|Report: School Debt Strangling Grads' Incomes|
|By CARA NEWLON||Jun 18, 2013, 11:34 AM|
After five years in the U.S. military and two tours in Iraq, 28-year-old Brandon Anderson finally expects to graduate next year from Georgetown University with a $26,000 starting salary.
He also anticipates graduating with $25,000 in student loan debt—a sum that will increase if Congress fails to stop the July 1 doubling of interest rates on Stafford student loans.
"It has been too much a couple times," says Anderson. "Because my family's already in debt…there have been times that I have felt the education that I'm getting is not worth it. The $4,000 … $4,500 that I pay per class is perhaps not worth it."
According to a report released today by the Joint Economic Committee, for the average student graduating in 2011, college debt amounts to 60 percent of their annual income. At around $1.1 trillion, student debt now exceeds auto loans and credit cards as the largest source of household debt, not including home mortgages.
They predict that a doubling of loan rates would cost students like Anderson, who borrow an average amount of about $27,000 to finance their education, an additional $2,600.
Congress is now locked in a fight over how to prevent student loan rates from doubling from 3.4 percent to 6.8 percent at the end of the month. But with fewer than two weeks remaining, there are still deep differences between Democrats and Republicans on the issue.
For students like Anderson, however, student loan debt only adds to a series of hurdles he has had to overcome to achieve economic mobility.
At 14 years old, he dropped out of his Oklahoma City high school, citing "family issues." He lived on his own for close to two years, getting his GED at 17 years old and joining the Army. But while he was deployed in Iraq, his mother became critically ill.
"My mom was put in a transplant list," says Anderson. He returned from Iraq on furlough so he could be with his mother when she died. "My dad had to retire early. My mom passed before she retired. We didn't have very good insurance."
Now, Anderson must cope with not only his mounting student debt, but his family's medical debt. He has taken two internships, and pinches every penny. It's still not enough," he says.
"After joining the military, I thought that the amount of money they paid for would go a lot further than where it goes now." Anderson receives around $20,000 a year from the GI Bill, which fails to cover the $55,000 to $65,000 per year of a Georgetown education.
There is bipartisan acknowledgment that the student debt burden has become untenable, with both Republicans and Democrats touting the slogan "Don't Double My Rate."
Obama's plan also calculates interest rates by adding a small percentage to the 10-year Treasury note, but locks the rates for the life of the loan.
House Republicans have a proposal that is similar to the president's but it adds a larger percentage to the 10-year Treasury note. And their proposal allows rates to vary like an adjustable mortgage, a feature that has prompted President Obama to threaten to veto the plan. Under the House Republican proposal, rates are capped at 8.5 percent.
Senate Democrats have put forward several proposals, but the primary one—sponsored by Senate Health Education, Labor and Pensions Committee Chairman Tom Harkin—would leave rates at 3.4 percent for two years, giving Congress time to find a long-term fix when they reauthorize the education bill.
So far none of the Democratic or Republican plans have garnered enough support to reach the 60 vote threshold for passage in the Senate.
Even if rates are kept low for student loans, the sheer amount of debt, experts agree, hold young college graduates back from other activities like buying cars, houses, or pursuing graduate degrees.
In the Joint Economic Committee report out today, Democrats offer several proposals, including loan forgiveness for students who pursue public service jobs, restructuring loans based on financial hardship, and converting private loans to federal loans so that students can take advantage of income-based repayment programs.
Nathaniel Tisa, Georgetown's current student body president, will have accumulated around $40,000 in student loans when he graduates next year. He wants to attend law school directly after graduation—but realistically, his debt will hold off his attendance for another three years.
"This does touch on that American Dream," says Tisa. "I'm not going to buy a house for as long as I can. That affects the economy…You can't have $1.1 trillion inhibiting the next generation of workers."
Indeed, two million more adults now live with their parents than before the recession. Yet with Congress gridlocked over simple interest rates, the situation seems unlikely to improve.
"I'm always worried," says Anderson. "And yet, I will certainly move forward with my education. I won't stop. I'll get it."
ABC News' Abby D. Phillip contributed to this report.