When college doesn't pay for itself 

Many former students working steadily at white-collar jobs still can't pay their loans. Should they have settled for a place at McDonald's instead?

click to enlarge Amy Peck "Property of Sallie Mae" T-shirt image
  • Brian Chilson
  • IN DEBT: Disgusted by how much she still owes Sallie Mae on her student loans, Amy Peck designed a "Property of Sallie Mae" T-shirt.

Amy Peck works a lot. Sometimes this makes her angry. Mostly it just makes her tired.

For 12 years, Peck has spearheaded outreach efforts as a salaried employee in Arkansas museums. For the past 14 years, she's been paying back the $13,465 she borrowed to obtain her bachelor's in fine arts degree from Atlanta College of Art.

Each month lender Sallie Mae deducts several hundred dollars from Peck's bank account for a payment that's roughly 30 percent interest. That means only 70 percent is actually applied against her remaining principal of $6,748. To keep up with these payments, she bolsters her $44,250 salary at the Old State House Museum with a part-time retail gig. For the past nine years, she's had to work two or three jobs, sometimes logging 70 hours a week.

Peck, 40, grew up in Louisiana. She attended college in Ohio before transferring the Georgia art college. But economically, Arkansas has suffered the most from her prolonged relationship with top college lender Sallie Mae. "If it weren't for these loans, maybe I'd buy a house. I certainly didn't expect to still be living in an apartment" this far out of college, she laments.

Peck has paid about $28,000 toward the loan of $13,465. She estimates that she has at least $10,000 to go. Her debt-load has stymied her life goals. "Working two jobs impacts my ability to meet people and date," she says. "I can't afford a house or children. I just turned 40, and I literally have no life."

Back in 1990, neither Peck nor her parents understood the policies governing student loans. Peck chose Atlanta College of Art because it seemed more studio-based than art programs at public universities. She and her parents thought they could handle the cost of a private education. "We didn't think we were borrowing extravagantly. We thought of $13,500 as a car note, paid off in five years," she recalls.

But it's not like a car note. Most students don't pay on their loans until after they've graduated, when, in most cases, interest has made the debt much higher than the original loan.

In his spring 2010 study of 199 University of Arkansas students, University of Arkansas human development professor Dr. William Bailey found that students tend to overestimate their financial aptitude. "Most students feel they can handle any sort of debt, but their responses to empirical questions indicate a high degree of financial illiteracy," he said. "There's a conflict between their confidence level and their actual knowledge. This makes sense developmentally because, without this confidence, people wouldn't do things like buy houses or have children."

But he's seen this confidence erode in recent years. "More and more, young adults are delaying these 'normal' behaviors. My junior and seniors are very concerned about the current job market and their future pay scales," he added.

The real cost of spending four to six years pursuing a degree in higher education is much steeper than tuition alone. "At the University of Arkansas, you pay about $80,000 for tuition, books and living," said Bailey. "Then you add opportunity costs to that. Instead of college, you could've worked at McDonalds for $10 an hour. That's another $80,000. So the actual costs are anywhere from $120,000 to $160,000."

According to Bailey, Arkansas's lack of high-paying jobs contributes to a high rate of student loan defaults — at 12.3 percent for public four-year colleges, it's the highest of any state. "Many graduates who stay in Arkansas can't find jobs," he said. "So they can't pay their loans, or they leave, find jobs and exercise their spending power elsewhere. They may have been educated at some cost to Arkansas, but they're buying houses and cars in other states."


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