Students loans are deemed “good” debt, but many loans turn out to be long-term burdens for graduates.

By Michelle Singletary

There’s been quite a bit of news lately about how, as the credit crisis continues, it may be more difficult for some families to get student loans.

I’ll be honest. I think if college students and their parents have a harder time getting loans, that’s a good thing. Perhaps now more people will stop and consider the long-term implications of taking on so much of this so-called “good” debt to fund a college education.

The College Board likes to highlight in its annual survey of college costs that over a working lifetime, a college-educated person can earn considerably more than someone with just a high school diploma.

But many of those college grads are now using an increasingly higher percentage of their incomes to pay down student loan debts — for at least a decade after they’ve left school. Add at least another decade if the student attends a pricey, private college.

As the college financial aid award letters arrive and you sit down with your child, consider the challenges faced by the following people who wrote to me.

South Carolina resident Brenda Nixon is having trouble paying back about $58,000 in undergraduate and graduate student loans.

“Are there any programs that you know of to assist borrowers with student loans?” she asked. “My forbearances and deferments have all been exhausted.”

As graduation season approaches, I’ll get more questions like this one. That’s when it hits people that they are struggling to pay back the thousands of dollars they borrowed. Many can’t even handle the pint-size loan payments made possible by extending the loans out for as much as 30 years.

While there are some loan forgiveness programs, they’re generally available only for people such as teachers or doctors who are willing to work in underserved and low-income areas.

If you’re a federal government employee, the Federal Student Loan Repayment Program allows agencies to make payments on certain workers’ federally backed loans, up to $10,000 a year for a total maximum benefit of $60,000. To find out more about this program, go to www.opm.gov/oca/pay/studentloan.

Of course there are catches to getting the cash. First, the agency has to set up the program. The federal employee has to sign a service agreement to stay with the agency for at least three years, and the loan repayment is taxable income.

If you volunteer for certain programs, a portion of your debt may be forgiven. For example, AmeriCorps volunteers may be eligible to receive up to $4,725 in exchange for a year of service through its Segal AmeriCorps Education Award.

To find a list of loan forgiveness programs, check out FinAid’s Web site at www.finaid.org/loans/forgiveness.phtml.

One Florida mother wanted to know how to help her 21-year-old son who has $45,000 in private and federally backed student loan debt. The payments on the loans total about $400 a month. And he’s still attending school, although he’s not taking on any additional debt.

“Can he consolidate his loans and make the payments much lower so he can get his own place?” the mom asked. “He is willing to pay back the loan but cannot afford $400 and an apartment.”

For all you parents poised to tell your kid to go to whichever college he or she wants regardless of ability to pay without large loans, consider the consequences of that choice.

A Falls Church, Va., father, who participated in a recent online chat, is trying to get his kid to be reasonable. He wrote: “Help! I’m a divorced father. My daughter could go to college for free the next four years in Virginia. She wants to attend school in New York where she will have huge debt upon graduation. She is a smart kid but doesn’t understand debt.”

Dad, do what my grandmother did when I won a four-year scholarship to the University of Maryland. I, too, desperately wanted to attend school out of state. To which my grandmother said: “No ma’am. You’re going where you won’t end up in debt.”

I went to Maryland. To this day I’m grateful for my grandmother’s tough stance. Not having student loan debt helped put me in the financial position to buy my first home about two years after graduating.

In the case of the Florida mother, her son could stretch his loans out to get an even lower monthly payment, but that means more interest charges.

He shouldn’t do it. Instead, I would suggest he keep living with his mama and pay off that $45,000 before moving out.

“Getting a college degree was always my dream, but if I had to do it over again, I would have probably foregone graduate school,” Nixon said.

“I’m not sure it was really worth it considering the cost.”

Before you sign for those student loans, think about Nixon’s regret as she reflected on her heavy borrowing for both of her degrees.

“Going into a lot of debt for my education seems crazy to me now,” she said. “Even though some financial counselors say education debt is good debt, it’s not good to me.”

