CHICAGO — Margo Alpert is on the 30-year plan. Every month, $500 to $600 is automatically deducted from her salary to pay off college loans. By the time the 29-year-old Chicago public interest lawyer is in her mid-50s and thinking seriously about retirement, she will finally be free of college debt.
"It's going to be part of my life forever," Alpert said. "I don't think about it at all because it's just a fact of life."
Alpert's experience with her version of debtors' prison is not unusual in the realm of recent college graduates whose unpaid loan and expense obligations have soared in the last several years. Some have been left with debts that are double, or even more than triple, their annual salaries.
Because of higher tuition, steady or declining grants and state aid, and a greater dependency on loans, the average student's debt has increased by more than 50% over the last decade, after accounting for inflation, according to the U.S. Department of Education.
And as Congress moves to cut the budget deficit, the cost pressure on college students and those preparing to enter university is about to worsen.
The era of low-cost loans is ending, and interest rates on many federal education loans are poised to leap, starting July 1, because of congressional cuts.
This is likely to add thousands and perhaps tens of thousands of dollars in new debt onto the long-term costs of a college education.
The rate for so-called Stafford Loans, which represent the vast majority of federal education loans, will be fixed at 6.8%, compared with the current variable rate range of 4.75% to 5.38%.
The rate for loans taken out by parents on behalf of their children will increase from 6.1% to 8.5%.
Changes to federal student loan guidelines, however, will raise the loan limits for freshmen and sophomores.
"Reality will begin to hit for student loan borrowers this summer," said Robert Shireman, executive director Project on Student Debt in Washington. "A lot of borrowers were helped in the past two years by the ability to lock in low-interest rates. That opportunity is slipping away."
The new interest rates will result in payments that are 20% higher than the 2004-2005 rates, doubling the total interest paid over the life of the loan, according to the Project on Student Debt.
"It's very worrisome to our kids. They come out of [undergraduate] school with $30,000 or $40,000 in debt, and then they marry someone with $30,000 or $40,000 in debt," said Karen Foley, president of Scholarship Chicago, a nonprofit organization that helps arrange financial aid for low-income students.
"Debt can be character-forming, but we don't want it to be so crushing that they then conclude they can't go to graduate school or that they can't get into a particular profession because most of their money goes to repay debt instead of going into a savings plan," Foley said.
In about a decade, average debt for a four-year college graduate rose from $12,100 to $19,300, with about 25% of recent graduates having borrowed more than $25,000 to pay for their undergraduate degrees, according to national education statistics.
Luke Swarthout of Public Interest Research Group in Washington said the combination of rising tuition and higher interest rates had led to "an increasingly worrisome picture for students," one that affects career and personal decisions.
"College is about opening doors to our nation's young people," he said. "Excessive student loan debt has the effect of closing those same doors by limiting the choices students can make."