Colleges Begin to Confront Higher Costs and Students’ Debt

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The remote server returned an unexpected response: (417) Expectation failed.
Andrew Spear for The New York TimesE. Gordon Gee, the president of The Ohio State University, says that public colleges and universities need to devise a new business model to pay for the costs of education, beyond sticking students with higher tuition and greater debt.

COLUMBUS, Ohio — In a wood-paneled office lined with books, sports memorabilia and framed posters (including John Belushi in “Animal House”), E. Gordon Gee, the president of Ohio State University, keeps a framed quotation that reads, “If you don’t like change, you’re going to like irrelevance even less.”

We would like to speak with more people about their experience with college loans.

Mr. Gee, who is often identified with a big salary and spendthrift ways, says he has taken the quotation to heart, and he is now trying to persuade Ohio State’s vast bureaucracy, and the broader world of academia, to do the same.

At a time of diminished state funding for higher education and uncertain federal dollars, Mr. Gee says that public colleges and universities need to devise a new business model to pay for the costs of education, beyond sticking students with higher tuition and greater debt.

“The notion that universities can do business the very same way has to stop,” said Mr. Gee, who is also the chairman of a commission studying college attainment, including the impact of student debt.

College presidents across the country are confronting the same realization, trying to manage their institutions with fewer state dollars without sacrificing quality or all-important academic rankings. Tuition increases had been a relatively easy fix but now — with the balance of student debt topping $1 trillion and an increasing number of borrowers struggling to pay — some administrators acknowledge that they cannot keep putting the financial onus on students and their families.

Increasingly, they are looking for other ways to pay for education, stepping up private fund-raising, privatizing services, cutting staff, eliminating departments — even saving millions of dollars by standardizing things like expense forms.

And Wall Street is watching.

Moody’s Investors Service, in a report earlier this year, said it had a favorable outlook for the nation’s most elite private colleges and large state institutions, those with the “strongest market positions” that had multiple ways to generate revenue. Ohio State, for instance, received a stable outlook from Moody’s last fall, though the report cautioned about the school’s debt and reliance on its medical center for revenue.

But Moody’s issued a negative outlook for a majority of colleges and universities heavily dependent on tuition and state revenue.

“Tuition levels are at a tipping point,” Moody’s wrote, adding later, “We anticipate an ongoing bifurcation of student demand favoring the highest quality and most affordable higher education options.”

Colleges can be top-heavy with administrators and woefully inefficient, some critics say, and some have only recently taken a harder look at ways to streamline their operations.

“Schools are very good at adding new things, new programs,” said Sherideen S. Stoll, vice president for finance and administration at Bowling Green State University in Ohio. “We are not so good at looking at things we have been doing for 20 or 30 years and saying, ‘Should we be offering those academic programs?’ ”

At Bowling Green, 62 percent of graduates have debt that averages $31,515, the highest among Ohio public universities that publish the data. In addition to raising tuition, which has been limited by state-mandated caps, the university has laid off employees, encouraged early retirements, required unpaid furloughs and limited pay increases, Ms. Stoll said. The belt-tightening hasn’t yet reached the point that academic quality has suffered, she said, but Bowling Green may not be able to offer as much in the future.

“We’ve done everything and anything to try to operate much more efficiently,” she said.

The problems aren’t confined to public colleges. Administrators at some nonprofit private institutions said they too had come to realize they could not keep raising tuition and fees. Families have become more price-sensitive since the economic collapse and are seeking deeper discounts on the sticker price.

“We know the model is not sustainable,” said Lawrence T. Lesick, vice president for enrollment management at Ohio Northern University. “Schools are going to have to show the value proposition. Those that don’t aren’t going to be around.”

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Consumers Raised Debt by $21.4 Billion In March

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The remote server returned an unexpected response: (417) Expectation failed.
Consumer debt rose by $21.4 billion in March from February, the Federal Reserve said Monday. It was the seventh straight monthly increase and the largest since November 2001.

A measure of auto and student loans increased by $16.2 billion. A separate gauge of mostly credit card debt rose $5.2 billion after declining in January and February.

Total borrowing rose to a seasonally adjusted $2.54 trillion. That is slightly below the record high of $2.58 trillion for July 2008, eight months after the recession began.

After hitting that peak, consumers sharply reduced borrowing for two straight years. They slowly began taking on more debt in fall 2010, and in recent months have stepped up the rate of borrowing.

