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Finaid.org clock offers sobering message about rising student loan debt

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By Michelle Singletary
Thursday, September 2, 2010; 4:46 PM

In Midtown Manhattan two years ago, the billboard-size clock that keeps track of the U.S. national debt ran out of digits when the figure ballooned to $10 trillion.

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It wasn't long before a solution was found to again tick, tick, tick away how deeply the country is in the red.

Now there's another clock, only this one is online, ticking away the amount of student loan debt being amassed by college students and their parents.

Mark Kantrowitz, publisher of finaid.org, one of the best sites for college financial aid information, has posted a Student Loan Debt Clock, www.finaid.org/studentdebtclock, that keeps a running tally of the outstanding federal and private student loans.

The last time I checked, the total was more than $848 billion. I watched in awe as the last five digits kept changing, pushing the debt load to a level that is, frankly, hard to fathom. It's a total, I realize, but I also know - and you probably do, too - what a financially debilitating effect this much student loan debt is having on families.

To develop the clock, Kantrowitz started with a conservative estimate of $665 billion in federal loans outstanding as of June. For private student loans, he used a repayment-trajectory model that he put together in addition to annual new loan volume data. Those calculations yielded $168 billion for private student loans. Combine all this debt and you get the starting estimate of $833 billion. The total debt figure is then increased by $2,853.88 for each second since midnight June 30, he said. The total debt outstanding will be more explosive at the beginning of each semester, when most student loans are disbursed.

Kantrowitz is quick to note that the student loan debt clock is an approximation and is supposed to be used for entertainment purposes. Okay, but there's nothing entertaining about this alarming clock. It makes as strong a statement as the national debt clock does.

"Hopefully, greater awareness of the aggregate magnitude of education debt will encourage families to minimize their student loan debt," Kantrowitz said.

He tries to discourage people from borrowing too much. Most recently on finaid.org, Kantrowitz released tips for families, including a recommendation that for a student's entire education, one should not borrow more than the expected starting salary upon graduation. Great advice, except many students and their parents don't bother to figure out what that starting salary might be before signing loan documents. I'm not including the students who are clueless about their career path as they add to the debt clock.

If you borrow more than twice your starting salary after college, you will be at high risk of default, he said.

Kantrowitz has another reason for posting the clock. He wants to draw attention to the inadequacy of need-based grants. The federal Pell Grant Program, which provides grants to low-income undergraduate and certain post-baccalaureate students, should be expanded. A Pell Grant, unlike a loan, does not have to be repaid. Kantrowitz suggests doubling the maximum grant, which for the 2010-11 award year (July 1 to June 30) is $5,550.

"Such an investment will increase the number of low- and moderate-income students graduating with bachelor's degrees by 200,000 to 300,000 a year, ultimately paying for the cost of the increase in grants through greater federal income tax revenue," he estimated.

In a report to Congress and the Education Department, the federal Advisory Committee on Student Financial Assistance found that inadequate need-based grants limit the ability of students from low- and moderate-income families to attend four-year colleges. In "The Rising Price of Inequality," the independent panel warns that if aid isn't increased, the percentage of qualified low-income students who receive bachelor's degrees will drop significantly.

We all know there is a growing gap between the haves and have-nots. In this case, it's the people who have enough money to go to college without debt and those who are burying themselves or their parents in debt for decades. The problem is that the conventional wisdom - a college education will pay off - isn't a guarantee in an economy with high unemployment and starting salaries that are insufficient to service the monthly student loan payments many people are taking on.

So if you're borrowing for college, go to finaid.org and just watch the clock for a little while. Take in its message as you view the debt total growing second by second. It's haunting. It's crazy. It's sad.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071. Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions might be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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