Mitchell: Student Loan Debt Shows No Hint of a Slowdown

In two years, Mississippi has moved from 29^th place to 19^th, but it isn’t good news. The ranking is for average debt of people who leave college with a bachelor’s degree and student loans to repay.

The topic comes up from time to time.

There were headlines when combined student debt hit $1.2 trillion, more than Americans owe on all their credit cards.

There were headlines when President Obama said he was going to fix this and help young people unburden themselves.

There was a dust-up earlier this month when a writer, Lee Siegel, described in The New York Times his decision not to repay his loans. He said, essentially, that he had a choice between a happy life and repaying his debt, and that he chose happy life. He encouraged others to do the same and suggested that college should be free to students anyway.

But whatever the news about student loans, we tsk-tsk and move on. Most of us don’t have loans anyway, right?

Well, no. Not right. The loans are federally guaranteed. That means tax funds are used to pay banks when the borrowers don’t. The current default rate is about 12 percent, including Mr. Siegel.

It is truly great, not to mention smart and wise, when families and students avoid college debt altogether. In Mississippi, 43 percent of students do. Because they are wealthy, because they are frugal and have saved or because they worked diligently to avoid taking out loans, these people have given themselves gifts of great value.

As for the other 57 percent, well, it’s going to be tough.

The Institute for College Access and Success says the average bachelor’s degree recipient with debt in this state in 2013 picked up a diploma and a notice to start repaying $27,571. That was up $4,000 from 2011, hence Mississippi’s rise in national rankings.

Now under traditional repayment, the note, accumulated interest and future interest would be divided into 120 bites and payable once per month for 10 years. The interest rate is variable, but let’s say it averages 6.8 percent. That’s $320 per month or about $38,000 (including interest) to be repaid.

Obama’s “help” can prove more costly. Annual payments are capped at 10 or 15 percent of a debtor’s disposable income — which makes the payments affordable — but the payback period is extended to 20 years or to 25 years. A banker can show you the math, but paying less over a longer time costs a lot more.

Not all Mississippi’s public universities reported their data. Jackson State, Delta State. Mississippi Valley and University Medical Center were not on the institute’s list. And, importantly, it doesn’t include students who left with debt and no degree.

Alcorn was the leader with 90 percent of graduates having debt, 77 percent receiving federal Pell grants of up to $5,500 per year that are not repayable and, on top of that, an average debt of $32,755. Following, in order, were Mississippi State University, the University of Southern Mississippi, the University of Mississippi and Mississippi University for Women.

As grim as any of that sounds, the class of institutions known best for real-sounding names and abundant advertising on TV, in magazines and on billboards is the real disaster zone of debt.

Several years ago former Sen. Tom Harkin, D-Iowa, held hearings that exposed many of these companies were (1) charging more than others, (2) producing less than others and (3) generating sky-high loan default rates while feeding disproportionately at the public treasury.

But Congress, in turn, has become increasingly well-fed by this industry. OpenSecrets.org tells the story. Donations by for-profit education groups were trending along between $1 and $2 million per year for several years, but jumped to $4 million after the Harkin hearings. U.S. Rep. John Kline, R-Minn., chairs Education and Workforce Training. His campaign fund received $186,000, which was $100,000 more than the next-highest donee.

Is this legal? Yes. A scandal? Sure. Or at least it should be.

But workaday Americans and Mississippians have a lot more on their minds. And, again, most of us don’t have student debt of any type hanging over us — or at least we don’t think we do.

Back to Lee Siegel. He says a happy life is important. Most will agree. Most will not agree, however, that walking away after knowingly accepting loans is a moral action even if the purpose is to be happy.

That leaves one crystal clear course of action: Avoid debt like the plague it can be. Not everyone can avoid borrowing. Having loans available is a good thing. But those who borrow the absolute minimum will be glad they did.

Charlie Mitchell is a Mississippi journalist. Write to him at cmitchell43@yahoo.com.