Washington Post Writers Group

Major commercial education companies are scrambling to ensure a steady stream of college-level students despite the credit squeeze, with some preparing to offer student loans themselves.

The move shows how dependent this sector of education is on student loans and how vulnerable the industry could become if credit woes continue to make it harder for lenders to raise capital.

Commercial colleges largely offer practical education in fields like business, computers, health care and culinary arts, often catering to low-income students and students already in the work place.

Seeking to reassure investors, Corinthian Colleges Inc., one of the nation’s largest chains, recently said it was exploring “alternatives to help students fund their educational programs,” including expanding its own lending program and finding new lenders.

The Career Education Corporation, another large chain, has announced a similar effort.

ITT Educational Services Inc. recently announced a deal with three major banks to preserve students loans through the rest of the year.

And Universal Technical Institute Inc., which offers programs in fields like automotive, diesel and motorcycle repair, said it could lose tuition revenue if students default on subprime loans from an outside lender. About 3 percent of the company’s revenue now comes from such loans.

The credit concerns come on top of other changes disrupting the student loan industry.

Congress has moved to reduce subsidy payments to student lenders making federally guaranteed loans. Investors have shown little interest in buying securities backed by student loans, leading a Michigan state agency to suspend a private loan program for students.

And loan companies — most particularly Sallie Mae, the nation’s largest student lender — are tightening standards for private loans for students who have poor credit or attend institutions with low graduation rates. Private loans are not guaranteed by the federal government and can carry rates as high as credit cards.

“It’s akin to death by a thousand cuts,” said Gary Santo, a managing director at Fitch Ratings in New York who follows the student loan business.

So far, problems have yet to be felt by most students. But some in the lending industry have begun to warn that there may be fewer borrowing options, even for traditional students, in the fall, at least for private loans, which students turn to when they have exhausted federal borrowing and grant aid.

Members of Congress in letters to the Bush administration Friday also raised concerns.

“A crisis is looming in which students and families may not have access to student loans,” said Ben Kiser, a spokesman for Nelnet, a large lender based in Lincoln, Neb.

Financial aid administrators at some nonprofit colleges countered that they see no imminent crisis and said not only that many companies offer federally backed loans but that the federal government is a lender itself, through its direct loan program.

They said lenders, which fought hard against changes in the student loan program, have been too quick to say cuts in subsidies will reduce availability of loans.

“They cried wolf a lot,” said Eileen K. O’Leary, assistant vice president for finance at Stonehill College in Easton, Mass., and a past chairwoman of the National Direct Student Loan Coalition, an alliance of colleges that participate in the direct loan program that was intended to make borrowing less costly by having the government provide loans directly to students.

“Will there be wholesale students not going to school?” she asked, “No, because federal money is still there.”

In some ways this should be a boom time for commercial colleges, with rising unemployment sending people back to school and falling interest rates translating, in theory, into cheaper student loans. But lenders, fearful of bad credit, are not cutting rates and have said they may not lend at all to students seen as high risks.

That makes commercial career colleges particularly vulnerable because they often draw low-income students with spotty education histories and they often charge considerably more than public two-year colleges.

“The for-profits typically have higher priced programs,” acknowledged Kimberly J. McWaters, president and chief executive of Universal Technical Institute.

The limits on federal borrowing mean students often must turn to private loans.

“We’ve got to be innovative and work together with students to give them access to cheaper money,” Ms. McWaters said. “Most of us have balance sheets that allow us to do so.”

Still, lending to students is a risk for commercial institutions because such a step exposes them to losses from defaults. While executives at the companies say they have the assets to back or make loans, they also acknowledge the risk.In a regulatory filing last month, Corinthian warned investors that “increasing the amount our new students pay in cash and instituting stricter underwriting guidelines may slow our rate of enrollment growth. In addition, expanding our own lending program and guaranteeing third-party lenders against default may increase bad debt from current levels and decrease liquidity.”

Investors are showing concerns about the sector. Since November shares of Career Education have fallen by about 50 percent, to close at $17.33 on Friday, when the company also announced that it was closing two colleges and seven campuses of its Gibbs division, including the Katharine Gibbs School in New York, after failing to find a buyer for those operations.

