Monday March 6, 2006
At age 25, Village Voice columnist Anya Kamenetz is already a prominent voice on the subject of debt for students and other young people. With tuition rates rising by more than 5 percent, with as many as 30 percent of young people uninsured, and with the average college student now graduating with nearly $20,000 in debt, Anya’s prescient new book Generation Debt: Why Now Is a Terrible Time to Be Young looks at the ongoing burden young people face.
Her book sprung from her ongoing Village Voice column by the same name where Anya uncovered the various money related maladies that plague our generation: low-paying McJobs, student loans with criminally high interest rates, too much temping, too little health insurance, credit card debt, the Baby Boomer effect, a media culture that views us as lazy and unmotivated, and more.
Campus Progress held a live chat with Anya on March 6. A transcript of the chat session is below.
For more information on Anya and Generation Debt, check out a review in the Washington Post as well as a recent interview with Anya on Salon.com.
Working with Campus Progress, Anya also is appearing on college campuses as part of the tour for her book. Check our Speakers Bureau events page to see if she is coming to your area.
Adam Johnson (Columbia U): How do you respond to critics who say that young people are in debt because of poor financial management, and that they just need to work their way out like everyone else?
Anya Kamenetz: The consumer credit industry has built a system where young people are given lots of rope to hang themselves at an early age.,000 lines of credit for 19-year-olds makes absolutely no sense, and 29% APRs were illegal a generation ago. The system is rigged—which isn’t an excuse for irresponsible spending, it just provides way too much opportunity for it.
Anya Kamenetz: Plus, student loans are the only alternative for the majority of students.
Michael G.: I am over $130,000 in debt from going to music school and have no real way of paying it off through music. I am actually a massage therapist now and part time musician and paying my bills ok, but my deferment will be forever over in the fall and I’m scared stiff. Any avenues I can look into for help out of this huge burden?
Anya Kamenetz: July ’06 is the deadline to consolidate loans at a fixed interest rate – the last year this option is offered. This could be a good option for you if you haven’t done so already. Making those payments is going to be really tough, but stay informed and don’t let yourself slide into delinquency or default—the penalties are murder.
Rodney S. (CUA): Student debt is obviously an issue that young people care about… in my case, A LOT. Do you think politicians aren’t as concerned with addressing student debt as they should be? What can be done about that?
Anya Kamenetz: Well, on February 1 Congress passed the largest cuts to federal student aid in the history of the program: billion. So it’s fair to say they don’t care so much. On the other hand, the vote was 216-214. Find out where your congressperson stands on this issue. My prediction is that it’s going to be a standout issue in the coming election cycle.
Julia Gronnevet (University of Bergen, Norway): What are the top two or three causes of students’ rising debt right now?
Anya Kamenetz: Campus Progress is one of the groups that will be organizing students on this, by the way. So are the PIRGs.
Ben Adler: Thanks for the plug anya :)
Anya Kamenetz: The top causes of rising debt:
-Student loans because of higher and higher tuition
-credit cards
-a lack of health care and other safeguards leading to unexpected expenses
Karen Havelin (UCLA): Do you think that American students’ debt problems are worse than those of students from other parts of the world, like Europe or Asia ?
Anya Kamenetz: America is no longer the world leader in student loan debt. Australia, the UK, and Canada are right up there with us. However as a study called "Global Debt Patterns" concluded, "in the worst case scenario of high debt and low income, the US is clearly the worst place to be" because we don’t have good policies for debt forgiveness.
Chip Mathiason: What steps need to be taken in order to help curb this problem, both from people our age and from powerful industries and institutions?
Anya Kamenetz: People our age: get informed – break the taboo around talking about finances. Get active – support politicians on the state and national levels who understand the problems young people are facing.
Powerful institutions: student loan companies need their billions in federal subsidies cut from the Department of ed budget. Credit companies need to be reined in with regulation.
Peter Phillips (Duke): You mentioned a few questions ago that we should "contact our representatives" about legitlation affecting student debt… I think my worry is that they clearly don’t care. Unlike other issues, this doesn’t seem to be something where a vocal platform exists… is a campaign "calling out" politicians on their votes against student aid feasible?
