Debt 101: our system now saddles students with loans that make low-paying but meaningful work impossible. Here's how to fix it

Washington Monthly, March, 1993 by John Heilemann

Since its debut the night before the Clinton inauguration, Fox television's new baby-buster series "Class of '96" has been called a lot of things--many flattering, some critical, even a few unprintable in a family magazine. But no one seems to have noticed that "Class of '96" is, incidentally, a legacy of the Great Society. Not that the show's treatment of campus life is especially liberal or PC. Instead, it's that "Class of '96" owes its plausibility to an idea hatched by Lyndon Johnson in 1965: rederally subsidized college loans.

The predictably pimple-free characters that populate Havenhurst, the ersatz Ivy League school where the show is set, don't all hail from "Beverly Hills 90210." The hero is working-class Irish; another is a poor, black Brooklynite; others are resolutely middle class. If their fictional financial aid files ever get opened on the air, you can bet student loans will be there in abundance. And for the real-life counterparts of students like these, government-guaranteed student loan programs are essential to paying for private and public universities alike.

According to the College Scholarship Service, the average student today finishes school $10,000 in debt. For graduate students, the figure is a crushing $35,000. This level of indebtedness among young adults is unprecedented in American history. Indeed, for all the media hubbub about twenty-somethings, the one thing that really sets them apart from their elders isn't Nirvana or lumberjack shirts, but coming out of college deep in hock. Forget Generation X. Call them Generation Debt.

There is sad irony in this. The loans which once promised to open doors for young people have instead ended up trapping them inside what Generation X author Doug Coupland calls "Student Loan Prison." Having taken the money to pay for a degree, students are frequently forced to make a bitter compromise: They must, after college, give up doing socially useful but ill-paid work, like teaching or public-interest law, and settle for uninspiring jobs that bring in enough to cover hefty monthly loan payments. For others (usually the less well-off), the fear of Student Loan Prison has them thinking twice about going to college at all.

Fortunately, there's a straightforward way of reforming the student-loan system that will make it more efficient, more accessible, and less punitive to those who want to chase their ideals before jumping on the fast track. And Bill Clinton knows all about it. But trouble looms. The interests with a stake in keeping the current system are circling, and Clinton's simple idea for fixing the loan program is bound up with his entirely admirable--but infinitely more complicated--plan for a sweeping national service scheme. There's a simpler way to fix the problem, whether national service ever comes to pass or not.

Just as higher education has become more and more necessary, it has also become less and less affordable. Between 1980 and 1990 the cost of attending the average college soared by an astonishing 126 percent--way ahead of inflation and, more importantly, way ahead of median family income. With college costs skyrocketing, families have turned increasingly to the government to keep up. Where loans once accounted for 15 percent of the total student-aid budget, they now make up fully half of it. In part, that's because middle class kids who once counted on mom and dad to foot the bill are now lining up for loans. Meanwhile, for poorer kids, grants are tougher to get, and grant levels have not kept pace with rising education costs.

Thus, federaly guaranteed student loans--also known as Staffords--have become the bread-andbutter of student aid. In 1980, the government loaned out around $6 billion in Staffords; in 1992, the figure was $14.6 billion. More than a third of all students today take out such loans. And that's only at the federal level: These same students and millions of others also borrow from state governments and individual colleges. No doubt most are grateful. In the absence of alternatives, low-interest loans are often the most sensible--and sometimes the only--way to get hold of the costly keys that open so many doors of opportunity. And to the extent that student loans have helped millions of young Americans do just that, they have been a success.

But that success has come at a price not easily measured in dollars and cents. Take Carl Botterud, who graduated last year from Whittier College of Law in California. Botterud had thought about doing public-interest law; then, after contemplating his $50,000 debt--or $600 a month--he thought again. Many public-interest attorneys earn about $25,000 a year, if that. Now he's working for a mid-sized law firm in Los Angeles for $48,000 a year.

Such stories are typical among the members of Generation Debt. Forget working as a doctor at a free clinic in Anacostia; or heading to Central America for Catholic Relief Services; or working as a house painter while you write a book of poetry; or starting a program like Teach for America. With any of these jobs, you'll be in default before you can say "slacker."