Parting gift for college grads: $25k in debt

Clark Eagling has $45,000 in student loans -- and he’s the lucky one in the family. His wife, Aimee Kessel, owes $90,000 for her undergraduate and graduate college education. The debt is so large that the couple may be collecting Social Security before they finish paying for college.

“We’ve both essentially said that we don’t plan on ever paying them off,” said Eagling, 30, ofRoyal Oak. "By accident of birth, we’re given this extra challenge.”

Eagling and Kessel were born and raised in Michigan and attended public universities here, where the net price of an education -- and the loans that come with it -- are higher than in almost any other state.

A Bridge Magazine analysis revealed that student loans at Michigan’s 15 public universities increased an incredible 49 percent in four years. From the 2007 to the 2010 academic year, the annual amount of loans taken out by college students jumped $600 million, reaching $1.8 billion at the state’s public universities in the 2009-10 academic year, the last year for which data is available from Michigan's House and Senate fiscal agencies.

Campus-by-campus snapshot of student debt at Michigan’s 15 public universities

That $1.8 billion figure represents just one year’s worth of loans for current students, according to the state fiscal agencies. Extrapolating from national figures, if you add in loans taken out during the rest of the college careers of current students, plus outstanding debt from those who have graduated such as Eagling and Kessel, Michigan’s student loan total likely tops $30 billion -- the equivalent of more than 20 years’ worth of state appropriations for higher education.

Many of those loans saddled students with interest rates much higher than current mortgage rates, making their burden even heavier in years to come.

The average graduate with a bachelor’s degree left campus in 2010 with $25,675 in student loans, according to the Project on Student Debt. That’s the 11th highest student debt load in the country.

That growing debt is a drag not just on graduates' wallets, but on Michigan's fragile economy. Student loan debt often means students cannot afford to purchase homes or new cars; every dollar spent on student loans is a dollar not spent in the state’s private sector.

In 2010, for the first time, student loan debt nationally topped credit card debt, with the total expected to surpass $1 trillion in 2011.

Mark Kantrowitz, founder of, calls the explosion of student debt “unsustainable.”

“We’re seeing debt at graduation grow while (starting) salaries are not,” said “We’re approaching a point at which the debt becomes unaffordable.”

Universities dependent on loan dollars

Michigan families already pay more to send their children to state universities than families in almost any other state, according to a Bridge Magazine analysis. Michigan’s “college tax” of exploding student debt has materialized in concert with disinvestment in public funding for Michigan universities and tuition increases that have far outpaced inflation. As Eastern Michigan University President Sue Martin explains, as state budgets tightened, higher education was an easy place to cut because universities had the “safety valve” of tuition to make up for lost state funding. As state funding dropped, tuition rose.

And, of course, increased tuition and fees led to increased student loans.

In fact, student loans  ($1.8 billion in 2010) now make up a larger percentage of Michigan public university budgets than state appropriations ($1.26 billion).

“If there weren’t any student loans, all the universities in the U.S. would fail,” Finaid's Kantrowitz said.

Bridge's analysis also found wide differences in the average loan debt of students at Michigan’s public universities. Ferris State University students graduated with the highest average student debt in 2010 ($35,468); Michigan Tech was next at $29,874; then Central Michigan, $28,142; and then the Universityof Michigan, $27,828.

Graduates of the University of Michigan-Dearborn in 2010 started their careers with the least debt ($19,463), followed by Oakland University, Wayne State and Western Michigan, all at about $20,000.

Debt rises as degrees fall

The surge in debt accepted in pursuit of degrees has not always led to a commensurate surge in degrees granted.

Four universities in Michigan (Western Michigan, Lake Superior State, U-M Dearborn and Saginaw Valley State) granted fewer degrees in 2010 than in 2007 -- even while total student loan debt on those campuses increased between 14 percent and 80 percent.

Among numerous possible explanations, those numbers may hint at increased challenges many students face in balancing studies with jobs needed to help pay for school.

Michigan State University economist Charles Ballard said he knows a student buried in loan debt who is “working 40 hours a week as a night watchman. Naturally, he’s having trouble staying awake in class.”

Students working more hours because of fears of mountainous school debt, and consequently faring worse in the classroom, is yet another ripple effect of lowered state funding, Ballard said.