More borrowing is generally viewed as a healthy sign for the economy. It suggests consumers are gaining confidence and becoming more comfortable taking on debt.

Analysts said a major factor in the recent increase in borrowing is stronger hiring since fall.

But another reason is that more people are returning to school. Student loan debt jumped in March.

Paul Edelstein, director of financial economics at IHS Global Insight, said that could reflect an effort to borrow before a scheduled rate increase in July.

Cooper Howes, an economist at Barclays Capital, said it could also mean that some people who cannot find work are returning to school.

“We expect that student loan growth will continue to push the level of consumer credit higher,” Mr. Howes said.

The economy grew at an annual rate of 2.2 percent in the first quarter.

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Helping Adult Children Transition to Financial Independence

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The remote server returned an unexpected response: (417) Expectation failed.

Unlike many adult children, however, Stephanie invited her boyfriend, Alex, to join her. The good-humored Ms. McGurk embraced the idea wholeheartedly. “I was happy they moved here and not Delaware, where he’s from,” she said.

Welcome to parenthood in 2010. Of course, parents of adult children face all types of challenges, even in the best of times. These days, though, they have to help their offspring cope with a tough job market and, often, debt from credit cards and student loans.

Many parents are also worried about their own jobs, shrinking home values and fading retirement dreams. That is a lot to handle. But with a bit of preparation, parents can prevent themselves from flying off the handle every time they see their child idling on the sofa watching “Family Guy.”

These are particularly difficult times for people in their 20s, who had a 12.5 percent unemployment rate in September, compared with 9.2 percent for the general population on a nonseasonally adjusted basis, according to the Bureau of Labor Statistics.

“The labor market has been a disaster for young people,” according to Andrew Sum, a professor of economics and the director of the Center for Labor Market Studies at Northeastern University. Not only is it difficult for young people to find work, he said, but “40 percent of college graduates under 25 who have jobs are mal-employed, meaning they’re working at jobs that don’t require college degrees.” That is up from 30 percent in 2000.

Stephanie McGurk, who majored in environmental studies, eventually took a job as a nanny. On Oct. 15, four months after she had moved home, she and Alex, who landed a job in his field of graphic design, found a small rental in Burbank, Calif.

Not all young people are able to transition as smoothly. As a result, parents are improvising as they find themselves in the role of life coach, career counselor, financial adviser, real estate agent and pseudo-psychologist for their adult children. Here are some tips:

EXPECT CHILDREN TO MOVE HOME It no longer has the same stigma. One in five people aged 25 to 34 lives in a multigenerational household, typically with their parents, according to a study released this year by the Pew Research Center. That figure has nearly doubled since 1980.

A survey released last month by Twentysomething, a market research firm, found that 85 percent of those graduating last spring planned to move back home, up from 67 percent as recently as 2006. Even when children get jobs, parents should encourage them to continue living at home — at least as long as everyone can tolerate it, some personal finance experts say. Money that would have been spent on rent could be saved, or used to pay off credit cards and student loans.

DO NOT SACRIFICE TOO MUCH If children move back home, it is reasonable to have them contribute in some way, said Ann Diamond, a financial counselor in New York City. “If they’re making enough money, you can ask them to pay some rent,” she said.

Otherwise, agree on responsibilities, like making dinner a few nights a week or doing the laundry. Most important, parents should not put their own financial security at risk, experts say. “I see too many parents, especially mothers, helping out grown children when they should be squirreling away more money for their own retirement,” said Cindy Hounsell, president of the Women’s Institute for a Secure Retirement, a nonprofit organization in Washington.

DO NOT MICROMANAGE CAREERS Parents should make it clear to their children that they are expected to be moving toward financial independence and give them a specific time frame to get a job, experts say. It is a good idea, however, to resist pointing out that their hopes of becoming rock stars, poets or even Internet entrepreneurs may not be realistic.

“Instead of saying you have to compromise on your dream job, let them figure this out by themselves,” said Ms. McGurk. She added that she and her husband had let their daughter and houseguest know that their comfortable arrangement was not intended to be indefinite. “Right now there aren’t too many jobs available in the fair trade, natural food movement, dealing with indigenous farmers in L.A.,” she joked, referring to her daughter’s college major.

