Linda Wilson was going nowhere in the secretarial pool of the California Assembly. So in 1978 she went back to college to get a diploma. At first, Wilson worried about meeting her expenses. But the 32-year-old single parent soon discovered that a variety of loans were available. "There was money for everything," she remembers. "Getting a student loan was as easy as opening a line of credit at Bullock's."
In 1980 she left UC Davis with a degree in environmental planning and a debt of $9,000. But she wasn't worried. "By then I had loan savvy and knew about programs like student-to-student loans and fee deferments."
Wilson headed for the University of Wisconsin, but that school's $5,000 loan barely covered out-of-state tuition and expenses. So back she went to California to finish her graduate studies at UCLA. "I couldn't work with a child at home, so I took advantage of everything," she says. "When the school provided a National Defense Student Loan worth $10,000, I happily accepted every cent."
After receiving a masters in city planning from UCLA, Wilson became a highly prized commodity. The Los Angeles County Transportation Commission came after her. So did the City of Montebello.
And so did the U.S. government--but for an entirely different reason.
"They wanted me to start making repayments of $150 a month," she recalls. " 'Please!' I said. 'With a monthly rent of $650 and a 10-year-old boy to feed, I simply don't have the money.' "
The Department of Education was not impressed. It declared her delinquent, began assessing interest fees and penalties and turned the debt over to Wachovia Services, an Orwellian-sounding collection agency.
Makes Regular Payments
Today Wilson is director of transportation and planning for the city of Casper, Wyo. Each month she sends checks totaling $150 to Davis and UCLA. But with a debt of $40,000 still outstanding, Wilson admits she'll probably be paying well into the 21st Century.
"At least I'll always have someone who cares," she says with a sigh. "When I'm 95, Wachovia will be writing letters saying, 'Linda, wait, you can't die yet.' "
Thousands of Americans share Wilson's little secret. Though they look and behave like yuppies, they are, in fact, classified as "deadbeats" by the U.S. government because of their failure to repay federally guaranteed student loans.
The government, according to Secretary of Education William J. Bennett, faces a default bill of $1.6 billion this year, a 200% increase over 1983, when the total was $531 million. And if present trends continue, it is expected that more than 12% of the 3.25 million students currently borrowing money will never pay it back.
Needless to say, the government takes none of it lightly. "These deadbeats we're talking about are adults," says Bruce Carnes, deputy undersecretary for budget planning and evaluation at the Department of Education. "People eligible to vote should be able to distinguish between a grant and a loan. A loan you pay back."
But in these days of rising school costs and lowered job expectations, nothing is that simple. Today, because of rising tuition costs that average $1,337 at public universities and $5,793 at private four-year colleges (according to the Assn. of American Universities), the amount of borrowing under the GSLP has soared to almost $10 billion a year.
As many as half of the country's 10-million undergraduates now leave school owing money, the Department of Education says, with individual student debt ranging from $6,500 to $9,000. For MBA and law school graduates, the average debt easily reaches five figures. A medical student can count on starting a practice $30,000 in the red.
In a report released earlier this year, UCLA and the American Council of Education jointly warned that a generation of student debtors is being created.
"Growing student indebtedness has raised questions about the implications of the debt burdens for the national economy, for the economic well-being of borrowers, for equality of access to higher education and even for the educational process itself," wrote Alexander Astin, the UCLA professor who directed the joint study.
When it began in 1969, the Federal Guaranteed Student Loan Program was fairly simple: A certified full-time student at an accredited school or university whose family income did not exceed $30,000 could apply to a bank for a loan guaranteed by the federal government. Because character and credit worthiness were not at issue, defaults occurred but the bad debts did not overly disturb the banks because repayment was guaranteed by Washington.