Anya Kamenetz: Ask the students at 21st Century Virginia, a student state pac that won a $260 million increase in their state aid budget. I truly believe the tide is turning on this issue, but it takes a concerted effort.
Tim Clarke (Duke): Do you think increasing tuition has more to do with the universities spending money recklessly on extravagant buildings and high staff salaries or more to do with the government, who has sharply reduced funding in the last 20 years or so?
Anya Kamenetz: interesting question. The basic problem, as an economist explained to me, is that education costs are always going to rise faster than inflation. Education is like healthcare that way—labor intensive. The second biggest problem is a decline in state support. The third biggest problem is not necessarily extravagance, but universities are not operating on the same efficiency principles that have caused a productivity revolution in business over the last generation. there needs to be more input from student and family stakeholders on universities’ spending decisions.
Stu Hartessy (Ursinus College): Do you think rent control in major cities helps or hurts the problem young people have finding affordable housing when they graduate?
Anya Kamenetz: I’m not an expert on housing costs. I guess the theory against rent control is that it restricts people from producing more housing, and that makes it hardest for people breaking in. On the other hand, teachers and others who have taken advantage of affordable housing programs are all for it!
Tricia Martin (Detroit): Can you discuss the politics of direct lending vs. guaranteed loans? Seems like direct lending makes much more sense, and schools and Congress should turn against the guaranteed loans. Why don’t they?
Anya Kamenetz: Aha! My favorite topic! The student loan industry has spent the last decade fighting direct loans from within and without—by lobbying, giving huge amounts of money to congressmen, and through Bush-appointees to the department of ed itself. The anti-direct loan campaigning is entrenched and will be hard to break out of, especialy since most colleges don’t take a broad view of the problem.
Anya Kamenetz: for more info, visit http://www.altrue.net/site/ndslc/ and
http://www.villagevoice.com/news/0603,kamenetz,71745,6.html
Tanya Williams (Temple University, Philadelphia): Credit card debt is also a huge issue with college students. What is your take on universities and their current deals with credit card companies? What can we as students do to ensure that credit card companies dont swarm our campuses and entrap our students into the world of credit card debt?
Anya Kamenetz: Colleges have been very successful with all types of anti-corporate campaigns. You could start by going to your financial aid office and asking for their cooperation in limiting cc solicitations or balancing the info with financial planning and education materials. If they won’t help you out, you could do a little "oppo" demonstration yourself. Go out there with handcuffs and when they are giving out the frisbees, demonstrate how ppl are going to get ‘shackled’ with debt if they’re not careful. Just a little bit of coverage in your school newspaper could clue in some fellow students who are more naive than you about credit.
Amanda Angelotti: Fortunately, I don’t have any debt from undergrad because I went to a state school on a scholarship. But I’m starting medical school in the fall, and I’m already getting worried about my future debt. How are loans and debt different for graduate and professional students compared to undergrads, and what can I do to get the best deal as I start filling out aid applications?
Anya Kamenetz: Doctors and lawyers are facing 6-figure debt burdens which are limiting their ability to choose public-service careers.
Try to maximize your use of direct loans and federal student loans as opposed to private loans. make sure you know about any loan-repayment programs. And do anything you can to avoid credit card debt. while you’re in school and living on loans, every dollar you spend may cost you 50 or more in the future.
Michael G.: Are you aware of any movements to revamp bankruptcy laws? If so, what can we do to help the cause?
Anya Kamenetz: Well, i just found out about a class-action lawsuit against a specific provision which is hurting holders of private student loans.
Alex Darrow (Evergreen, Olympia): I understand how the lending industry convinces congress – with campaign cash. How do they persuade universities to use guaranteed vs. direct loans?
Anya Kamenetz: By offering special incentives – discounts for students (good) and kickbacks, especially through a program called school-as-lender (bad). School as lender gives the school a pool of $ to lend to students and allows them to keep a cut of the interest/profit.
Lorraine Perez (UNC): Can you recommend a good beginner’s source – sort of a how-to – for learning about personal finance?
Anya Kamenetz: Books: I have to recommend 2 competitors: The Money Guide for the Young Fabulous and Broke by Suze Orman, and Generation Debt: Take Control of your Money, a how-to guide (no relation) by Carmen Wong.