HELP WITH FINANCIAL PLANNING Even if the subject of personal finance terrifies parents, it is a good idea to confront it for their children’s sake. Ms. Diamond suggested that parents sit down and talk through their basic monthly expenses, including cellphone charges, credit card debt and car insurance. Introducing a Web site like mint.com to assist with budgeting, debt repayment and savings goals can help a parent avoid being the one doing the nudging.

“It’s a rude awakening for many people recently out of school,” said Ms. Diamond. “But you need to start the conversation and talk to them like adults.”

HAVE THE DEBT TALK The average college student leaves school with more than $4,000 in credit card debt and $24,000 in student loan debt. It is wise for parents to make sure that children know the rates on their student loans and credit cards, and that they should pay the highest interest debts first.

Parents should not co-sign credit cards for their children because the parents’ credit score will most likely drop if the child misses just one payment, finance experts say. Also, have them find out if they are eligible for the government’s Income-Based Repayment plan, which can reduce the cost of their federal student loans significantly. Try finaid.org and ibrinfo.org.

If your children need money for graduate school, steer them to the federal Graduate Plus loan program, which charge a fixed rate of 7.9 percent. That may be lower than many private student loans. Go to studentaid.ed.gov.

CONSIDER HEALTH INSURANCE Grown children may want help in paying off their car loans, but if money is tight, springing for their health coverage is a better idea. Under the new Obama health care rules, you may already be allowed to cover your children under 26 years old on your policy, whether they live at home or not. (Check state laws, too. New Jersey, for example, allows parents’ policies to cover their children through age 30.)

LET THEM DEFINE SUCCESS More young people are pursuing nontraditional paths because of the abysmal job market. (Applications to the Peace Corps, for example, were up 18 percent last year, the highest since 1998.)

After graduating from high school in 2008, Zach Cooper trained at the French Culinary Institute in New York City for a year and then went to college. After his freshman year, he told his parents that he was not returning to school because he had been offered a full-time job as a line cook at Morandi, a Keith McNally restaurant in New York.

His mother, Lynn Sonberg, was not thrilled at first. “I wanted him to have the luxury of a period of intellectual exploration,” she said. But she is proud of his achievement. “He’s almost financially independent at age 20 at doing something he loves,” she said, “and that’s a blessing.”

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Peliculas Online

Balancing Debt Against the Perfect College Choice

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The remote server returned an unexpected response: (417) Expectation failed.

WHEN the financial aid award letter arrived from Juniata College several weeks ago, Mino Caulton and his parents had many reasons to celebrate.

He had been accepted, an accomplishment in itself for a dyslexic 18-year-old who has refused to take any extra time on his tests for much of high school.

Juniata, in Huntingdon, Pa., gave $18,500 in grants, not bad for a college with an endowment of much less than $100 million.

But it was not enough, not even close. Mino’s parents, whose household income has fallen 80 percent in the economic downturn, have little for his education now. Juniata wanted him to borrow $6,500 his freshman year and would probably suggest more in future years. And finally there was the $10,000 or so, beyond the grants and loans, that he would need to pay the total cost of attendance, more than $43,000.

His parents could borrow it, or he could borrow it himself if a bank offered him more in higher-rate student loans, aside from the federally subsidized $6,500.

So he has a question to answer, a choice that most 18-year-olds have no idea how to make and that a vast majority of parents are ill-equipped to consider as well: just how much sacrifice should teenagers (and often their parents) make to attend a high-quality liberal arts college, when a perfectly good community college is just up the road?

Both of Mino’s parents are struggling to help him sort it out. His father, Greg Caulton, did not attend college and apprenticed himself to a graphic design company in Australia, where he grew up. “There were 20 institutions of higher learning,” he said. “And the costs there are still structured in a way that it can’t ruin your life.”

His mother, Emily Bayard, is a college graduate, but she attended city schools in New York when they cost next to nothing.

While they did not anticipate a six-figure bill or the possibility of five-figure debt for their only child, they did raise Mino to watch his pennies.

“I have a 10-second memory of my dad telling me that I don’t need an inch of toothpaste,” he said. “And I got a lot of hand-me-downs, which I still wear. Why spend money on new clothes when these ones fit?”

Mino remembers the money he earned from a Mother’s Day lemonade stand years ago ($6) and from picking strawberries and tomatoes at a local organic farm ($25, cash on the barrel). He’ll gladly run for six hours straight if he can pick up four consecutive games of referee work in youth soccer leagues, at $35 a game.

