When Julia Barbour was 18 and graduating from Moorestown High School, she wanted to be a lawyer. But she only qualified for less than half the amount of financial aid she needed to attend Rutgers University.
So Barbour went with a private lender to cover the difference—at a variable rate, with her parents as cosigners, for about $50,000.
“I clicked online, I put in some information and I had money,” she said. “And it was great.”
Post-graduation, however, things had changed. Barbour had gone to work for an attorney, was laid off and needed more school to facilitate a career change (a graduate degree in occupational therapy).
She tried to put her loans into forbearance. Her lender told her a deal was approved—and then started sending her notices that she was in default of her loan. The family spent six months trying to get back into repayment, a process Barbour said was only greenlit by a corporate vice-president.
“I never thought I was going to have to fight so hard to get somebody to take money,” she said.
$27K in the hole, on average
Right now Barbour is financing her loans at a 3 percent rate, but they started at 9 percent before the bottom fell out of the market. Unless she finds a lender that will refinance and consolidate her debt, Barbour will be beholden to those economic forces.
(And she's not the only one. In the past two years, Americans have owed more for student loans than they have in credit card debt for the first time in history, even as revolving credit card debt has decreased. The average college student graduates with $27,000 in debt, reported Forbes, up more than $10,000 in the past seven years.)
“It’s this super-unregulated market, and as of right now there are only two or three banks that will consider doing consolidation of private loans,” she said. “It’s a really complicated process and [no lending institution] wants to do that.”
The process was a sobering financial lesson, and Barbour said she wouldn’t do it again. But at 18, she didn’t have the wherewithal to seek different options.
“I think I would have taken less money out,” she said. “I would have looked to finance it in other ways, or taken out exactly what I needed to meet tuition and room and board and just worked a lot at a second job.
“Right now I’m a full-time grad student, I work full-time, and I manage a household full-time, and I think that’s the best way to do it because it’s realistic,” she said.
“My graduate education is that much more important to me because I’m working for every dollar, every credit. Maybe I would have come out of undergrad ready to hit the ground running.”
Clearing up the financial picture
A new bill signed into law by Gov. Chris Christie this month might have helped Barbour get that financial education that she needed at age 18 without the hardship.
The Kean-Singer Student Loan Literacy Initiative “requires the Higher Education Student Assistance Authority (HESAA) to develop a student loan repayment information document, post the document on its website, and annually distribute the document” to juniors and seniors in public and private high schools throughout New Jersey.
The information covered in that annual document must include, according to the law:
- examples of monthly and annual loan payments required for various types of student loans, based on differing principal loan amounts and current interest rates;
- the time period it would take to fully repay those loans based on various monthly or annual payment installments;
- definitions of fixed rate loans, variable rate loans, and consolidation loans
- the consequences of defaulting on a student loan.
N.J. Sen. Robert Singer (R, Lakewood) told Patch that part of the motivation behind the bill is a sense of financial urgency. In confronting a "$75,000 to $125,000" tab, he said, "neither yourself nor your parent can afford to misspend that."
"We can’t expect parents to put themselves into serious hoch to pay for their education and then find out that the kid moves back in," Singer said. "People have to re-think what they’re going to school for, what the advantages are, and better options.
"We’re no longer in the era where you can say 'I’m going to go to school for four years' and take the liberal arts and then decide what you want to do," he said. "You’ve got to at least start to think of a track of what has a job at the end of it.
Alternatively, Singer pointed out, the cost for a year of New Jersey community college is about $3,700 (as compared with $24,000 at Rutgers, a New Jersey state school). He hopes the new law will help "the student seeing all the loans and the paybacks to [understand] the cost."
Singer also advocated for students doing more research into degreed programs that will translate into employment after graduation before selecting a school. For some, he added, a vocational pursuit just might make more financial sense.
"My neighbor down the road is a licensed electrician, and my other neighbor is a licensed plumber. They both have bigger houses than me," he said.
"We’ve got to educate and put all the tools in front of parents and help them make better decisions."
Collingswood Superintendent Scott Oswald believes that understanding the costs of college, and of student loans in particular, is “critical” for students, many of whom get wrapped up in the “prestige” of a school that “carries real weight in only a few select academic fields,” he told Patch in an email.
“Students who attend expensive private schools or the Ivies without a clear plan and path to career in place will often find themselves not getting a real bang for their buck,” Oswald wrote.
In a school district that has developed a number of support systems to keep students on track to graduate, and others to help them pass the SAT entrance exams, Collingswood is working hard not only to get students their degrees, but to advocate earning them in a financially responsible fashion.
That’s one reason why, Oswald said, a preponderance of Collingswood High School (CHS) seniors are finding the New Jersey county college system to be a more manageable choice.
Another is the NJSTARS program, which offers tuition scholarships for state residents at any of the 19 community colleges in New Jersey.
Participants must complete a series of courses at the high school level and maintain a 3.25 cumulative average over five semesters of program eligibility. Currently the top 15 percent of the CHS graduating class qualifies annually for STARS aid, Oswald said; some 25-30 students (27 in the Class of 2012).
“Over the past few years, several of our top students have elected to attend local community colleges under NJSTARS before moving on to four-year colleges and universities,” Oswald wrote.
“They could have attended anywhere after high school, and were often accepted into some top schools, [but] after the celebration that accompanies the acceptance, the financial realities kick in.”
Oswald’s main concern is not whether a student chooses a two- or four-year program or a state school over an Ivy League university, but whether “America has become so hung up on prestige that we lose track of the idea that prestige often comes with a pretty hefty price tag,” he wrote.
“Some public schools actually value themselves based on how many of their graduates attend prestigious colleges. Is that a quality metric?” he asked.
'A cultural shift'
Although Barbour is hopeful that something like the Kean-Singer law could help save another generation from getting stuck in the same boat she’s in, she doesn’t necessarily believe there’s an institutional solution to over-borrowing for college
“I think there’s a cultural shift where people are more aware, but I think that’s from a lot of anger at the credit industry,” Barbour said. “I think until a lot of that anger and frustration boils over for student loans, there’s a lot of having to do it on your own.
“Everybody’s up in arms about repayment for federal loans,” she said, “but people who didn’t qualify but still wanted to go to college are left in this middle ground where they can’t repay [their debt], they can’t discharge it in bankruptcy, [and they’re subject to] variable interest rates.”
And here’s another thought, she says—one pertinent to the students in a school district like Collingswood, which is seeing a growth in the number of students who are nonnative English speakers.
“If you’re not coming from an English-speaking background, the literature is not going to make a lot of sense,” Barbour said, “and if you’re the first one to go through the process, there’s a tremendous learning curve.”
Oswald mentioned much the same thing in his response to the Student Loan Literacy Initiative.
“Will the senator’s bill address all of these issues or just formalize a process that most schools already have in place?” he wrote.
“Will the senator himself serve his constituents directly in hopes of helping them better understand or just mandate that the schools do it?”