How Much College Debt Is Too Much? (Transcript) | WAMU 88.5 - American University Radio

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How Much College Debt Is Too Much?

MS. REBECCA SHEIR

00:00:02
So, yeah, it's true, our national debt numbers in the trillions, but you don't have to owe trillions of dollars to feel like you're stuck between a rock and a hard place. Just ask Amy Letteri. Letteri's halfway through her clinical psychology Ph.D. program at Gallaudet University. She considers herself a pretty smart person, but when it came to paying for her education, well, she's pretty up front about the fact that she made some mistakes. Mistakes that led to some pretty major debt. Emily Berman brings us her story.

MS. EMILY BERMAN

00:00:32
Amy Letteri was the first person in her family to apply to college.

MS. AMY LETTERI

00:00:35
My whole family was like, you are too smart, you can't stay here, you can't do this, like, you are going to go to college.

BERMAN

00:00:41
When she found herself with a stack of rejection letters and not a single acceptance, she didn't really know what to do.

LETTERI

00:00:48
My school was like, here's some things that you can do. And one of those things was like a handful of programs in England.

BERMAN

00:00:55
Doing her first semester in Europe sounded pretty great to Amy. So she enrolled at The University of East Anglia, which would actually be cheaper than a public college here in the U.S. The only hitch was that she couldn't use federal loans to pay for college abroad.

LETTERI

00:01:10
We just thought, well, whatever. That's fine. So my mom took out, like, a private student loan thinking it would be the same. And it's not. It's definitely not.

LETTERI

00:01:20
The loan was for $18,000 with a variable interest rate, quite different from the fixed-rate loans the government offers. After just a few months, Amy and her mom realized this loan was going to be a problem.

LETTERI

00:01:32
Oh, wow, this was probably not the best idea we had.

LETTERI

00:01:36
Amy came home and applied again to colleges in the States. She decided on Baylor University, a private school in Waco, Texas, with a program in American Sign Language. It was just what she wanted. But, she says it wasn't what she needed.

LETTERI

00:01:50
If I had had somebody to sit down and say, like, why are you going to Baylor, instead of going, you know, SUNY Oswego, who also as a ASL program, I wouldn't have been able to give them a good answer. So what that actually means is that I spent probably another $20,000 a year for no good reason.

BERMAN

00:02:08
Now, she's midway through her Ph.D. and certainly wiser than before. But it hasn't made paying for grad school any easier. Gallaudet covers some of her tuition. And to pay the rest, Amy has two part-time jobs on top of a full course load. This year, she took out $20,000 in federal loans to pay down a chunk of her private loan.

LETTERI

00:02:28
I am probably going to still be thinking about my student loans when I have kids and I have to start thinking about planning their college.

BERMAN

00:02:34
It's stories like Amy's that prompted the federal government to make a change, so that future Amys won't have it quite as bad. The change is a newly enacted law called Pay As You Earn.

MS. JASON DELISLE

00:02:45
Anybody going forward, so essentially new borrowers, a few recent borrowers, not a whole co-horde of recent borrowers, are eligible to use this program if they have federal student loans.

BERMAN

00:02:57
Jason Delisle is the president of the Federal Education Budget Project at the New America Foundation, a think tank in D.C. Paying in accordance with your income, he says, is a concept that's been around for a few years, but really ramped up at the end of 2012. Under this program, undergraduates can borrow around $6,000 a year. And graduate students can take out loans for the entire cost of school and living expenses.

DELISLE

00:03:20
You make payments based on your adjusted gross income. It's your income after you take various deductions. So it's 10 percent of your adjusted gross income after you get an exemption for what we call cost-of-living.

BERMAN

00:03:35
After you graduate, you pay 10 percent of your adjusted gross income every month. There is no interest rate.

DELISLE

00:03:42
Then once you hit 10 years, if you're in non-profit, you're a non-profit or a government then you're done. And if you're working in the for-profit sector, after 20 years, you're done.

BERMAN

00:03:52
After you hit that 10 or 20 year mark, the rest of your debt is forgiven. The program has been available since the very end of December, and already students are jumping onboard.

BERMAN

00:04:05
Roman Makonnen is the school social worker at Maury Elementary on Capitol Hill. And is using the Pay As You Earn program to pay off her past loans. She earned her master's degree in social work at Howard and that, on top of about $40,000 in undergraduate federal loans, left her owing $100,000 to Uncle Sam.

MS. ROMAN MAKONNEN

00:04:23
I considered it like a limb, like it's just always going to be with me. I'm going to paying them for the rest of my life.

BERMAN

00:04:28
A friend sent her an email about the program and she looked into it. She was approved and for the first time since finishing school felt a bit of relief.

MAKONNEN

00:04:37
I was excited it would be 10 years and not 30. And it was nice to see that there was, like, a light at the end of the tunnel.

BERMAN

00:04:43
She will be paying that bill for 120 months straight. No breaks.

MAKONNEN

00:04:48
My payments will be $450 a month and that's really difficult. Mainly because of rent in this area, is kind of insanely expensive. So $450 is such a huge chunk.

BERMAN

00:04:59
If she stays at her current salary, in the low 60s, for the next 10 years, that would mean she'd pay about $55,000 and have $45,000 forgiven. Of course, she'll probably get a more lucrative job at some point in the next decade and her monthly bill will go up. But her total payment will likely be a whole lot less than $100,000. Jason Delisle says, sure, it's a good deal for people like Roman Makonnen, but it also puts the taxpayer at a big risk.

DELISLE

00:05:29
You've got the incentives going in pretty bad directions, at least for students and schools, where they can just borrow away and raise tuition away. And the only person who ends up baring the cost is the taxpayer.

BERMAN

00:05:42
Delisle recommends putting limits on how much grad students can borrow, and pushing more subsidies to undergrads. Roman Makonnen sees it differently. A master's is required for a lot of public service jobs, she points out, and Pay As You Earn makes it easier to work in the lower-paying jobs in the public sector and get out of debt.

MAKONNEN

00:06:02
Until it's forgiven, it's still all in your name. It's still on your credit reports. So I mean it's still not fun to see that number.

BERMAN

00:06:09
The program is helpful, she says, but certainly doesn't feel like a free ride. Iā€™m Emily Berman.

SHEIR

00:06:20
This story came to us through WAMU's Public Insight Network or PIN. It's a way for people to share their stories with us and for us to reach out for input on topics we're covering. You can learn more about the network by visiting metroconnection.org/pin. And we're curious. Do you have a child who's figuring out where to go to college? If so how much is price factoring into your school selection? You can reach us by sending an email to metro@wamu.org.

SHEIR

00:06:57
Time for a break, but when we get back, what happens to high school dropouts in the decades after they leave school?

MS. SHIRLEY ASHLEY

00:07:04
I used to say, Lord, find me a school for people that's on my level.

SHEIR

00:07:09
We'll bring you the first in a new five-part series on yesterday's dropouts. That and more in just a minute on "Metro Connection," here on WAMU 88.5.

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00:07:18
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