Shares of Corinthian, which traded for more than $17 in December, closed Friday at $7.72. Shares of ITT Educational closed at $70.85 Friday, but were more than $130 in November. Universal Technical Institute shares have fallen by about a third since November, closing Friday at $15.31.

Many commercial educational programs are privately held and have not disclosed the impact that tightened credit markets may have on their business or what steps they are taking to make sure that students continue to enroll.

“The publicly traded schools are actually the best of the bunch,” said Trace A. Urdan, senior research analyst at Signal Hill Capital Group, which does not own shares in companies covered by its research.

Not everyone believes that retrenchment in commercial education would be bad. “High-risk borrowers with low academic achievement who are pursuing post-secondary training should not go to expensive, low-quality proprietary schools,” said Michael Dannenberg, director for education policy at the New America Foundation in Washington. “They would be better off going to community colleges, which are lower cost and open enrollment, for the most part.”

Not all commercial institutions are equally at risk. Some charge tuition low enough that it can be covered just by federal loans and so will be better able to ride out a credit crunch. Capella University, for example, got less than 1 percent of its revenue from private loans in 2007; the University of Phoenix, one of the biggest players in the industry, gets just 4 percent.

“We are not really seeing any impact on our business,” said Stephen G. Shank, chief executive of Capella.

The distraught father accused of stabbing a boy he believed was a witness to a sexual assault on his daughter may have attacked the wrong person, the boy’s attorney said Tuesday.

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The 17-year-old high school junior spent the weekend with his parents and did not attend the party where the sexual assault allegedly took place, attorney Fernando Valdes said.

The boy was stabbed three times Monday at Wunsche High School and remained hospitalized Tuesday in good condition.

“He was not at any party at all,” Valdes said. “This kid was student of the month last month. He’s not some thug that runs around gang banging. He hangs around computer guys. He’s a techie, a good guy getting a bad rap.”

Harris County Sheriff’s Sgt. Kenneth O. Thomas said investigators hadn’t yet confirmed whether the boy was at the party.

“This was an unwarranted act of vigilantism,” said Valdes, who said the boy knows the girl but had never before seen her father.

The man went to the school Monday with his 17-year-old daughter and wife to report the sexual assault to school administrators.

Valdes said the man spotted the boy in the school lobby, called out to him and lunged at him from behind, stabbing the boy in the chest, one hand and the abdomen.

The teenager knocked the knife out of his attacker’s hand before school police subdued the man.

Spring Independent School District police arrested the girl’s father and charged him with aggravated assault with a deadly weapon. Court records did not indicate whether he had an attorney to speak for him, and a telephone number listed for his address had been disconnected.

The Associated Press is not naming the man because his daughter may have been a juvenile victim of sexual assault and could be identified through the father’s name.

Court records show that the 44-year-old man had received deferred adjudication for discharging a firearm in 2001, and pleaded guilty to theft in 1990.

About 1 million students at community colleges in economically disadvantaged communities can’t get cheap federal loans to fund their education, according to a report from the nonprofit Project on Student Debt.

Administrators at more than 250 public colleges have opted out of the Stafford loan program, which offers to lend low-income students at least $3,500 a year at no more than 6.4 percent after fees. “Students who need extra money to pay for community college will be left with no choice but to use credit cards, payday loans, and other high-cost debt,” says Robert Shireman of the project. Community college officials say their annual tuition, averaging $2,361 last year, is low enough that students can pay it without taking on unnecessary debt, says David Baime, spokesman for the American Association of Community Colleges.

Surveys of admissions officers show that fewer than 30 percent of the students who agree to stay on a college’s wait list are eventually accepted. At many elite schools, the chances are even slimmer. In recent years, for example, Massachusetts Institute of Technology has accepted anywhere between none and 40 students from its wait list of several hundred.