Though Mino spends hardly anything, he has not saved enough to make a dent in private college tuition. So he applied to some financial safety schools: Greenfield Community College nearby and the flagship University of Massachusetts campus in Amherst. He is not sure that a big state school can provide more individualized instruction.

So how much should he sacrifice to get it? Zac Bissonnette, the 22-year-old author of “Debt-Free U,” a 2010 book that encourages families to borrow as little as possible in pursuit of a child’s bachelor’s degree, was practically foaming at the mouth with anger when Mino showed him his letter from Juniata.

The college’s subtle word choices reflect a cavalier attitude toward debt, Mr. Bissonnette said. “Your parents may further reduce 2011-12 educational expenses by applying for the Parent Loan for Undergraduate Students (PLUS),” the letter read.

“I think it’s sleazy to send a letter to a student suggesting that their parents borrow $10,180,” Mr. Bissonnette said. “If you’re going to send someone a letter suggesting they should borrow $10,000, you should send it to them.”

He also rejected the idea that loans reduced expenses. “Borrowing money to pay for something doesn’t reduce the expense,” he said. “It increases it, because you have to pay interest.”

John T. Wall, a spokesman for Juniata, said the college planned to change its wording in response to that criticism and added that it began encouraging parents to borrow over 10 years ago to remind families that there was an alternative to students taking on additional higher-interest debt to pay for college.

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Placing the Blame as Students Are Buried in Debt

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The remote server returned an unexpected response: (417) Expectation failed.

Today, however, Ms. Munna, a 26-year-old graduate of New York University, has nearly $100,000 in student loan debt from her four years in college, and affording the full monthly payments would be a struggle. For much of the time since her 2005 graduation, she’s been enrolled in night school, which allows her to defer loan payments.

This is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of people like Ms. Munna are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up.

Meanwhile, universities like N.Y.U. enrolled students without asking many questions about whether they could afford a $50,000 annual tuition bill. Then the colleges introduced the students to lenders who underwrote big loans without any idea of what the students might earn someday — just like the mortgage lenders who didn’t ask borrowers to verify their incomes.

Ms. Munna does not want to walk away from her loans in the same way many mortgage holders are. It would be difficult in any event because federal bankruptcy law makes it nearly impossible to discharge student loan debts. But unless she manages to improve her income quickly, she doesn’t have a lot of good options for digging out.

It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners. For starters, it’s a shared failure of parenting and loan underwriting.

But perhaps the biggest share lies with colleges and universities because they have the most knowledge of the financial aid process. And I would argue that they had an obligation to counsel students like Ms. Munna, who got in too far over their heads.

How many people are like her? According to the College Board’s Trends in Student Aid study, 10 percent of people who graduated in 2007-8 with student loans had borrowed $40,000 or more. The median debt for bachelor’s degree recipients who borrowed while attending private, nonprofit colleges was $22,380.

The Project on Student Debt, a research and advocacy organization in Oakland, Calif., used federal data to estimate that 206,000 people graduated from college (including many from for-profit universities) with more than $40,000 in student loan debt in that same period. That’s a ninefold increase over the number of people in 1996, using 2008 dollars.

The Family

No one forces borrowers to take out these loans, and Ms. Munna and her mother, Cathryn, have spent the years since her graduation trying to understand where they went wrong. Ms. Munna’s father died when she was 13, after a series of illnesses.

She started college at age 17 and borrowed as much money as she could under the federal loan program. To make up the difference between her grants and work study money and the total cost of attending, her mother co-signed two private loans with Sallie Mae totaling about $20,000.

When they applied for a third loan, however, Sallie Mae rejected the application, citing Cathryn’s credit history. She had returned to college herself to finish her bachelor’s degree and was also borrowing money. N.Y.U. suggested a federal Plus loan for parents, but that would have required immediate payments, something the mother couldn’t afford. So before Cortney’s junior year, N.Y.U. recommended that she apply for a private student loan on her own with Citibank.

Over the course of the next two years, starting when she was still a teenager, she borrowed about $40,000 from Citibank without thinking much about how she would pay it back. How could her mother have let her run up that debt, and why didn’t she try to make her daughter transfer to, say, the best school in the much cheaper state university system in New York? “All I could see was college, and a good college and how proud I was of her,” Cathryn said. “All we needed to do was get this education and get the good job. This is the thing that eats away at me, the naïveté on my part.”

