The book of broke: SF students rethinking whether student debt is worth it

The sign Annabelle Niebel waved at a recent Occupy San Francisco protest tells the story: “$120,000 student debt, 2 grad degrees = no job.”

For a chart outlaying the rise in tuition versus grant endowments over time, as well as a list of average student debt by degree type, click on the photo to the right.

The problem, Niebel said, is that her degrees in South Asian studies and counseling psychology are seemingly useless in a sputtering job market that favors technology, finance and health care.

“My first degree was abstract,” she conceded. “But the second time I decided to go for a more practical field, something where I would have job skills. I went to the orientations for this counseling psychology program and everyone said we’d have work. But upon graduating, it became clear that no one was finding a job.”

While it is high, Niebel’s debt load is hardly unique. And it isn’t just graduate students. Last year, two-thirds of bachelor’s degree recipients left college with student debt averaging $25,250, according to a new report by the Project on Student Debt. Such debts are likely to climb if states keep cutting education to solve their budget woes.

UC regents are now considering a fee hike that could raise tuition and fees by as much as 16 percent a year through 2016. Then an education that cost $3,429 a year only a decade ago would soon have an annual price of about $22,000.

Such rising costs, combined with a lethargic economy, also have produced a spike in student loan defaults.

According to the U.S. Department of Education, 8.8 percent of the 3.6 million student borrowers who started repaying their loans in fiscal year 2009 defaulted within the first two years, up from 7 percent the year before.

The problem is so dire that President Barack Obama announced a plan last month that will allow students graduating next spring to pay back 10 percent of their discretionary income for 20 years and have the rest of their debt wiped clean. This “Pay as You Earn” option is an expansion of the current income-based repayment program, which currently allows borrowers to pay back 15 percent of their discretionary income for 25 years.

The president’s new repayment plan comes at a time when some are asking whether student debt is still a sensible investment.

But Lauren Asher, president of the Institute for College Access and Success, said borrowing for college is a smart investment even if returns aren’t guaranteed.

“College graduates still have a much better chance of getting and keeping a job than those who don’t obtain an education,” she said.

On average, Asher said, college graduates earn salaries at least two times larger than people who only have high school diplomas.

But that doesn’t mean the investment always pays off. Princeton educational economist Cecelia Rouse said student borrowers need to be thoughtful about what they’re investing in.

“The reality is that, if you take out a loan, there is a risk to that investment,” she said.

Mike Noonan didn’t think he was gambling when he borrowed $34,000 to get a bachelor’s degree from UC Berkeley and a master’s from San Francisco State University. His goal was modest: land a job teaching history at a local community college. At first, it worked out; he got part-time gigs at Cañada College in San Mateo and Berkeley City College soon after graduation in 2010.

But now, due to budget cuts, his courseload is being cut to two classes this semester and probably just one in the spring. He’s deferred his debt payments and is rubbing two sticks together to make ends meet in The City on roughly $1,200 a month.

“I want to teach — this is what I’m designed to do,” he said. “My master’s degree was supposed to be my ticket.”

But not every degree has equal value on the job market, said Mark Kantrowitz, founder of the student loan advice website Students who pursue degrees in fields such as science, math, engineering, computer science and health care are more likely to land jobs and earn higher salaries than people with liberal arts degrees, he noted.

“Borrowers need to think about these things before they incur the debt,” he said. “Are you going into it with your eyes wide open, or did you ignore the problem and say, ‘I’ll figure out how to repay those loans after I graduate?’”

Saul Steier, chair of the humanities department at San Francisco State, said he’s worried about the future of liberal arts if classes continue to be cut and middle-class students are priced out. He said courses in English, history and philosophy teach young adults critical thinking, which is essential to being a good citizen.

“We’re telling these kids that the only goal of education is business,” he said.

Making money wasn’t the first thing on Jeanie Kirk’s mind when she signed for a $70,000 loan to get a master’s degree in climate and society from Columbia University. She said students like her seek liberal arts degrees because they want to devote themselves to helping people and solving global problems.

“A lot of us are trying to do things that are going to have a positive impact on the world,” Kirk said.

Grant program no longer offers full ride students once relied on

Pell Grants used to be a low-income student’s ticket to an affordable college education, but now tuition hikes are pushing more and more recipients into heavy debt.

Another consequence of soaring college costs is the reduction in value of the Pell Grant, the nation’s largest financial-aid program for low-income students. Because the maximum award a student can receive under the Pell Grant program is $5,550, as tuitions rise recipients are borrowing more to fill the gap.

“Low- and moderate-income students are increasingly being priced out of a college education,” said Mark Kantrowitz, founder of the student loan advice website

In the 1970s, maximum Pell Grants covered almost 75 percent of the cost of attending a four-year public college. Now they account for only one-third, a number that will only drop further if recent trends continue.

Two years ago, the Pell Grant program received a short-term boost in President Barack Obama’s $787 billion stimulus package. But it took a $4 billion cut in last spring’s budget showdown and legislation currently being debated in the House Appropriations Committee could potentially reduce funding by another $44 billion over the next 10 years.

“These changes to Pell Grant funding would mean that fewer people would be eligible and those who are eligible would be at risk of receiving lower grants,” said Lauren Asher, president of the Institute for College Access and Success.

Asher said the proposed cuts would be especially crippling for low-income students because Pell recipients already borrow more than the average student. The awards are of particular importance to minority students, she said, with nearly half of all black undergraduates and roughly 40 percent of Hispanic undergraduates receiving them.

“Cuts could deter these students from going to college at all,” she said.

Robin Powers knows just how unaffordable college can be even with the support of a maximum Pell Grant. On her own by the time she was 16 years old, Powers considers herself self-sufficient, having put herself through college at UC Santa Barbara. But tuition increased from roughly $6,500 a year to almost $9,000 by the time she graduated in 2010, so she took out more and more loans to make ends meet. Now, she’s stuck with $45,000 of student debt and a temp job that pays $13 an hour.

“I was under the impression that if I did the right things I could make something of myself,” she said. “What I got instead was a whole lot of debt.”

San Francisco needs to plan for 80,000 homes. Where will they go?

West side neighborhoods could be transformed by the ‘Housing Element’

Niners vs. Rams: It’s like fighting your little brother

These two teams know each other well. And they look alike, too

What happens when a pandemic becomes endemic? S.F.’s top health official weighs in

Dr. Susan Philip envisions a city that will manage this ongoing disease