Chris Brennan’s student loan story is a cautionary tale for today’s – and tomorrow’s – college students.
He borrowed $15,000 in his final year at the University of St. Thomas in St. Paul while earning his undergraduate degree. He went back to the school in 2009 after the non-profit where he had worked since graduating in 2001 downsized during the Great Recession and laid him off.
Brennan took out another $25,000 in student loans for graduate school. His wife, Emily, returned to the University of Minnesota for a master’s degree in public health and accumulated $50,000 in student loans.
Brennan, 35, lives in St. Paul and is now a high-school social studies teacher who loves his job. He starts his second year of teaching this fall; after five years, $5,000 of his loans will be forgiven.
His wife works at a hospital. They own a house and have three children.
And they haven’t paid off their student loans.
“It’s going to take a long time,” says Brennan – maybe 15 or 20 years. “We’re struggling financially right now.”
Brennan says he and Emily had no choice but to borrow to get the education they needed, but he wishes he had gotten more blunt advice before he signed the loan documents.
He should have pressed his academic adviser and financial aid officials about his job and income prospects while he was earning his undergraduate degree in justice and peace studies, he says.
The questions he should have asked, Brennan says: “How much money will I make? Will I be able to pay this back?”
He advises students to ask those tough questions and be realistic about taking on a mountain of debt. That’s difficult for young students, he acknowledges. “My own mindset was, I was in college. I wasn’t thinking about anything,” he says.
“Don’t say, ‘What the hell.’ It does matter,” he says.
House passes compromise loan bill
The U.S. House of Representatives on Wednesday passed a compromise bill that links student loan interest rates to 10-year Treasury notes and eliminates the requirement that Congress determine rates each year.
The U.S. Senate has passed a similar version of the legislation.
If the proposal becomes law, the interest rate for undergraduates this fall would be 3.9 percent. Graduate students would pay 5.4 percent. Rates would increase in coming years if the economy continues to improve.
The bill would cap interest rates at 8.25 percent for undergraduates and 9.5 percent for grad students.
Whatever interest rates they’re paying, says Terry Nelson, a certified financial planner in Roseville, many students “are taking on way too much debt for college.”
Too often, he says, “students don’t plan through the job opportunities out there in their field. They just want to follow their dreams.”
Nelson recommends that students and their parents approach paying for college as a business decision.
“Kids need to look at themselves as an asset,” he says. “They need to know that their job opportunities are going to be able to pay for that expensive degree.”
Focus less on the status of degrees from high-priced, top-tier universities, he suggests, and pay more attention to tuition costs. Consider starting at a two-year school. Sometimes enlisting in the military is a solid option for someone who wants to get experience that helps hone career decisions and needs help paying for college.
As Brennan learned, it’s vital to “focus on earning potential,” Nelson says. Students who choose to major in a field where jobs are difficult to find, he says, should consider a minor that translates more readily into an entry-level job.
Students should apply for paid internships or jobs so they can earn while attending school, Nelson says.
Accumulating additional debt after college is another trap for people embarking on their careers. “They come out of college with way too much debt, then go buy a house … and a couple of newer cars and they are up a creek for the next 30 years,” he says.
Ashley Hall, 26, doesn’t want that sort of future.
This fall she’ll start her second year of veterinary school at the University of Minnesota and expects to need – for the second year in a row — $75,000 in student loans for her out-of-state tuition.
She and other students dependent on loans “have this cloud over our heads that we’re constantly thinking about,” she says. Hall’s husband is working two jobs; they have a 5-year-old son.
They sought advice on their fiscal future from a financial planner and know some lean years lie ahead.
“It’s kind of scary,” Hall says, “but we’ll find some way to make it.”
Defaulted on loans
Tanya Meintsma of New Brighton is afraid student loans have helped land her in a similar predicament.
She took out $60,000 in student loans and enrolled in a two-year surgical technologist program at High-Tech Institute. She graduated in 2007, just as the recession was taking hold.
She’s never been able to find a job as a surgical tech, in part because of some personal setbacks, and Meintsma now earns $9 an hour working in a call center. Earlier, she worked at Walmart and in a plastics factory.
“Nobody knew the economy was going to crash,” she says. “I wish I had gone to school part-time and paid it off as I went.”
Meintsma, 33, has defaulted on her loans and recently received a letter saying her debt has been bought by a third party that is increasing the pressure on her to start making payments.
“I’ve just been ignoring them. What else am I going to do?” she says. “You can’t be upset over something that’s out of your control.”
Meintsma says she has few options. She could go back to school for a four-year surgical tech degree in hopes that would make it easier to find a job in the field, but that would mean taking out still more student loans.
She hates her current job, which she got through a temp agency, she says. “I am better than this job,” she says. “It lowers your self-esteem.”
Meintsma, who has a 12-year-old son, worries that her mistakes will affect the rest of her life.
“I have no credit. I’ll never be able to buy anything,” she says. “I have no assets. I don’t even have a checking account.”
$200,000 price tag
Jeff Remakel considers himself lucky.
His parents helped pay his undergraduate tuition at the University of Minnesota, so he didn’t need student loans until he enrolled in dental school.
The price tag: $200,000. His parents loaned him $50,000 and he got the rest from subsidized and unsubsidized government loans. Not bad, he says, compared to some classmates who have “easily $300,000” in student loans.
Still, Remakel says, he’ll be writing checks for the equivalent of a monthly mortgage payment “for the next 10 years” to pay back his loans. He graduated in 2011 and works at a large dental practice in St. Louis Park.
He can afford the loan payments, says Remakel, 28, but he thinks now about ways he could have made college more affordable. He could have completed his undergraduate degree in three years instead of four, he says, and he could have taken some college-level courses for free while he was in high school.
“Live smart. You don’t need a fancy car,” he advises current students and other recent graduates. “Create a budget.”
Remakel says his student loan debt affects his life now. “Your savings don’t go up as much when you’ve got big student loans,” he says, and he hasn’t been able to “give back to patients on medical assistance” as much as he’d like.
When he has a family, he says, he’ll definitely do what his parents and grandparents did: Start a college fund early.
‘I wish it was different’
Brennan says he’s resigned, not bitter, about his student loan debt.
“I wish it was different,” he says. “I wish I didn’t have to put all our money” into loan payments.
“I made the choice,” he says. “No one made me do it, but it affects our life right now and how we live.”
There’s no way to make student loan debt disappear, Brennan says, “You’re just stuck with it no matter what. It’s a different look at the American dream, though, compared to 40 years ago.”