But admissions officers say there are a few steps students can take to ease the anxiety and improve their chances:

• Choose among the colleges you have been accepted to, and send a deposit and commitment by the May 1 deadline. At the very least, you should arrange to enroll in a local community college. Admissions officers say the single most important action for all wait-listed students is to be realistic about the low acceptance rates for those on the wait list and make sure they have some other college alternative lined up.

• Don’t automatically ask to stay on a college’s wait list. Colleges typically ask wait-listed students to mail a card or letter stating their continued interest in getting a shot at admission in May, June, or even later. “If they are happy with their other choices, please don’t say, ‘Yes’ to the wait list,” says Eric Kaplan, dean of admissions at the University of Pennsylvania. “They could effectively be taking somebody else’s spot.”

• Ask the school about your chances. Some schools rank their wait-listed students: Lower-ranked students have lower odds of getting accepted. But many schools don’t rank. They instead look to the wait list to replace the kind of student they had been counting on with a similar student—such as someone to fill a spot in an orchestra, a team, or a major. This system makes any individual student’s chances much harder to predict.

• Ask the school about criteria for getting on, and off, the list. Emory University in Atlanta says that the students on its wait-list are typically those with academic credentials matching those of students who were admitted but who didn’t demonstrate any special interest in or affection for Emory by, for example, visiting the campus or attending a local recruiting session.

• Be eager and creative, but not scary or desperate. There’s a fine line between admirable persistence and stalking. Most admissions officers say students can help their causes by obeying the school’s instructions and perhaps sending one well-written letter updating their achievements and explaining why they still should be admitted. Creative stunts can sometimes help. Jean Jordan, dean of admissions at Emory, remembers admitting a student who rewrote the words of the school song to argue her cause. But Jordan’s pretty tired of getting mailed shoes from students who “want to get their foot in the door” and is a little leery of any gift of food. “Don’t come down here and make a big plea; and hounding us can be superdestructive,” she adds.

Even though 2007 taxes may still be on your mind, here are some items to consider for 2008.

Retirement savings. Employees who participate in a 401(k) plan are allowed to sock away up to $15,500 for 2008—if they can afford it and their plan permits maximum contributions. Participants 50 or older can put in an additional $5,000.

The individual contribution cap for IRAs is $5,000, up $1,000 from 2007; people 50 or older can add an extra $1,000, the same as in 2007.

The income levels that may limit IRA contributions are raised. Joint filers with income of up to $159,000 can, for example, fully contribute to a Roth IRA in this year, up from $156,000 in 2007. Various other ceilings for Roth and traditional IRAs also are higher.

Standard deduction. For many taxpayers with limited deductible expenses, saving receipts to itemize deductions is not an imperative.

For 2008, these non-itemizers can claim a standard deduction of $10,900 on a joint return, or $13,000 if both spouses are 65 or older. A single can claim $5,450, or $6,800 if 65 or older. An unmarried head of household gets $8,000, or $9,350 if at least 65.

Itemized deductions. People who do claim itemized deductions may lose less of the benefit because of their income. A phaseout of itemized deductions begins when 2008 adjusted gross income tops $159,950, compared with $156,400 for 2007. The phaseout itself is also less severe than in 2007.

Education. Parents and others paying for college may have to rethink their options. Unless it is extended by Congress, a deduction for college tuition is dead. But the higher-education Hope credit increases to $1,800 from $1,650. The alternative Lifetime Learning credit is unchanged at $2,000.

Alert: Teachers who dig into their own pockets to buy classroom supplies may get less tax help this year unless Congress reinstates an expired deduction for up to $250 of such spending.

Capital gains. How about a tax rate of zero? While most investors pay tax of 15 percent on their long-term capital gains, starting this year, people in the lowest two tax brackets will pay no tax.

Included are people with taxable income up to $65,100 on a joint return, after deductions and exemptions, and $32,550 on a single return. A sizable gain, though, could easily push them into the higher brackets. But at least some of their gain may escape tax.

Kiddie tax. Parents who try to shave overall tax by shifting income-producing assets to their lower-taxed children get attacked anew by the tax code. For 2008, investment income over $1,800 of children 18 or younger—or through age 23 if a full-time student—may be taxed at the parent’s tax rate. In 2007, this provision applied through age 17, and before a tightening in 2006, only youngsters under 14 were affected.

