A college degree has traditionally been viewed as a virtual guarantee of a better-paying job and a higher standard of living. And on the whole, that remains true. The unemployment rate for Americans with only a high school education is 9.2 percent — more than double the rate for those with college degrees. The median weekly earnings for high school graduates last year was $638, according to government data, compared with $1,053 for college grads.
But with the recent recession prompting layoffs at white-collar law firms and investment banks as well as auto plants and construction companies, more Americans are finding themselves out of work and deep in debt. At a Senate subcommittee hearing last week, Treasury Secretary Timothy F. Geithner said the cost of higher learning should reflect the quality of education received.
Many students “haven’t been able to earn a return that justifies the expense,” he said.
Over the past decade, the cost of college rose between 2 and 6 percent per year, depending on the type of institution, according to the College Board.
Meanwhile, the New York Fed estimates that Americans owed $870 billion in student loans during the third quarter of last year, significantly outpacing credit card debt or auto loans. Borrowers age 60 and above accounted for 5percent of that debt. The share for Americans age 50 and older is 17 percent.
In some cases, student debt has been a burden for even financially responsible older Americans.
Maxine Bass, 60, of Minnesota said her granddaughter dreamed of going to college since she was a child. But her mother could barely afford to provide her lunch money, much less pay for tuition. Bass had good credit and a steady job.
So when her granddaughter was accepted into St. Catherine University to study biology, Bass said she gladly co-signed for a $38,000 loan with her. But when the granddaughter fell behind on the payments as she hunted for a job with a decent salary, Bass’s own finances took a hit.
“I went into a panic, like, what was I gonna do?” Bass wondered.
Because of late fees and missed payments, Bass said she and her granddaughter owe about $69,000. They are now contributing monthly, but Bass is worried she won’t be able to catch up.
“Many parents who thought they were headed to retirement with a college-educated child end up continuing to work because of student debt that can’t be paid,” Sen. Richard J. Durbin (D-Ill.) said at last week’s hearing.
Durbin has introduced legislation that would allow private student loan debt to be discharged in bankruptcy, though borrowers would still have to pay off any federal loans. Sallie Mae, one of the nation’s largest private student lenders, as well as consumer groups support all types of student loans being forgiven during bankruptcy. Last year, President Obama addressed the issue by easing the repayment requirements for federal student loans. The new rules allow borrowers to pay 10 percent of their income for 20 years before the loan is forgiven.
Still, the bill would only address one aspect of what many believe is a more fundamental problem: the cost of college. Until that is solved, Suzanne Martindale, an attorney with Consumers Union, said she anticipates older Americans’ share of student loans will only increase.
“This current generation of borrowers is going to be a generation of seniors who are burdened with debt,” she said.