A New Kind of Indentured Servant

Just weeks after receiving their degrees, college graduates are now dealing with a dual dilemma: struggling to find good-paying jobs in the worst economy since the Great Depression and coping with mountains of student debt.

Students are graduating from Vermont colleges with an average of roughly $28,000 in student loan debt. Many students, however, are struggling with a debt load several times that amount. Making matters worse, Stafford student loan rates are set to double on July 1 from 3.4 percent to 6.8 percent. The heavy debt loads and rising interest rates place financial stress on students and families who are stretching their budgets to cover payments. Borrowers of subsidized Stafford loans make up more than one-third of those using federal student aid, the New York Times reported. More than two-thirds of those borrowers are from families with an annual income under $50,000.

Justin Karwatowski, a 22-year-old University of Vermont graduate, reads a bank-issued student loan notice last week. He said he and his family are painfully aware of the financial burden of student loan debt.

Sen. Bernie Sanders is drafting comprehensive legislation that would reform how students pay for higher education and help students deal with skyrocketing tuition and massive debt loads. Sanders is also working with Sen. Elizabeth Warren, who introduced legislation that would ensure students are offered the same loan rates the Fed gives big banks on Wall Street: 0.75 percent. “I strongly agree with Senator Warren,” Sanders said. “If the Fed is lending money to huge and profitable Wall Street financial institutions at less than 1 percent, it is absurd that students and their families are paying interest rates that are much, much higher in order to get the education they need to make it into the middle class.”

Sanders continued, "Young people in Vermont and across the country are now paying three to four times as much as their parents did for a college education. With families already overburdened, it would be unconscionable to allow interest rates to double on July 1. One of the major priorities facing our country is the need, on a long-term basis, to make higher education affordable. This is a crisis that must be solved.” Bernie has asked students to share their experiences on dealing with student debt with him. So far, hundreds of students have shared their difficulties in paying down the debt they accrued to obtain their degree.

Justin Karwatowski, a 22-year-old who recently graduated from the University of Vermont, said he and his family are painfully aware of the financial burden of student loan debt. Karwatowski said his parents have been frugal his entire life to afford to send him and his two siblings to college. Recently, his mother substantially increased her hours at work to help address her children’s student loan payments.

“Despite my parents’ best efforts, my brother who attended Hofstra University and I are still tens of thousands of dollars in debt,” Karwatowski said during an interview last week. “I sometimes feel that college is a modern day indentured servant factory.”

Karwatowski’s roommate is also coping with tens of thousands of dollars in student debt. Carson Lemieux, a 21-year old Vermonter, initially attended an out-of-state private university as a freshman, but transferred to UVM to take advantage of lower in-state tuition. Lemieux, who is a business major and owes $35,000 in student loans, said many students often do not fully read or understand how interest rates on some loans can skyrocket over the course of time.

“Kids who graduate with $100,000 in debt basically owe a mortgage payment,” Lemieux said. “I don’t want to pay my loans off for the next 30 years.”

LIMITED OPTIONS

College graduates said they have been forced to limit their options to search only for higher paying jobs, regardless of whether it is a career they are interested in. Students are often forced to put jobs they are passionate about—public service and social work, for example -- on hold in favor of jobs that can keep student debt at bay.

“It prevents you from exploring what you really want to do once you graduate,” Zach Despart, 23, said of his need to pay down student loans. Despart graduated from the University of Vermont in 2012 after studying political science and film studies. “The absolute necessity to make enough money to pay back loans is so sudden that you don’t really have an option.”

Faced with limited job choices after college graduation, some students are considering pursuing graduate degrees – taking on more debt in the process– to increase their odds at finding a better paying job in the future. In some cases, students who pursue graduate level degrees can defer loan payments.

“It’s an incentive to go to graduate school so that I can be in a position to earn more money someday to pay back loans that keep increasing. It’s a vicious cycle,” said Keira Tachibana, 20, who is planning to graduate from UVM in two years. She anticipated owing about $100,000 upon graduation.

LINGERING DEBT

The crisis of student loan debt is not limited to recent graduates. “I’m not unemployed, but I’m being crushed under a mountain of educational debt,” said Clancy DeSmet, 38, of Montpelier, Vt. "If something doesn't change, I'll never be able to own a home and have even considered not starting a family because of my debt."

After paying student loan payments each month, not much is left over for other expenses, DeSmet said, calling the situation “unsustainable.” DeSmet has paid off his student loans from college, but has accrued $180,000 in additional debt after attending Vermont Law School. DeSmet suggests capping student loan interest rates, expanding loan forgiveness for public employees, and allowing bankruptcy to wipe off debts left by student loans.

Families are also facing financial strain because of mounting student loan debt. “We hear about the burden of debt on students. Let’s not forget families,” writes a 48-year old from Colchester, Vt. “I have one son in college and have more than $50,000 in loan debt. Because of the high interest rates … I have had to borrow against my home.”

The 54-year old parent of a recent graduate wrote that her son had been suffering from depression after owing more than $50,000 in student loans: “The very terrible case of depression came from spending time searching for work with threatening letters sent to him from college loan collectors.”

The burdens of student debt are plaguing a generation of students. In addition to fighting for meaningful student loan reform in the Senate, Sanders plans to hold a student town meeting in Vermont on the crisis of student debt when students return to campus this fall.