“The MSU student body is stronger academically than it was 10 years ago, but yet we have this problem (of falling grades), Ballard said. “That’s not trivial.”

Loan debt at Lake Superior State Universityincreased 57 percent between 2007 and 2010, while the school awarded 23 percent fewer degrees. At the University of Michigan-Dearborn, total loan debt jumped 64 percent, while degrees dropped 11 percent.

"Declining state support and cuts to state financial aid programs have led to increased borrowing for many students," said LSSU's Thomas Pink. "and when they have to take time off to work and save more money, it takes a longer time for them to complete their degrees."

At Western Michigan University, the number of degrees granted dropped 11 percent because enrollment declined; the percentage of students completing a degree within six years has remained steady, said Cheryl Roland, executive director of university relations at WMU.

“As state funds have dwindled and the cost of higher education has shifted to students and their families, our students' debt load has increased,” Roland said. “That's simple math. While we work hard as a university to offset costs, it is impossible for us to replace lost state revenue without increasing tuition.”

Ken Kettenbeil of U-M Dearborn responded, "We do acknowledge tuition at Michigan's public universities has increased.  This is a direct result of the reduction in state support.  Specifically to U-M Dearborn, we strive to make a U-M Dearborn degree accessable to qualified students who can least afford it.  Each year the university increases centrally awarded financial aid by at least the same percentage as tuition is increased."

Interest makes loans double-pricey

The student debt mountain is made even more treacherous by the interest rates attached to many student loans -- rates higher than what you find advertised now for mortgages and car loans.

You could nearly fill MSU's Spartan Stadium twice with the number of Michigan university students -- 147,389 -- who took out unsubsidized federal Stafford Loans in 2010. That’s 54,000 more unsubsidized Stafford Loan debtors at Michigan universities than in 2007. A commercial website,, quotes a current rate of 6.8 percent on unsubsidized Stafford Loans. That’s 70 percent higher than current 30-year mortgage rates for home buyers with good credit. Student loans also are difficult to abandon; unlike credit card debt, student loans are almost never erased in a bankruptcy.

Kantrowitz says the rule of thumb on student loans is, by the time they are paid off, college grads will have paid double the amount they original borrowed, creating even more of a drag on the Michigan economy.

Extrapolating an estimate Kantrowitz makes for national student loan payments, Michigan college grads probably pay about $1.6 billion per year in student loan payments.

“Twenty years from now, there will be a cascading effect of this debt,” Kantrowitz said. “Parents won’t have saved for their children’s education because they will still be paying for their own. That will create an acceleration of a loss of affordability.”

In Royal Oak, Clark Eagling can’t help but imagine how his life would be different if he were born in another state. “I have family in Georgia, where if you have a B average (in high school), college is basically free,” Eagling said. “I understand what kind of fiscal shambles the state is in, but ... I feel like I’m being ripped off.”

Meanwhile, Eagling is back in school -- this time to try to become a teacher. While enrolled, payments on his existing $55,000 in student loans are put on hold.

“All I’m doing is delaying the inevitable,” Eagling said.

John Bebow contributed to this report.