Websites: moneypants.com is a fun site, their main feature is a pay service but there’s other good content.
There’s a ton of personal finance blogs out there, too…
Michael Berge (St. Cloud State): What steps can college students take to improve our money skills?
Anya Kamenetz: These days, budgeting gets a lot easier because everything can be automated. Automate your bill-paying, and especially savings, online, and all of a sudden everything’s simpler.
Absorb the basic rules & start with short term goals – saving is addictive, I promise.
Alex Darrow (Evergreen, Olympia): What do you think about the Commission on the Future of Higher Education? Specificly, they seem to be moving to suggest that schools that accept financial aid would be forced to use standardized tests?
Anya Kamenetz: Right. The US PIRGS are running a student campaign to get student comments in front of the commission.
Obviously, part of their policy recommendations are going to hinge on "accountability" (read: testing) since this is an obsession of this administration. The feeling in the higher ed policy world is that colleges need to come up with a pro-active response to this because accountability is a real concern, but we don’t necessarily want inflexible and expensive national tests. Not to say that the recommendations will go anywhere in a climate where higher ed budgets are being cut.
Randall Cox (Evergreen State, Encino, CA): How do you respond to critics who say that young people who are unable to pay their debt because their in low-paying professions should stop complaining and try to find better paying jobs in other industries?
Anya Kamenetz: That argument doesn’t hold water. There’s not enough good jobs to go around!
A new survey shows that median incomes fell for households under 45, even as they rose for older ones, between 2001 and 2004. Income fell 8 percent, adjusted for inflation, for those under 35 and 9 percent for those aged 35 to 44. The numbers add new weight to longstanding concerns about whether younger generations of Americans will achieve living standards that are better – or at least equal to – those of their parents.
From Krugman’s column last week: Educated workers have done better than those with less education, but a college degree has hardly been a ticket to big income gains. The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.
Adam DeDent (Ohio State University, Columbus, Ohio): How much worse do you think this problem will be allowed to get before we start to see a major response?
Anya Kamenetz: I hope we are close to the tipping point. Recent articles in several national newspapers (Seattle P-I, Chicago Tribune) and op-eds (New York Times, Washington Post) are ringing some bells. The problem is our entire economy is on shaky ground, limiting our ability to make bold new investments. A report last week showed that all 50 states will face budget overruns by 2013, meaning continued austerity in higher ed budgets.
Milton Lebowitz (City College of New York, South Fallsburg, NY): Do you think that schools could hold costs down and therefore limit the increase in tuition? If so, how? And how can students pressure schools to implement those changes?
Anya Kamenetz: It depends on the school. Private universities with big endowments have lots of leeway – Harvard could afford to be free for all students. The for-profit higher ed sector has experimented with cost-cutters like abbreviated programs, online ed, and the deprofessionalization of teaching – these (except maybe for the last) might best be adopted by community and other public colleges. It’s a good idea for students to get involved in costcutting discussions to make sure their priorities are straight.
Bill Thompson (Ithaca, Boston): For students who come from lower income families, do you think the prospect of debt forces them to be risk averse, essentially locking them out of higher education?
Anya Kamenetz: Short answer: yes. Especially for hispanics, and to some extent Muslim students. a good report on this topic: http://projectonstudentdebt.org/pub_view.php?idx=28. The phenomenon is called "debt aversion".
Dustin Sabetto (Texas A&M, El Paso): Howdy. From what you’ve seen, is the rise in college tuition coming from pressure on the government side, the university side, or a combination of both?
Anya Kamenetz: Hola! Government side. I talk about this more in the book. In the 1990s, higher ed became known as the "cash cow" or "budget balancer" for states facing fiscal crises – they could (relatively) painlessly cut higher ed budgets when they couldn’t cut food stamps, for instance.
Ben Adler: This is gonna be the last question…
Denise Rotman: I’m a senior, and since I started college a few years ago, my public school’s tuition rates have increased by about 20%. Is this happening everywhere?
Anya Kamenetz: Yes, it is! According to the college board, tuition at public universities is up 57% since 2000-2001.
If you guys want to continue the conversation, post at anyakamenetz.blogspot.com.