College kids gird for 'student loan debt bomb' in their futures

"It's easy to feel like you're drowning when you look at how much college will cost," says Shade Oladetimi, 18, a pre-med student entering New York University this Fall. Even with scholarship the 4.0 student received, Oladetimi had to take out a $10,000 loan just to get through the first semester.

She and her friends are "definitely in denial," about the gigantic sinkhole of debt they are diving into, admitted Oladetimi, a child of immigrants who see college as the realization of the glittering American dream. But their willingness to serve as willing economic hostages is based on "the feeling that college is so important: You have to do it, no matter what."

Indeed. The typical college graduate earns an estimated $650,000 more than the typical high school graduate over a 40-year work life, according to the Pew Research Center. The belief that a college degree is a pre-req in an increasingly competitive economy is further bolstered by a new study out of Georgetown University: While seven percent of graduates with a bachelor's degree or better are unemployed (and another 14 percent underemployed), a full 24% of high school graduates lacked jobs and 42% were underemployed.

But postsecondary education comes, increasingly, at the cost of assuming boat loads of burdensome -- even bankruptcy-causing -- debt. The Pew study, released in May, revealed that while 94% of parents expect their children to go to college, 75% of the public believes that college is now too expensive for most Americans to afford.

That is because tuition costs have skyrocketed, while wages and the demand for professional positions have failed to keep pace, forcing both parents and their progeny to mortgage themselves -- and sometimes their property and retirement funds -- in order to obtain any kind of credentials at all.

Average tuition and fees for four-year, private colleges have increased from an average of $4,113 per academic year in 1981-1982 to $28,500 for 2011-2012, not taking into account room and board, according to The College Board. During the same period, average tuition and fees for four-year public institutions increased from $909 to $8,244. Even taking inflation into account, those breathtaking seven and ninefold increases translate to 181% and 268% rises, respectively, said the Board.

Sixty-one percent of New York State students graduate with college debt and the average amount they owe is $26,271, slightly more than the national average, according to CollegeInSight, the Institute for College Access & Success.

A national survey of bankruptcy attorneys this year revealed that 81% had seen an increase in clients with student debt problems, prompting the National Association of Consumer Bankruptcy Attorneys to declare that America's next mortgage-style economic crisis is the "student loan debt bomb."

Many of the people getting "hammered" by student loan debt are over 50 years old, noted Jay Fleischman, a consumer protection attorney at Shaev & Fleischman, LLP, in midtown. "They're parents who cosigned these loans. Now, they're robbed of their retirements because their kids graduated and didn't find the professional opportunities they expected."

Student loan victims, he added, come from every walk of life. Many are surprised to discover that student debt, unlike other debt, cannot be discharged or forgiven even in a personal bankruptcy.

College age kids are often financially illiterate and "are not getting educated by the people who are giving them the debt," complained Marlin Potash, a Manhattan psychologist who served as The Bank of Mom, for one of her daughters, loaning her money from her retirement fund because Potash didn't like the terms of a loan offered, an act she conceded was unwise. But, she explained, "we're family. If she goes down, we go down together." Having her daughter forego college would have been unthinkable, Potash conceded. Young people have to go to college "so they can compete for unpaid internships," that will help to qualify them for "an underpaid job," she quipped.

Oladetimi said many of her friends are changing majors to more "practical," choices and declining admission to their first choice schools in favor of cheaper alternatives. But not to go is simply unthinkable.

Foregoing college means getting an even crappier job -- or no job at all -- with no hope of ever having financial stability, said Natasha Henry, 18, an incoming freshman to Long Island University who lives in Bay Ridge. The pre-law major and her friends avoid the topic of the student loan debt they must incur to obtain an education "because it tends to stress us out."

Of course, you can always postpone the day of reckoning by staying in school, which delays the payment dates for the loans. That is what Anna Callaghan, 22, who has $20,000 in undergraduate debt from Santa Clara University, is doing. Now entering a master's degree program at NYU, the new East Village resident expects to amass another $50,000 in her three-semester program in international relations and journalism. "You'd think it would scare you to death, but it doesn't," said Callaghan. "Everyone has loans. The fact that everyone has them makes them seem more normal." Her parents, she said, "take it a lot more seriously than I do."

The loans won't seem quite real, said Callaghan, until she graduates, gets a job and is made to realize "how much of my salary is going toward them."

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Control your college debt

Reduce the debt you take on, if at all possible. "Find all the free money first," in the form of scholarships offered not just by your school, but by foundations and other organizations, advised Kevin Stump, the higher education coordinator for NYPIRG. If you have to take out loans, government loans are typically better than private loans, which carry higher rates of interest. Collegefinancecenter.org is a great tool to use to find scholarships and help you make a step-by-step plan so you know what you're getting into.

Plan, plan plan. Or "start with the end in mind," as Jay Fleischman, a consumer protection attorney and partner at Shaev & Fleischman, LLP, advises. While a four-year college once served as lovely place to discover your enthusiasms and strengths, it has become an extremely expensive laboratory for self discovery. "You are making a financial investment and that investment must bear a return," said Fleischman. If you simply want to get a feel for college life, community college is a less expensive option to experience samples at the educational buffet: You can transfer when you figure out your major.

Figure out what works for you. "A lot of folks are going part time or working their way through school," noted Jen Mishory, deputy director of Young Invincibles, a national youth advocacy organization. Almost a third of all undergraduates work more than 35 hours a week. It may be advantageous to delay college for a year while you live at home, work full time, and save up money. Whatever you do, avoid credit card debt, which carries a horrendously high rate of interest.

Reduce college costs. The average textbook for an introductory course costs $176. You can whittle down textbook costs by looking out for campus book swaps, using the price comparison engine of CampusBooks.com, checking out the prices at Half.com and Amazon.com, renting textbooks at Chegg.com, or getting e-books at CourseSmart.com according to Nicole Allen, the affordable textbooks advocate for The Student PIRGs.

Think for yourself. Don't sign anything you don't understand. And don't assume that college is the only way to pave a path to a lucrative career. "You can make a very good living in some trades," noted Celeste Gertsen, a Portchester psychologist in private practice who worked at SUNY Stonybrook. "But vocational paths are just not promoted."

After college. Go to nslds.ed.gov, the National Student Loan Data System. You not only can obtain "exit counseling," but may be able to consolidate your loans at a lower interest rate. Too, certain kinds of government and public service may entitle you to wipe out a portion of your government debt.