THE PENDULUM
NEWS
WEDNESDAY, SEPTEMBER 21. 2011 // PAGE 7
Increase in student loans, defaulting
d(
leads to problems for students, lenders
Caitlin O’Donnell
News Editor
Jaclyn Cabral always knew she
would attend a reputable university.
She knew Elon University was her first
choice when she stepped onto campus.
But what the 2011 alumna didn’t
know was that she would be without
a job months after graduation — and
more than $90,000 in debt because of
student loans.
“You can’t get a good job without
an education, but you can’t get an
education without being in debt,” she
said. “It’s a vicious cycle.”
Cabral is one in a growing number
of recent college graduates struggling
under the weight of their loans.
Not only is the average student
loan debt S24,000 for the Class of
2009, according to a report from
the Project on Student Debt, but the
number of students taking out loans
has increased dramatically. A decade
ago, a third of college students had to
borrow money. Now, that number is up
to two-thirds.
A serious crisis
The student loan crisis is headed
in much the same direction as the
mortgage crisis of recent years,
according to Greg Lilly, associate
professor of economics.
“(Loan agencies) didn’t make really
smart investment decisions on who to
give loans to,” he said. “They probably
lent out too much to students who
were much riskier than they thought
in terms of paying it back.”
Besides major increases in tuition,
Lilly said he speculates that the job
market is a key factor in the problem.
“A lot of these loans are taken out
under the assumption that students
will graduate and immediately land a
good-paying job that will allow them
to repay,” he said. “The unemployment
rates are still high, the economy is
still struggling, college graduates
are still (trying) to find permanent,
well-paying jobs. It leads to higher
defaults.”
In Cabral’s case, she expected
little-to-no trouble finding a position
after college, especially thanks to
her competitive internship at the
Hill Holliday advertising agency the
summer before her senior year. The
reality is that while she has been
called in for numerous interviews, she
hasn’t landed the job.
“I’d love to be in an ad agency doing
project management or producing
but because most of those require
experience. I’m trying to go in as
an assistant account executive and
become more valuable and move in
that direction,” she said.
In some cases, Lilly said there is
a disconnect between what jobs are
available and what students choose
as majors. By choosing a major with
limited career potential, students end
up hurting themselves.
“1 think often times professors
tell students to major in this because
you’re going to find it interesting or it
will be fun,” he said. “But professors
want to have students in their classes,
but often they’re not thinking about
what comes after college graduation.
College is college and the real world is
something very different.”
A long-term problem
According to a recent report from
the U.S. Department of Education, the
default rate on student loans within
two years of entering repayment was
8.8 percent for fiscal year 2009, up
from 4.5 percent for the fiscal year
2003.
The consequences are serious for
both the lender and the borrower,
Lilly said.
“Loans are typically the way banks
make money,” he said. “They engage
in an information search to make sure
the borrower is a good credit risk. So
you’re supposed to gain information
on collateral in case the person
defaults, income prospects, grades.
You know this potential borrower
better than anyone else.”
By providing a loan, the bank is
taking a risk, but if its preliminary
information is correct, the borrower
will pay back an excess of what he or
she borrowed, meaning a profit for the
bank or lender. Defaults not only force
lenders to take a loss, but can impact
the borrower, particularly students
with college loans, for the rest of his
or her life.
“It hurts their reputation, it hurts
their credit score,” he said. “It’s
going to be tougher to get loans in
the future. They won’t be able to get
another student loan, a car loan, a
mortgage, until you can build up your
reputation again.”
Currently employed at a local
restaurant, Cabral said she has claimed
forbearance on her loans for the time,
meaning she has informed the lender
that she is currently experiencing a
financial hardship and is unable to
pay. Otherwise, she would be paying
about $900 a month, an amount she
simply can’t afford.
This process of delaying repayment
can only extend through a year, but
Cabral said she is hopeful that she
will be employed and more financially
stable by January.
“I’m trying to stay optimistic and
am still applying everywhere,” she
said. “I’ve been talking to Ross Wade
(career counselor), talking to Elon
alumni I was friends with. The past
two months have been networking.”
Stereotypes challenged
Cabral was one of 10 recent college
graduates featured in a story by the
Huffington Post called “Majoring in
debt; College students struggle under
the weight of loans.”
“In a country where education
is highly valued and reviewed
as a necessity, the cost is simply
outrageous,” she wrote in a brief
biography on the site. “Even if I get a
job with a good starting salary in my
field, 1 know 1 will be paying back my
college loans for almost the rest of my
life.”
Her stance on the price of a college
education was not met without some
criticism. One commenter questioned
why “students from average blue collar
families feel compelled to attend very
expensive private schools.” Another
COURTESY OF JACLYN CABRAL
Elon alumna Jaclyn Cabral was recently featured in a
story by the Huffington Post about excessive student
debt. The publication ran this photo of her total debt.
said Cabral “hijacked” her younger
sister’s education and should pay for
her to attend college. Others said it
was her decision to attend a private
university.