But Cortney resists the idea that this is a tale of bad parenting. “To me, it would be an uncharitable reading,” she said. “My mother has tried her best, and I don’t blame her for anything in this.”

The Lender

Sallie Mae gets a pass here, in my view. A responsible grownup co-signed for its loans to the Munnas, and the company eventually cut them off.

But what was Citi thinking, handing over $40,000 to an undergraduate who had already amassed debt well into the five figures? This was, in effect, a “no doc” or at least a “low doc” subprime mortgage loan.

A Citi spokesman declined to comment, even though Ms. Munna was willing to sign a waiver giving Citi permission to talk about her loans. Perhaps the bank worried that once it approved one loan, cutting her off would have led her to drop out or transfer and have trouble paying back the loan.

Correction: An earlier version of this column online misstated the benchmark year in a study by the Project on Student Debt.

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Out of College, Not on Her Own

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The remote server returned an unexpected response: (417) Expectation failed.

COURTNEY McNAIR has been out of college for three years. She has a degree in political science and Spanish. She also has the same address she had in high school and the same bedroom in her parents’ Los Angeles home. Not to mention $40,000 in student loan debt, $2,000 in credit card bills and $10,000 left to pay on her red 2008 Chrysler PT Cruiser.

And this is what she worries about: winning the lottery.

“I’ll just spend it all and have no idea where it went,” said the 25-year-old graduate of Wellesley College.

That would be a luxurious problem. At the moment, she’s taking out more loans for graduate school in an effort to pursue a career as a special education teacher.

So someday she’ll have a steady income. Her biggest problem, however, is getting a better grip on where her money goes. She doesn’t know how to budget and hasn’t put much thought into her financial future. “I’ve always hated money; I’m scared of it,” said Ms. McNair.

After she graduated in 2008, Ms. McNair took the first job she was offered, as a match coordinator at the Los Angeles Boys and Girls Club. It paid $25 an hour, but she didn’t like working in an office. She switched to tutoring high school students, for $13 an hour, three hours a day. “That was enough to, I guess, swing it for a while. Make my car payments, pay my phone bill and all that other stuff.”

Now she’s tutoring and working part time for a foundation started by her parents, who are both lawyers. The foundation provides low-cost legal services for students with special needs and eventually hopes to open a charter school. Her father, Greg, pays her $13 an hour. Her parents don’t charge her rent, but she has to do the grocery shopping and make dinner for her family four nights a week. She’s also responsible for all expenses related to her terrier, Queen Anne.

The McNairs have three other daughters, including a 22-year-old who lives at home. But she didn’t want to end up like her sister, so she didn’t take out student loans.

Margaret McNair, Courtney’s mother, said her children had expectations different from hers when she finished school. “When I was in my 20s, I couldn’t wait to get out there,” she said. “Nobody could hold me back.”

A 2009 survey by CollegeGrad.com found that 80 percent of college graduates moved back in with their parents. And Courtney said that many of her friends were back in their old bedrooms, too. “So it doesn’t feel like, oh my gosh, I’m the only one still here. I figure if I’m 30 and living at home, there’s something wrong.”

Without better budgeting skills, however, she could easily end up having to stay in her childhood bedroom. Ms. McNair decided about a year ago that she wanted to teach special education students. For that, she needed to return to school. So she’s taking classes at California State University, Los Angeles.

According to PayScale.com, the starting salary for a special-education teacher is $29,000 to $40,000. After graduate school, Ms. McNair will owe roughly $50,000 in student loans, with payments of over $500 a month.

Lauren Lyons Cole, 29, is a certified financial planner in New York City. Her concern about Ms. McNair’s situation is the risk of taking on more loan debt than she will earn when she graduates. “I see that so many young people don’t understand that $40,000 a year, $50,000, even $60,000, it just really doesn’t go far,” she said.

But to Ms. McNair, that kind of salary seems comparable to winning the lottery. Asked about her dream financial situation, she replied, “I’d find a job that paid me goo-gobs of money to do what I love.” Her definition of “goo-gobs”?

Something around $25 an hour. Or $52,000 a year.

Ms. Cole said Ms. McNair was wise to pursue a graduate degree in a field where there were jobs. But she was underestimating the salary she should ultimately shoot for, given her education and skills. “Nobody’s telling her that she has to work on Wall Street or sell her soul,” Ms. Cole said. “But the reality is life is expensive.”