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Lou Glazer
Thu, 01/12/2012 - 9:30am
Great article. That the state's disinvestment in higher education has driven up college loans is really stupid. But ultimately the question is even with high and increasing student loans is it a good investment. College loans are not like car loans where the value of the asset is going down. What these loans are buying is an asset that pays off for a career (something like 40 years). A recent Brookings study demonstrated that the cost of college is a far better investment than buying a house, stocks or bonds. And yet we view a mortgage (at least before the housing bubble) as a terrific investment for recent college grads and the college loan as a crushing burden. That is wrong. For those who get a degree the college loan is a much better investment.
Greg N
Thu, 01/12/2012 - 9:31am
WOW ARE YOU KIDDING ME!! "By accident of birth, we're given this extra this extra challenge." What the hell! YOU signed up for college dude. YOU asked for the loans. And you componded the problem by marrying someone with twice as much debt. Did you ever think of going to school part-time and paying more of the costs as you go? Good luck people!
Greg N
Thu, 01/12/2012 - 9:47am
I do agree with you Lou that going to college is still a good investment but not if you get into so much debt that you "don't plan on ever paying them (loans) off." You gotta be smarter than that. College isn't for everyone I guess.
Thu, 01/12/2012 - 12:36pm
My view exactly, Greg. It was hardly an accident of birth, and they were not forced at gunpoint to borrow. It was their own free-will choice. Worse, if they accepted the money knowing they'd not pay it back, then the basic difference between them and Bernie Madoff is that Madoff set his sights higher.
Thu, 01/12/2012 - 1:02pm
You're right Greg. Also, I would like to know how many trips to Ft Lauderdale and Cancun were paid for with these "student loans". Our kids have worked (sometimes 2 jobs while carrying a full load of classes) or joined the military to keep their college expenses low. They also don't spend their hard earned cash on anything frivilous...especially on eating out or on trips to the sunny south. As a result, they are graduating from college with little or no debt. Once again, the individuals who choose to feed at the trough and live without a care in the world expect me to feel badly and bail them out. I'm the 1% (still paying and not taking) and I'm fed up with the lazy (99%).
Thu, 01/12/2012 - 3:26pm
You want to know how many trips were paid for with that money? Zero. In fact, I graduated with highest honors after using the Detroit bus system to get to and from school and working midnight shifts at a shipping facility. I worked hard and was a serious student -- I still am. I'd say that, in general, the students I've encountered who take their education least seriously are trust fund kids that don't have to shoulder their own education costs -- the children of your 1%. That's not always true, of course, and neither are the shoddy generalizations you obviously get so excited over.
Thu, 01/12/2012 - 3:17pm
The accident of birth quote was referring specifically to the fact that Michigan is less adept than other states at supporting lower-income people's desire to gain a higher education. I was saying that, if I lived in Georgia like some of my family members, I would have been given free access to a public university as long as I kept my grades above a B average in high school. I don't regret the choices I made and I'm not afraid of my debt. I also don't feel like I'm owed anything by the state or anyone else, and I tried my best to make sure that sentiment came across in my interview. I am sorry it didn't make it into my published quotes. Good luck with your rage issues, Greg.
Fri, 01/13/2012 - 3:59pm
Im with you Clark, because I am graduating with a lot of debt, and I have worked while at school. There are way too many circumstances that people tend to forget about, like unexpected emergency's, or when your parents become so broke thy use your entire college fund. You cannot even begin to categorize people as 1% or 99% this is not a black and white subject at all. It is ignorance.
Thu, 01/12/2012 - 10:05am
The article doesn't address the reason for the rise in costs for the universities. Ok , so the State cut funding, what's fueling the increased expenses? Overpaid professors and retirement and insurance costs. Where's the shared sacrifice?
Thu, 01/12/2012 - 10:32am
Lynn, you are correct that the focus of this article was not on what causes increased costs for the higher education community. But, neither does your comment. Who (other than you) has determined that professors (a general term) are "overpaid." Evidence? Retirement and insurance (I am guessing you mean health insurance, beats me) -- are the professors and staff supposed to do without those employee benefits? Do other employees at other firms do without those benefits? The reality is that university staff are paying more and more (not less and less) of retirement and health insurance plans at their schools. Most reacing staff are not on a tenue track, and are not close to "overpaid" relative to their workload. Again, where is your evidence for your claim?
Megan Inbody
Fri, 01/13/2012 - 11:16am
Lynn, It is NOT overpaid professors who are fueling the outrageous costs of university. I am a PhD candidate at MSU, and I can tell you that it is an extremely top-heavy administration. It has absolutely nothing to do with the teaching staff in general, the vast majority of whom are graduate students and non-tenure track (adjunct) faculty, who take peanuts for wages and whose benefits are negligible at best. And in general, it makes absolutely no sense for the Legislature to say that universities need to pay attention to markets and issue degrees based on what will make undergraduates "employable." I teach in two different departments at MSU: English and IAH (humanities), and I've seen plenty of business / engineering/ advertising/ teaching / accounting students who can't even frame an argument and provide supporting evidence. A university degree is supposed to broaden one's view of the world, not make a perfect cog for the machine. We're graduating students unable to critically interrogate the world around them. We're creating a generation that's not only burdened with excessive debt, but who are little more than drones.
