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Ryan Johnson, Published March 23 2013

A mortgaged future: Few options for area college graduates facing large student loan payment

FARGO - Financial counselor Duane Emmel says Benjamin Franklin’s famous quotation is missing one certainty of modern-day life.

“It’s sort of like death and taxes, and student loans,” he said.

A new report from the New York Federal Reserve shows it’s a familiar certainty for a growing number of Americans. Nearly 40 million now have student loans, with an average of $25,000 per borrower.

The nation’s total student debt nearly tripled since 2004 to $966 billion by the end of 2012, the report shows.

But with limited options to make the payments more manageable after school, graduates are faced with tough financial decisions. They may need to delay buying homes, upgrading vehicles or even starting families when the income they get from their first decade or more of a post-college career is devoted to paying off their education.

Jodi Schultz, a 2007 University of North Dakota graduate, said she’s “drowning” in the more than $70,000 of debt she took on to get a bachelor’s degree in forensic science and biology.

“The 18-year-old getting into all of these loans, they don’t understand what it really entails,” she said. “A lot of people think, ‘I’m going to get out of college and have a great job right off the bat.’ Well, it doesn’t usually work that way.”

Schultz, who lives near Glyndon, Minn., said she spent years trying to crack into the forensic science field, landing an unpaid internship with a Las Vegas coroner’s office that still didn’t open doors to entry-level positions.

After unsuccessfully trying to market herself locally as free labor to get more experience, she had to switch her focus to paying the bills when her 3-year-old daughter was born.

Schultz was able to get a job as a health care office specialist, but said more than half of her take-home income goes toward making minimum payments to her four student loan providers. This adds up to about $800 each month.

She’ll celebrate her 30th birthday next month, but she’s nowhere near being able to buy a house. Just keeping up with being a single mother is hard enough.

“If I didn’t have school loans, I would be very comfortable because I wouldn’t have to be worrying about this,” she said. “But I make just barely too much to be qualified for any kind of assistance, any income-based anything, and they also don’t look at your debt-to-income ratio.”

An affordable risk?

Emmel said student loan debt is a common piece of the “financial pressure” he helps clients deal with at The Village Family Service Center in Fargo.

There are few options to discharge this debt. Severe or permanent disability can lead to loan deferment, but student loans can’t be dismissed through bankruptcy, and the government can seize Social Security benefits to pay down old loans.

While getting the money is relatively easy, paying off loans often requires a decade or more of sacrifices and tight budgets with monthly payments that can add up to hundreds, or even thousands, of dollars.

“So often I think you’re told just go ahead and borrow the money, you can pay it back someday,” Emmel said. “Well, that’s true, yes, but can I afford to pay it back? That’s the whole question.”

Andy Schaaf said he can afford the $750 obligation he’ll have each month for the next decade. The 2012 North Dakota State University graduate and Hawley, Minn., resident has about $60,000 in loans.

He admits he’s a “relatively unique case.” His career as a pharmacist provides more than enough income to cover the bills, and Schaaf and his wife were able to buy their first house and upgrade to a newer vehicle since he graduated last May.

“I guess I don’t necessarily not buy things,” he said. “I try to just be more conscientious about my spending and where it’s going. I don’t think we’ve really withheld anything.”

Schaaf said one factor that’s on his side is his chosen career path, with a higher earning potential and availability of jobs.

Not all recent graduates have the same prospects, and the New York Federal Reserve report suggests more and more are having a hard time keeping up with their student loans.

About 17 percent of borrowers were past due on their payments by more than 90 days in 2012, up from less than 10 percent in 2004. The report said 44 percent of borrowers are not yet in repayment; excluding those, the effective 90-day delinquent rate is more than 30 percent.

Fargo resident Crystal Farnworth said she hoped the two years of education she recently completed at Rasmussen College would allow her to achieve her dream of working as a police officer or probation officer. But that goal would require completing a $4,000 law enforcement training course and taking a three-month break from working, even with the associate degree she earned.

Farnworth said keeping up with the $300 monthly minimum payments for her $32,000 in student loans will be difficult, especially as she balances that obligation with other bills and raising three children on her earnings as a security guard.

Still, the 29-year-old hopes to find a way to complete the training soon and move closer to becoming a police officer before she’s too old to consider it.

“People spend all this money to go to school, and sometimes they just have too high hopes,” she said. “Maybe a lot of students do, I guess.”

Planning for debt

Schultz said she wants to pay back her debt to the government. That goal has been complicated because she has several types of loans, and various rules and policies prevent her from consolidating the debt.

She said it means she has four payments each month, driving up her minimum costs and resulting in a confusing schedule of payments to different lenders for different bills.

Emmel said these restrictions can make it hard for new graduates to know where they send their payments or how much they’ll owe each month. He said borrowers need to keep up with it because going into default allows guarantee companies to add fees of as much as 40 percent to the debt.

Borrowers do have some options to make the burden more tolerable, including deferment if they go back to school, and income-based repayment that adjusts minimum monthly payments to current earnings.

The Federal Student Aid website, available at

studentaid.ed.gov, can help track down loan information and find out what’s available, Emmel said.

Josh Jangula and his wife, Keri, chose forbearance after he graduated in 2009 from NDSU. He said the option allowed them to delay payments on their $50,000 in student loans, freeing up money to pay down credit cards, get a car and build up savings.

But forbearance is limited to three years, and their break will end in October. There’s another hitch: Interest continues to accumulate on the loans, and an extra $5,000 will be added to their principal.

The Fargo couple has arranged graduated payments to their lenders that will start out smaller and increase throughout repayment to make the transition easier. Still, he said there’s been stress even if they haven’t had to deal with it yet.

“It’s something that always stays in the back of your head,” Jangula said. “It always has been there. We haven’t talked about it much, but as it gets closer, you have to budget enough.”

He said he has no regrets about going to college, and said the economics degree he earned and his wife’s special education degree have allowed them to find good jobs. But he said it was hard to know at the time how the financial choices he was making would affect his future.

“I kind of wish I would have looked at it more, but I’m thankful I have the degree, and those loans were able to get that,” Jangula said.

Don’t go ‘blindly’

Emmel said it’s important for prospective students to not go into their education “blindly.” They should consider how they can cut costs, perhaps by living at home while in school or starting their education at a cheaper community college.

He said they also need to research their chosen career path, including how much they can realistically expect to earn and how much debt they’ll need to take on to get there.

While a doctor may be able to keep up with $100,000 or more of student loans, a teacher may struggle to make the payments on $25,000 of debt.

Once the money is borrowed, Emmel said it’s crucial to stay in touch with lenders, especially if the borrower is having a hard time keeping up with their payments. He said it’s better to have a plan well before the first student loan application is ever submitted.

“If you’re coming to college to find yourself, quit,” he said. “Go hire a therapist. It’s much cheaper.”

Readers can reach Forum reporter Ryan Johnson at (701) 241-5587