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Student Loans Weighing Down a Generation With Heavy Debt

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The remote server returned an unexpected response: (417) Expectation failed.
Photographs by Ruth Fremson/The New York Times and Ty William Wright for The New York TimesTaking on debt has become a central part of the college experience for many students.

ADA, Ohio — Kelsey Griffith graduates on Sunday from Ohio Northern University. To start paying off her $120,000 in student debt, she is already working two restaurant jobs and will soon give up her apartment here to live with her parents. Her mother, who co-signed on the loans, is taking out a life insurance policy on her daughter.

We would like to speak with more people about their experience with college loans.

WORKING 3 JOBS  Chelsea Grove dropped out of Bowling Green State University and owes $70,000. “I’ll be paying this forever,” she said.

“If anything ever happened, God forbid, that is my debt also,” said Ms. Griffith’s mother, Marlene Griffith.

Ms. Griffith, 23, wouldn’t seem a perfect financial fit for a college that costs nearly $50,000 a year. Her father, a paramedic, and mother, a preschool teacher, have modest incomes, and she has four sisters. But when she visited Ohio Northern, she was won over by faculty and admissions staff members who urge students to pursue their dreams rather than obsess on the sticker price.

“As an 18-year-old, it sounded like a good fit to me, and the school really sold it,” said Ms. Griffith, a marketing major. “I knew a private school would cost a lot of money. But when I graduate, I’m going to owe like $900 a month. No one told me that.”

With more than $1 trillion in student loans outstanding in this country, crippling debt is no longer confined to dropouts from for-profit colleges or graduate students who owe on many years of education, some of the overextended debtors in years past. As prices soar, a college degree statistically remains a good lifetime investment, but it often comes with an unprecedented financial burden.

About two-thirds of bachelor’s degree recipients borrow money to attend college, either from the government or private lenders, according to a Department of Education survey of 2007-8 graduates; the total number of borrowers is most likely higher since the survey does not track borrowing from family members. 

By contrast, 45 percent of 1992-93 graduates borrowed money; that survey included family borrowing as well as government and private loans. 

For all borrowers, the average debt in 2011 was $23,300, with 10 percent owing more than $54,000 and 3 percent more than $100,000, the Federal Reserve Bank of New York reports. Average debt for bachelor degree graduates who took out loans ranges from under $10,000 at elite schools like Princeton and Williams College, which have plenty of wealthy students and enormous endowments, to nearly $50,000 at some private colleges with less affluent students and less financial aid.

Here at Ohio Northern, recent graduates with bachelor’s degrees are among the most indebted of any college in the country, and statewide, graduates of Ohio’s more than 200 colleges and universities carry some of the highest average debt in the country, according to data reported by the colleges and compiled by an educational advocacy group. The current balance of federal student loans nationwide is $902 billion, with an additional $140 billion or so in private student loans.

“If one is not thinking about where this is headed over the next two or three years, you are just completely missing the warning signs,” said Rajeev V. Date, deputy director of the Consumer Financial Protection Bureau, the federal watchdog created after the financial crisis.

Mr. Date likened excessive student borrowing to risky mortgages. And as with the housing bubble before the economic collapse, the extraordinary growth in student loans has caught many by surprise. But its roots are in fact deep, and the cast of contributing characters — including college marketing officers, state lawmakers wielding a budget ax and wide-eyed students and families — has been enabled by a basic economic dynamic: an insatiable demand for a college education, at almost any price, and plenty of easy-to-secure loans, primarily from the federal government.

The roots of the borrowing binge date to the 1980s, when tuition for four-year colleges began to rise faster than family incomes. In the 1990s, for-profit colleges boomed by spending heavily on marketing and recruiting. Despite some ethical lapses and fraud, enrollment more than doubled in the last decade and Wall Street swooned over the stocks. Roughly 11 percent of college students now attend for-profit colleges, and they receive about a quarter of federal student loans and grants.

In the last decade, even as enrollment at state colleges and universities has grown, some states have cut spending for higher education and many others have not allocated enough money to keep pace with the growing student body. That trend has accelerated as state budgets have shrunk because of the recent financial crisis and the unpopularity of tax increases.

