the university’s undergraduates are transfers, many from community colleges.
“We’re seeing more students come to us with loan debt and that’s causing some issues with degree completion,” she said. “They maximize all their loans, then they don’t have a degree, then they’re not getting a job.”
Barnhart said the maximum amount students can secure from federal, fixed-interest Stafford loans is $23,000. Some burn through that money quickly.
“Think about the psyche of a college student — they very much live in the now,” she said. “We’ve noticed that students are living on their loan money, as well. They may need $2,000 to pay the rest of their tuition bill, but they’re borrowing an additional $5,000 so they can live on it because maybe their part-time job isn’t enough.”
Barnhart expects changes at the federal level will simplify the student loan process, but part of the deal could be an elimination of subsidized loans.
“If they make one loan program, subsidized loans go away,” she said. “That means interest will start accruing on those loans from Day 1 to pay for the program. There’s going to be some wild changes, and I think it’s going to happen within the next year or two.”
$45K in the hole
Reilly Dixon is working two part-time jobs as he prepares for his December graduation date at Wright State. The Greenon High School graduate has about $45,000 in student loan debt — $14,000 from his one year at Kent State.
The 22-year-old English major plans to enter the Peace Corps and maybe go back to school to get a master’s degree — two moves that would delay payments on his federally subsidized loans, which currently have a repayment schedule that starts next June.
“The good thing is college lowered my standard of living,” Dixon said. “I have no problem being on the Ramen (noodle) diet and the Taco Bell diet or driving a really bad car, and living in a small apartment. I’m happy to continue that lifestyle for a little while.”
Dixon puts in full-time hours between his two part-time jobs. He works in WSU’s Office of Communications and also landed a Teaching English as a Second Language gig. That job in Kettering currently pays $15 an hour; once he graduates he’ll get $25 an hour.
Dixon sees plenty of angst in his peer group about finances.
“I see a little nervousness,” he said. “My generation seems to think they’re going to see the world, but it’s hard to be adventurous when you’re shackled to tens of thousands of dollars (of debt).”
Staff writer Kyle Nagel contributed to this report.
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