Student loans puts college graduate into deep financial hole

Student loans were a fact of life for Marjorie Dillon and she was OK with that — even though she didn't keep close track of how much she borrowed or completely understand the agreements. She and many of her former classmates at Robert Morris University in Moon relied on loans to pay tuition and expenses.

Ms. Dillon, 26, of Coraopolis, was the first in her family to attend a four-year university and loans were the only way to finance the business administration degree that would be her passport to a better life.

But six months after graduating with her bachelor's degree, Ms. Dillon is making $7.25 an hour plus tips serving beer at a bowling alley, working 25 to 30 hours a week. She's nearly $120,000 in debt, behind on her bills and, despite her best efforts, cannot find a better job. Her 80-year-old grandmother co-signed for the loans and could lose her house in North Fayette if the debts are not repaid.

"Honestly, I wouldn't have gone to school if I knew I would be in debt the rest of my life," Ms. Dillon said. "I won't be able to ever own anything. If you look at my credit report, it's (loaded) with Sallie Mae loans."

The financial crisis she is facing provides a snapshot of the worrisome outlook confronting many college graduates who find themselves juggling a mountain of student loans and other forms of debt in the early stages of their working lives.

Her case might be considered a worst-case scenario. The average cumulative debt for four-year college graduates has reached $22,656, according to Finaid.org, a leading Web site for financial aid information.

Some relief is on the way thanks to a new federal student loan repayment plan that will set monthly payments based on how much borrowers make and the size of their families instead of how much they owe. In some cases, graduates will make no monthly payments if their income falls below a certain level. And after 25 years of payments, any remaining balance is cancelled.

But the reduced income repayment program is only available for federal student loans under Stafford, Grad Plus and federal consolidated loan programs.

Ten of Ms. Dillon's loans totalling $108,639 were private signature student loans through the SLM Corporation — commonly known as Sallie Mae — which cannot be consolidated, forgiven, deferred or erased in bankruptcy. Two of her loans, totalling $9,000, are federal government loans.

Even if the variable interest rates stay frozen or never go up during the 25-year life of the loans — which is unlikely — her monthly payments on the $117,600 borrowed will climb to more than $1,100 and she will end up repaying at least $270,000.


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