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We Owe, We Owe 

Student loan debt has now surpassed credit card debt in the U.S., with job prospects bleak even for graduates with degrees. As defaults increase, can anything be done?

click to enlarge MIKE FUNKHOUSER

As a single mother working toward a master's degree and a teaching credential at Sonoma State University, Tegan Henry, like many students, paid her tuition fees and living expenses with federal student loans. Last year, she graduated with $75,000 in debt. Excited to start a career, Henry interviewed for nine teaching jobs, but in a tough job market, she was offered only one position—as a part-time teacher–reading specialist at a Santa Rosa elementary school with no health benefits or job security.

Henry, 35 and raising a child, brings home $2,100 a month after taxes, almost half of which is spent on an $800 a month student loan payment. She and her husband were able to "buy" a house last summer, but only because it was purchased under her father-in-law's name; the bank wouldn't approve the newlywed couple for a loan.

Henry's story is one of millions in the United States. The numbers are astounding; as of May 2012, total student loan debt has reached $1 trillion, far surpassing credit card and auto loan debt. The average undergrad leaves school owing about $24,000. As a result, graduates are putting off buying cars, houses and even starting families to afford monthly loan payments that for many surpass the amount of the average mortgage. In an interview on the "Bloomberg Surveillance," Neil Soss, chief economist at Credit Suisse in New York, confirmed that rising student loan debt is preventing potential buyers from entering the housing market.

Henry hopes to eventually qualify for the Public Service Loan Forgiveness program, which forgives student debt for public service professionals who work for 10 years, full-time, in underserved communities. "I have it figured out with the loan people that if I pay this $800 a month for 10 years, then, at that point, if I'm still a teacher, I would be finished with my payments," says Henry, chuckling ironically at the long time frame. But Henry isn't working full-time. "And," she adds, "I would have to have continuous employment."


If someone in Henry's situation hit on hard times, they could forget about applying to have the student loans discharged. Unlike gambling and credit card debt, education debt is virtually impossible to cancel through bankruptcy.

"We live in a country that values consumerism over education, which is why I could discharge my considerable debt in bankruptcy if I had spent the money on shoes, travel and restaurant meals," writes Ann Nichols on her Forest Street Kitchen blog, after confessing that she'd gone into default for law school debt. "Because I spent the money on an education, it is not dischargeable."

Robert Applebaum, founder of the website and movement Forgive Student Loan Debt (newly rebranded as StudentDebtCrisis.com), says that hearing stories like these—and not to mention worse stories, since "student loan suicides" are tragically becoming more common—are the norm in his work.

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