Where I grew up, it's in bad taste to talk about your personal finances. But with the financial woes of governments, companies and ordinary people making headlines just about everywhere you look these days, it's about time we had an honest discussion about the great big money mess of 2009.
Let's start with student debt.
For me, it was necessary to go into debt to get an education. In my undergraduate years, I tried to accrue as little debt as possible. I worked two jobs while maintaining a full course load at the University of Wisconsin-Madison. But when I was accepted to New York University to study business journalism last fall, I faced a real hurdle. How was I going to pay for it? I had no parental support and I was going into a professional degree program, for which there is little funding available from the university or other sources. With numerous hands eager for a slice of the financial aid pie, chances are slim that you'll get a piece.
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A couple of months before I moved east, I examined my finances. I had two options: first, to not go to grad school; or second, to fund most of my education with student loans. NYU ain't cheap. My tuition runs upward of $15,000 per semester.
Most graduate students borrow
I was fully aware of the consequences of going tens of thousands of dollars into debt to pay for school. But with no alternatives, I took out the loans. With the stroke of a pen, I indebted myself to Sallie Mae for what today feels like an eternity. (It's actually around 10 years.)Now multiply my experience by millions. As college tuitions rise, so, too, do student debt loads. The average yearly cost of a private four-year college in 2008-09 was $25,143, an increase of 5.9% from the year before, and $6,585 for a four-year public school, up 6.4% from 2007-08, according to the College Board. With tuition levels as high as they are, many students have no alternative but to fund their schooling with loans. Among graduate students in 2007-08, 55% borrowed money for a master's degree, and among those seeking a professional degree, borrowers constituted 86%, according to the National Postsecondary Student Aid Study.
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That's just one part of the story. Students are carrying credit cards to meet other expenses. In 2008-09, 84% of undergraduates had at least one credit card, and half of all college students had four or more cards, according to the Project on Student Debt. Of course, the study doesn't say who makes the payments on the plastic, the students or their parents. But with the average outstanding balance on a graduate student's credit card sitting at about $8,000, the debt burden carried by young adults can be debilitating.
For Meghan Sharp, these statistics are all too real. The 29-year-old graduate student in landscape architecture at the University of California, Berkeley, funds 100% of her $11,000-a-year tuition with student loans. On top of that, she carries about $18,000 in credit card debt. Sharp got her first credit card when she was 18 while a freshman at William Jewell College in Liberty, Mo. Matriculating students were given information about on-campus resources, university paraphernalia and an unexpected lesson in personal finance: a credit card kit.
Still paying for long-gone items
How convenient. It's situations like this -- credit card companies plying their wares to people who typically don't have jobs or substantial assets of their own -- that should inspire fury in 20-somethings. It's part of the reason why so many of us carry so much debt. My first credit card, which I applied for during my sophomore year in college, was sent to me by the UW-Madison alumni association. Madison mascot Bucky the Badger smiles at me each time I buy a plane ticket home.For Sharp, the available credit has been dangerous. She says she's probably still paying for things she bought when she was 22 -- stuff she no longer has. She also knows her decision to live by herself last year, paying $1,200 a month in rent, hasn't helped. "I will probably try to find a roommate or a cheaper place this fall," she says. "I guess this falls in the category of changes I'm making to deal with my debt."
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To be sure, students should also look in the mirror when searching for someone to blame for their credit problems. Many make questionable choices. But not all students accrue debt to maintain comfortable lifestyles. Katie Fleischman, a third-year doctoral student in educational and counseling psychology at the University of Wisconsin-Milwaukee, faced extra expenses when she considered attending graduate school. As a survivor of malignant bone cancer, the 28-year-old had to pay $800 a month to extend her health insurance coverage through COBRA. To fund her coverage, tuition and living expenses, she borrowed more than $20,000 during her first year in graduate school.
Unlike many 20-somethings, she couldn't forgo medical coverage. "Being a cancer survivor, I had to continue my coverage. But my health would have had to outweigh my education," she says.
Continued: Degrees lose investment value, too
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