Rising debt, interest rates leave students worried

LIMA — In her two years at OSU-Lima, Megan Walterbusch took out $7,000 in federal loans. The debt is relatively small compared to some private-school graduates leaving school with 10 times as much debt. Still, she's had enough.“I won't take out any more,” said Walterbusch, of Minster, who heads to main campus in the fall. “With the interest rates that keep occurring, my parents are going to help me out instead. I don't want to have any more debt.”Walterbusch will still owe, but to her parents, who she says thankfully won't charge interest, and won't make her start paying until she has a job. The business major is working two jobs now to save a little extra money.“I worry about getting a job when I graduate,” she said. “Nowadays, you need to go to college just to get a job. The debt just kind of rolls with you, I guess.”Interest rates and debt are on the minds of many recent and future college graduates. Student debt is growing and unless Congress acts by July 1, the interest rate on federally subsidized Stafford loans will double.U.S. Sen. Sherrod Brown's Stop the Student Loan Interest Rate Hike Act, which would have maintained the current interest rate, failed to get the 60 votes needed in the Senate a few weeks ago. The issue is less about whether the hike should be avoided than about how to pay for the extension.The Ohio Democrat's bill proposed paying for it by requiring some privately owned companies to pay higher payroll taxes for Medicaid and Social Security.The current student loan interest rate is 3.4 percent. That will return to 6.8 percent July 1 as legislation from 2007 to reduce the rate expires. The increase would impact more than 7 million students across the country; 382,000 in Ohio. According to the Senate Health, Education, Labor and Pensions Committee, a higher rate would add about $1,000 in loan debt per loan for the average student.Josh Luke, OSU-Lima financial aid coordinator, said an undergraduate student taking the maximum loan offered would see an additional $4,000 during the standard 10-year repayment plan. That is roughly $9 a month.More than 80 percent of OSU-Lima students receive some sort of financial aid. A large portion, Luke said, are student loans. More than 26,000 Ohio State University students, including main and regional campuses, are recipients of Stafford loans. Combined they have received $134.73 million. At Rhodes State, 2,163 students receive $5.87 million. Cathy Kohli, Rhodes director of financial aid, said the increase likely won't deter students from going to college or taking out loans, but they might not take out the maximum amount. “Students are being more conscious maybe when they hear this information and making choices that affect their financial situation,” she said.The University of Northwestern Ohio sees 3,814 students get $13.63 million. At Bluffton University, 827 students get $4.08 million, and 2,115 Ohio Northern University students receive $11.72 million.Carmen Gibson, of Lima, graduates soon from Rhodes with a degree in early-childhood education. She will go back to Rhodes for business administration. She took the maximum loan amount allotted for all college-related expenses and owes $23,000. She vows she'll try to avoid any more debt.“This time I will try to go for scholarships and things I didn't know about when I started school,” she said. “I already have one [loan], I want to try paying that off before I start racking up another.”Gibson, who already works at a day care center, is thankful for the loan. It allowed her to finish school quicker than friends who didn't want the debt, so took five to six years to finish. To Gibson, the debt is worth it, but still a worry.“Especially now coming so close to my graduation and I know I am going to have to start repaying that back. That is an extra bill I have,” she said.Student debt has reached nearly $1 trillion, exceeding credit cards and auto loans. A recent analysis by The Associated Press found that half of young college graduates are either jobless or underemployed in positions that don't fully use their skills and knowledge.Jared Oehler recently graduated from Ohio Northern University with a business degree and at least $50,000 in debt. He suspects it could near $70,000 or even $80,000. He is worried, but a little at ease because the Trenton native has already secured a job with Marathon Petroleum in Illinois.“It definitely does worry me due to the fact that I am not making the money right now, but I know going to school there put me in position to help me pay those back,” he said. Oehler understood early on in college how large his debt would likely be. While he has 10 years, his goal is to pay them off in five to seven. Oehler knows graduates who haven't yet found jobs or ones they really want. They are more worried than he about repaying their loans. Melanie Weaver, the school's director of financial aid, said students are often more worried about private loan interest rates than federal loans.Yearly tuition at ONU ranges from $45,000 to $50,000. The school's average loan debt is $48,000.Larry Lesick, ONU vice president of enrollment, said the school has less than a 1 percent loan-default rate. The national average is 8 percent. Last year's graduating class had a 94 percent job placement rate.Lesick said the real issue is that higher education used to be considered a public good and therefore society's responsibility“Now we seem to be in a position where we are saying there is much more private good than there is public good, and that private good is basically for the individual's responsibility to then pay for everything,” he said. Officials remind families to be proactive in finding ways other than loans to pay for college. “Exhaust scholarship searches, talk to high school and college officials, work while in school,” Luke said. “There are multiple things students can do to help minimize indebtedness. Research schools and maybe choose a low-cost option. It could be a smart financial decision.”