Jim Zielske
Thu, 01/12/2012 - 11:39am
I recently talked to a friends daughter, a recent graduate, from FSU, having a hard time finding a job, after graduation. I was shocked to learn she has student loan payments of $430 a month, $45.000. Yes she took them out and yes she agreed to pay them back, those facts are not in dispute. My question is how can we help her achieve this goal? Is there a way to restructure to make these loans more affordable? Does having a bank make 6.8%, 70% more than a mortgage make sense? How will she be able to buy a house, raise a family, partake in the American dream? I am not suggesting a free ride, just saying how can we find common ground to help?
Thu, 01/12/2012 - 1:11pm
I totally agree. Student loans should be at a much lower interest rate and should be capped. Over 5% points on a loan is robbery over the life of it. 2.5-3% would be much more fair and allow students to afford the costs of college. Heck they have car loans at 2.79% at most credit unions..!
Thu, 01/12/2012 - 1:11pm
Answer the question how do Michigan universities compare verses other states in compensation and employees! If you cared to to check I'd bet you'd find a bloated bureaucracy with compensation levels way out of line with other state's university systems and not to mention private sector levels. But then again that's not the point of the supposedly "non partisan" Center for Michigan. Let's face it the Center for Michigan is nothing but a shill for the MEA and other various public employee unions and it's purpose isn't to ask uncomfortable questions, it's just to whine for higher taxes! Prove me wrong.
Thu, 01/12/2012 - 1:39pm
Lou is right about the loans being a good pick the right field and the skills that are in demand in the market place. If you don't, I' m afraid your in real trouble for quite a while until you some how find a way to pay off the loan! Oh and that just keeps accumulating, putting you deeper in debt.
Thu, 01/12/2012 - 5:07pm
I'm only sympathetic to a point with the plight of Clark and Aimee. I am one of those students from a low income family. I attended a community college for two years, lived at home, worked at multiple jobs and saved everything I could so that I would have to borrow as little as possible once I transfered to a 4 year university. I chose my classes carefully and took full loads each term so that I could graduate after two years. I cut grass, waited tables and did every meanial job I could find to cover as much of the cost as possible. I graduated with less than $10,000 debt. I don't know the circumstances of Clark and Aimee, but I watched some of my friends screw around for 5+ years before they finally graduated, and while they could party Saturday night til sunrise, they had no energy to go find a job "because they're aren't any jobs." No one said a college degree should come without sacrifice, and it's never free. Someone always pays for it. Clark and Aimee's debt represented a choice, and they now each own an asset they will have forever. There are not many investments you can say that about.
Fri, 01/13/2012 - 8:23am
This is unacceptable. Another thing that bother's me is all the classes required that don't have a hill of beans to do with your major. That also needs to be addressed. It may help students who actually finish is six years to accomplish their goal in the four years it's suppose to. For state institutions, they certainly aren't regulated enough and held accountable for their failure to produce!
Fri, 01/13/2012 - 3:56pm
I think everyone here needs to look at the real issue at hand, and NOT the fact students took out loans. YES, people make the choice to go to certain schools and take out debts and live their lives the way they choose. HOWEVER, it is extremely unreasonable that student debt and the amount per credit hour is up fifty percent in a couple of years. That is outrageous. Plus, tragic events come up that end up costing kids more money in their student debts, so we cannot be too quick to judge the reason people have so much debt. That is a whole other issue. The point is that we need to work on making college more affordable, and help with students pay off their debt. Everyone first assumes that you can go to a community college first, but what about the kids wanting to be doctors? It is frowned upon to do that, so they are stuck at a cross roads. The fact of the matter is that no school should be charging students this much to further their education. especially when the economy is down and the job outlook is grim. The RICH get RICHER while the POOR become POORER.
Anne Seaman
Sat, 01/14/2012 - 10:49am
Nothing will happen with the proposal. The Dems are trying to make the point that our state schools suffered during the last 15 years of cuts to higher education. One thing they miss about cost control, in comparison to our neighboring states is that Michigan does not have a state SYSTEM. Indiana, Ohio, Illinois, all have a system that controls to a much greater extent which institutions get to add specific academic programs. Eg. Indiana gets the arts, humanities, and social sciences while Purdue gets the engineering and technology. They create regional institutions that are comprehensive like IUPUI; but Purdue will never be allowed to open a medical school because that goes to IU. We have medical schools at UoM, 2 schools at MSU (MD and OD); Wayne State, Western, Central, Oakland, and Grand Valley State. The last three are brand new. The local Boards of Regents approved these and will now compete for faculty, students, and resources to fund them. Expect tuition to keep rising as long as such duplication of effort continues.