Foiled: parents who planned to have their youngsters cash in on capital gains at 2008’s zero percent tax rate.

On the road. People who drive for business and opt to take a fixed per-mile tax deduction rather than claiming depreciation and other actual expenses—often the better, though more complicated choice—can look forward to a bit more this year. The per-mile allowance, regularly adjusted to reflect changes in gas and operating costs, rises to 50½ cents for 2008, up two cents from 2007.

Government
The federal government gives out the most. To qualify, students and parents must fill out the Free Application for Federal Student Aid. (FAFSA). Most federal grants, such as Pell grants, are awarded strictly on the basis of financial need. But some new programs, such as the Academic Competitiveness Grants and Smart Grants, are awarded to low-income students who also have good grades. State governments give out lots of money, too. Some states, such as Florida, New Mexico, and Tennessee give out grants solely based on grades. Others, such as California, give out money based on financial need and grades.

Schools
Universities give out lots of their own money. To get any money from a school, students usually have to at least fill out a FAFSA. Many schools also require students and parents to fill out the CSS/Profile. Many others will simply award a “merit” scholarship, regardless of the student’s financial situation, to students with top grades, test scores, or other in-demand skills or talents.

Charities
Many nonprofits give out free money. Some require students and parents to document their financial need by filling out the CSS/Profile. Others require their own forms, or essays, or other projects. Your high school counselor and college department head are likely to know of the local, less publicized programs that offer you the best odds. But you can try searching on the Web at sites like Scholarsite, College Board, Dollars for Scholars, and this list maintained by a Ph.D. named Paco Tomei.

Companies
Some employers provide education assistance to their employees and to the children of their employees. Some unions and professional associations also provide assistance to their members or the children of their members. And some companies have “scholarship contests” that are often also clever marketing campaigns, such as the Duck Tape prom outfit contest.

By federal law, colleges are supposed to tell students their full cost of attendance—including all hidden fees, book costs, and living expenses. While many colleges post their COA on their websites, many post low-ball numbers that don’t include fees or reasonable living expenses. And some don’t include any price information at all and will reveal it only if you call them.

If you can’t find your college’s COA on its website, you can check out the federal government’s free College Opportunities Online Locator or purchase access to U.S. News’s Premium Online Edition ($14.95). Unfortunately, sometimes the costs listed on these sites are for previous years. But if you add about 5 percent a year for inflation, you’ll have a fairly close estimate of what next year’s bill will look like.

The costs of college include:

Tuition: the cost of classes
Fees: Don’t leave out of your budget the growing number of fees being tacked on to college bills, including “student activities” fees, gym fees, health clinic fees, lab fees, technology fees, library fees, etc.
Room (or rent)
Board (or food)
Textbooks
Supplies: Some schools, for example, require students to own a computer.
Health insurance: A few schools require students to buy a campus health insurance plan. Others strongly recommend that students buy a plan that covers them while on campus if their home plan doesn’t cover the area.
Transportation: The student will need to fund travel between home and campus, at the very least.

A college degree is just like anything else. You can pay a lot or you can pay very little. And you don’t always get what you pay for.

A few hundred of the very top students and student-athletes around the country don’t pay anything because they manage to win “full ride” scholarships each year. A few hundred more are admitted to the handful of colleges that don’t charge any tuition (though they still usually have to pay for their textbook and living costs). About half of all college students get some sort of grant or scholarship to reduce their costs. But the size of the grant is typically modest. The averages range from $2,200 apiece to community college students to $7,700 apiece to private university students.

But about half of all college students get no free money and have to pay the full price of college by borrowing, working, or withdrawing from their savings.

Each college has a different cost, but here are the College Board’s estimates of total costs (including books, travel, etc.) for the 2007-08 academic year:

Type of School                  Without grants      With grants
Community college*             $4,552                  $2,352
In-state public university     $17,336                 $13,336
Private university                  $35,374                $27,674