THE NEW LOST GENERATION: Part 1

By Darryl Holliday

Jourdan Robles has done everything right.

Having graduated from Columbia in December 2010 with a degree in theatre, the 23-year-old newlywed is keeping up with payments when it comes to her student loans.

But she’s still approximately $35,000 in debt.

When you take into account the student loan debt of her husband, also a Columbia alumnus whose concentration was music business, their joint debt is nearly $60,000.

“I think I went about [my loans] as well as any 19-year-old could have,” she said.

Even though they chose to pursue degrees in the notoriously unremunerative arts, the couple still finds the pressures of owing so much money stressful. Like many college graduates from Columbia as well as nationwide, they are increasingly feeling the heavy weight of debt—leading many to default in staggering numbers and become saddled with higher interest rates as punishment.

The Chronicle’s review of Illinois school default rates, provided by the U.S. Department of Education, shows that Columbia, a private not-for-profit college, has the highest rate of students defaulting on their loans of any major private, not-for-profit, four-year college in the city of Chicago (schools that don’t offer master’s degree programs were excluded from this list).

A student loan is considered in default when non-payment of a monthly installment has persisted for 270 days. So, put another way, Columbia students are more likely to fall out of compliance with student loans than the largest private, not-for-profit city schools, according to federal data. Likewise, Columbia, with a 7.4 percent default rate, is in excess of the average national default rate for private schools, which stands at 4.6 percent for 2009—the latest figures available.

By contrast, in 2009 the University of Chicago and Northwestern University had relatively low default rates of 1.1 and 1.2 percent, respectively, Robert Morris University and the School of the Art Institute of Chicago were above the national average at 5.8 and 6.9 percent, respectively, while Loyola University and DePaul university had rates of 3.5 and 2.4 percent.

Numerous attempts to contact Columbia’s administration for comment were unsuccessful.

The high default rate may reflect Columbia’s nontraditional students, who studies suggest are at greater risk of default, the intense competition for creative jobs and the reality that many jobs in the arts do not pay well. Columbia’s default rate, like the national average, has risen steadily in recent years.

Now approaching an all-time high of more than $1 trillion, overall student debt is due to surpass overall consumer credit card debt for the first time ever. Similarities to the 2008 mortgage crisis have prompted many experts to cite the increasing student debt as the next financial bubble.

According to the 2010 factbook of the college’s Office of Research, Evaluation and Planning, Columbia students getroughly 66 percent of their financial aid money through government loans, 15 percent from government grants, 11 percent through private loans from corporations such as Fannie Mae and Freddie Mac, 7 percent or so from Columbia scholarships, such as the—Fischetti Award—and less than 1 percent comes from external scholarships. Seventy-four percent of Columbia students receive one of these forms of aid, the majority of which contain a mix of Stafford unsubsidized loans (64 percent) and Stafford subsidized loans (59 percent), among others.

The factbook further breaks down those loans into demographics—an important factor in understanding default.

According to a 2009 study from researchers at Indiana University, titled “What Matters Most in Student Loan Deficit: A Review of the Research Literature,” age, race, family structure, income and academic enrollment eventually come into play regarding a student’s likelihood of default.

“I think it’s an emerging problem,” said Jacob P. K. Gross, assistant professor of higher education at the University of Louisville and co-author of the default study.

“What’s happened in the U.S. is that people used to pay for college primarily through grants and then they’d take out loans—we have reversed that 100 percent. For the most part now, people use loans and [then] grants to clean up the rest. Loan debt has been increasing a lot because of that. At the same time we’ve got a struggling economy. With a combination of those things, you’d expect higher default. It’s really problematic.”

While it could seem at first glance that Columbia is at fault when it comes to a higher-than-average default rate, Gross said that may not be the case. Columbia’s mission statement involves a mostly open enrollment process that is geared toward providing students of all incomes and ethnicities with a chance at a good education—students who may typically be passed up at more prestigious colleges that employ a more selective enrollment process and are frequently less diverse.

Columbia’s diversity, while likely contributing to a higher default rate, is one of its strengths. While black students make up 16 percent of the school, Hispanic/Latino students 10 percent and white students comprise 62 percent, minority students across the board receive more financial aid dollars: 85 percent of black students, 93 percent of Hispanic/Latino students and 72 percent for white students.

However, the fact remains that minority and low-income students are more likely to default on loans, largely through systemic racism and significantly lower levels of post-grad employment, according to Gross.

“My fear is that open-access schools that try hard to graduate their students will be penalized [for higher than average default rates],” Gross said, noting that those schools play an important role in society because they are open to students of all incomes and backgrounds—not just the rich. “My issue with default rates is that they are correlated with things like how much money students have, how many low-income students there are and how many students of color are enrolled.”

As early as the 1970s, the emphasis in federal higher education policy began shifting away from grants and toward loans as the principal means of providing financial assistance to low and moderate income families, according to the report.

However, it still isn’t clear what role and to what degree a college contributes to student default.

“There’s some evidence that some colleges can play a more direct role in helping students not default once they go into repayment,” Gross said. “It’s not that colleges can’t do anything, it’s just that people who research this aren’t sure what colleges can specifically do.”

Some experts feel the full extent of the crisis will take years to play out before the opportunities lost to this generation can be assessed.

“I think we’ll continue to see increases in the default rate and the impact of default will [affect] every aspect of a person’s life,” Gross said. This could conceivably mean

deferring marriage, home buying, birth of children, entrepreneurism and philanthropic activities.

A recent study by Generation Opportunity, a nonprofit public engagement group, found that 77 percent of 18-29 year olds will delay a major life change due to economic factors.

Robles, to a certain degree, is an outlier who is comfortable with her choices.

“What I’m most in debt for is living [in Chicago],” she said. “Columbia is expensive, but it’s also expensive to play here and it’s expensive to eat here.”

Though she lives in Pilsen—a relatively cheap and increasingly popular area for artistically inclined 20-somethings—the cost of living, along with debt, makes it necessary to live frugally.

Robles is better off than most recent grads—she’s been paying off her loans ever since her freshman year, having paid for most of that first year with savings she accumulated in high school.

Despite nearly $400 monthly payments between her federal and private loans—not including her husband’s loans—Robles said she has never defaulted.

“I have a 15.5 percent interest rate and that was on [approximately] 16 or so thousand [dollars],” she said. “Watching the interest rate grow and grow made me physically sick. So I just kept making payments.”

Robles uses phrases like “lump sum” and “repayment” with an ease suggesting hours spent researching. She said her mother made it clear what she, as a young college student, would be getting into financially—also that she was on her own when it came to being on top of it. Her grandmother co-signed her first loan, but Robles has largely managed her own repayments since then.

She said many people she knows who are defaulting share a certain attitude—something of an “I’ll-just-go-to-grad-school-and-defer” attitude. The result is to put off dealing with repayments.

“I think a lot has to do with how they started off when they finish school,” she said, noting that graduates are in debt before they even receive a diploma. “And you still have to feed yourself, and you

can have a million roommates, but it’s too much. They just can’t get out from under it.”

This feeling is shared by millions of college students who, through lack of proper planning, socioeconomic circumstances or relatively unmarketable majors, find themselves in debt and under-employed.

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