But, Cabral insists, she made the
right financial decisions and the cost
of her education was well worth it.
“Elon is a well-recognized
university known to provide the best
education for the money spent,” she
said. “It was totally worth it for me
and the experiences I’ve had. I’m in
debt and the economy sucks, but I’d
never take it back. There is no reason
not to have the same opportunity as
anyone else. It’s not fair that people’s
grandparents who have millions of
dollars can afford to go, but people
who work hard can’t."
Marriage bill passes Senate, moves to statewide vote in May
Kassondra Cloos
News Editor
When it comes to marriage equality in
North Carolina, the polls seem to show
the state is confused. Elon Poll results
from February indicated the population
was split almost down the middle on
whether to vote on a constitutional
amendment to ban same-sex marriage.
Only 28 percent of respondents said they
supported full marriage rights for gay
couples.
But senators in the
North Carolina state
legislature insist they are
doing what North Carolina
citizens want by giving
the state an opportunity
to vote on whether the
state constitution should
include an amendment
to define marriage as a
union between one man
and one woman. Same-sex
marriage is already illegal
in North Carolina but a constitutional
amendment would make the existing law
nearly impossible to overturn.
It would also likely deal a harsh blow
to the state economy.
The United States’ economy currently
relies much more on the creation of
ideas, such as inventions, than the
manufacturing of goods, said Tom
Tiemann, professor of economics at
Elon University. More open-minded
people tend to be better at idea-sharing,
a coveted trait in hiring new employees,
and the best idea-sharers tend to gravitate
toward cireas that are cilso more tolerant
and accepting of differences, such as gay
rights.
“Ideas come from people bouncing into
each other,” Tiemann said. “Firms that do
that are pretty sure they’ll find it harder
to attract new people (if the amendment
is passed). North Carolina does better
than Virginia or South Carolina because
it has changed faster than other parts
of the south. There’s a less entrenched
political - social structure.”
While North Carolina has never been
an overly gay-friendly state, its position
as the only southern state to exclude
marriage laws from its constitution was
economically beneficial for companies
seeking new personnel. The state may
experience a “brain drain” following the
decision in
May, he said.
Two of
T i e m a n n ’ s
neighbors
have been
partners for
at least 10
years and
were pretty
sure they
were going to
stay in North
Carolina and commute on odd weekends
when one of them got a job in Washington,
D.C. But since the amendment has come
to the table, they’re starting to reconsider.
“They’re talking about selling their
house and moving because of this,”
Tiemann said. “They’re not the only
ones.”
Senior Mary Nease is a North
Carolina native and said she thinks
the amendment is a terrible thing and
goes against the First Amendment of
the United States. The United States was
founded on the separation of church
£md state, she said, and the only support
she has seen for the amendment is for
religious reasons.
“Legal marriage is very different
from religious marriage,” she said. “If
two individuals want to enter into a
“By putting (the marriage bill)
in the constitution, it says this
is really a bedrock value here
in North Carolina. It’s really
hard to get rid of.”
-Tom Tiemann
PROFESSOR OF ECONOMICS
relationship, it should be totally separate
from a religious union.”
Many of the senators who supported
the bill to put the amendment on the
ballot have said their personal opinions
did not factor into their decisions, but
they are instead giving North Carolina
what it has demanded for years.
“I think the senators are being kind
of weak on it,” Nease said. “They’re doing
the political thing of being weak on their
stance."
Freshman Aviya Payne said she thinks
the amendment is redundant and finds it
sad that, in 2011, this is still an issue. She
does not think senators are being honest
by saying they are doing what citizens
have asked, she said.
“There are plenty of things people
ask for the opportunity to vote and don’t
get the chance,” Payne said. “There’s
obviously something deeper than that.”
The amendment will pass if a simple
majority of North Carolina residents vote
in favor at the upcoming election in May.
It’s hard to tell right now whether there
is enough support, however, because
Republican politics will play a large role,
according to Tiemann. The turnout for
primaries is typically 13 percent of the
population, he said, but if there is a lot of
interest in the Republican primary, it will
likely pass because Republican residents
will have more reason to go to the polls
than the Democrats.
If it does pass, a two-thirds majority
of both legislative houses and the general
population will be required to repeal the
amendment. If it passes, there may even
be an effect on the number of students
applying to Elon from the north, Tiemann
said.
“By putting it in the constitution, it
says this is really a bedrock value here
in North Carolina,” Tiemann said. “It’s
really hard to get rid of.”
BY THE NUMBERS;
In March 2CXD9, 44%
opposed any legal
recognition for same-sex
couples.
28% supported civil
unions or partnerships, but
not full marriage rights.
21% supported full
marriage rights.
As of February 2011,
35% oppose legal
recognition.
29% support civil
unions.
28% support full
marriage rights.
56% oppose
constitutional amendment
to ban same-sex marriage.
Information courtly of the
Elon Poll.