Average number of credit cards is 6 per person,
Debt Consolidation Expert
By Alex Distefano
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The first step, of course, is a bachelor's degree, the minimum requirement for most of the jobs typically associated with upward mobility. Recipients of four-year degrees have much higher average earnings than people sans sheepskins$52,200 for a full-time worker with a college diploma, versus $30,400 for a mere high school graduate. For the Kid, college is where he'll start climbing the economic ladder.
It's also where he'll start digging his financial hole. The notion of skyrocketing tuition is such a cliché, it's easy to miss exactly how steep the increase has been. Over the past decade, according to the College Board, average tuition and fees in real dollars rose 47 percent at public four-year colleges, and 42 percent at private four-years. Just in the past year, tuition and fees nationwide rose an average of 14.1 percent; in New York, where Governor George Pataki cut $184 million from the State University of New York budget, a 35 percent tuition hike is on the table.
So a year at Big State U will run the Kid $4,694, not including room and board (which averages another $5,942 in 2003-04). Unless he can snag substantial financial aid, the private route is almost out of the question for the Kidtuition and fees average $19,710 per year, plus $7,144 for a dorm and three squares a day.
Federal Pell Grants were once a boon to students like the Kid, but no longer. In 1980, the average Pell Grant covered 77 percent of the cost of a four-year public college; to-day, it's just 40 percent. Worse yet, despite President Bush's brief State of the Union aside about "larger Pell Grants for students who prepare for college with demanding courses," obtaining a Pell is harder than ever. The Department of Education recently revised its eligibility guidelines, which will exclude 84,000 students from the program entirely, and reduce awards for 1.5 million.
If the nation's commitment to economic mobility is genuine, it's hard to understand the logic behind the Pell Grant cutbacks. When the Minnesota Private College Research Foundation studied the post-graduate fortunes of the state's class of 2002, for example, it found that recipients of state grants earned average incomes on par with their peers who hadn't received aid. "Few other government programs are capable of producing such a positive transformation," the Minneapolis Star-Tribune wrote. Yet federal grants were slashed despite the evidence of their value. Perhaps those who've suffered as a result of Pell cutbacks can take solace in the fact that the money may go toward helping astronauts walk on the moon. Again.
Shafted by the Pell system, the Kid has to pay a visit to a federal loan office or a private bank, just like over 60 percent of his post-secondary peers. The average student loan debt for an undergraduate like the Kid is $18,900, up 66 percent since 1997; over the same time period, by way of comparison, per capita income in real terms increased by just 8 percent. Kathryn Rube of the Public Interest Research Group's Higher Education Project says surveys reveal that nearly 40 percent of these debt loads can be classified as "unmanageable"in order to service the debt, recent graduates must fork over more than 8 percent of their monthly income. And over a third of student borrowers are simply not prepared to meet their debt service obligations once they've left campus.
But we're jumping ahead a bit here, for the Kid has yet to earn that coveted bachelor's. Like three-quarters of his fellow higher-education enrollees, the Kid needs to work while taking classesbooks don't buy themselves, as a snarky parent might say. For undergraduates who identify themselves primarily as studentsas opposed to full-time workers taking classes in their spare timethe average number of hours worked per week is 26. Since the Kid is working to meet expenses, rather than to further his career ambitions, he doesn't have the luxury of taking on an unpaid internship, or even a work-study job with a modest stipend. Instead, he slings ribs at the local chain restaurant, and the hours spent amid the grease have a predictably deleterious effect on his grades.
The other financial ogre the Kid must contend with are credit card shills, who swarm his campus like ants on a picnic chicken. Colleges make millions off credit card hawkers, who pay for the privilege of setting up kiosks or affixing a school's logo to their plastic. Students, in turn, get stuck with deceptively marketed cards at near usurious rates. True, the students deserve some blame, especially when they charge needless luxuries. Groceries and books, however, don't qualify as needless.
The good news, if there's any, is that the average credit card balance among the Kid's demographic has slipped a smidge since 2000 to $2,327; the bad news is that 21 percent of card-toting undergrads have balances between $3,000 and $7,000the high end marking a 61 percent increase from 2000.
The twin burdens of debt and after-hours work, piled atop the rigors of hitting the books, are a big part of why 600,000 undergraduates drop out of four-year schools each year. According to College for All? Is There Too Much Emphasis on Getting a College Degree?, a 1999 study published by the U.S. Department of Education, those dropouts end up making less long-term than peers who earned only an associate's degree. "In addition," the authors add, "they (or their parents) pay more in tuition and are more likely to have student loan debts than are 2-year college students." In other words, the gamble on a bachelor's came up snake eyes.