Nationally, state and local spending per college student, adjusted for inflation, reached a 25-year low this year, jeopardizing the long-held conviction that state-subsidized higher education is an affordable steppingstone for the lower and middle classes. All the while, the cost of tuition and fees has continued to increase faster than the rate of inflation, faster even than medical spending. If the trends continue through 2016, the average cost of a public college will have more than doubled in just 15 years, according to the Department of Education.

Much like the mortgage brokers who promised pain-free borrowing to homeowners just a few years back, many colleges don’t offer warnings about student debt in the glossy brochures and pitch letters mailed to prospective students. Instead, reading from the same handbook as for-profit colleges, they urge students not to worry about the costs. That’s because most students don’t pay full price.

Even discounted, the price is beyond the means of many. Yet too often, students and their parents listen without question.

“I readily admit it,” said E. Gordon Gee, the president of Ohio State University, who has also served as president of Vanderbilt and Brown, among others. “I didn’t think a lot about costs. I do not think we have given significant thought to the impact of college costs on families.”

Andrew Martin reported from Ada, Ohio, and Andrew W. Lehren from New York.

This article has been revised to reflect the following correction:

Correction: May 16, 2012

An article on Sunday about college students’ debt, and an accompanying chart, misstated the percentage of bachelor’s degree recipients who had borrowed money for their education from the government, private lenders, or with the help of family members.

The article stated that the percentage had increased to 94 percent from 45 percent in 1993, based on data from the Department of Education, whose officials reviewed The Times’s methodology before publication. While the percentage of students borrowing for college has indeed increased significantly, the 94 percent figure reflected an inaccurate interpretation of the data, which came from a survey of 2007-2008 graduates.

That survey showed that 66 percent of bachelor’s degree recipients borrowed from the government or private lenders; an additional percentage of graduates had family members who borrowed on their behalf or who lent them money, meaning that the total percentage with college borrowing increased to more than 66 percent. But the precise figure isn’t known because the department survey did not address borrowing involving family members. (The earlier survey, of 1992-1993 graduates, found that just 45 percent of graduates had borrowed from all sources, including from family members.)

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Explaining New Federal Student Loan Rules

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The remote server returned an unexpected response: (417) Expectation failed.

But if the questions sent to our Bucks blog from indebted people are any indication, any change in Student Loan Land almost inevitably leads to enormous confusion. Many questions had to do with whether private loans, the kind that come from banks and often have higher and variable interest rates, are part of these changes. Nothing is changing with those loans.

This is crucial, since many of the people in the worst sort of trouble — the ones you’ve read about with six-figure balances — often have both private loans and federal loans.

Instead, only those with different kinds of federal loans — an estimated 5.8 million borrowers — will be able to consolidate them into one loan under the new plan and also save themselves a bit of money.

Borrowers also remain befuddled about the confusing eligibility requirements of a two-year-old program that limits the monthly payment for certain federal student loan borrowers based on their income and then forgives any remaining debt after 25 years.

Starting sometime next year, the limit will be cut by a third for certain borrowers, and that will lower payments. Also, loan forgiveness will happen after 20 years. (The income-related changes were already scheduled to happen in 2014, but they will occur sooner now.)

Today, at least 450,000 people participate in the federal income-based repayment program that started about two years ago, though there are probably many more borrowers who are eligible but don’t know about it or haven’t figured out how to sign up.

I’ve answered as many of the reader queries as I can below, and will answer more on the Bucks blog in the coming weeks.

Q. Who is eligible?

A. People with at least one federal loan that they borrowed directly from the federal government and at least one that originated with a bank or other lender. If you have a bunch of bank-issued federal loans but no loan directly from the government, you can consolidate them under an older federal program, but it won’t save you as much money.

The PLUS loans that some graduate students have taken out in recent years are eligible. Perkins Loans and many federal loans for people entering health professions are not eligible. And again, private student loans are not part of the mix here either.

Also, if you’re in default on the loans, you won’t be eligible.

Q. How do I know what kind of loan I have?

A. Don’t be embarrassed to ask, since many people have forgotten or never knew in the first place. Call your lenders now and ask them. The Education Department plans to inform all eligible borrowers in January as well. If you haven’t heard from them by the end of that month, call them at 1-800-4FEDAID (1-800-433-3243) and ask.

Q. Is there a limit to the number of federal loans I can consolidate?

A. No.

Q. What will I save if I consolidate under the new program?

A. It depends, and the formula for calculating your new interest rate is complex.

First, you’ll subtract 25 basis points (a quarter of a percentage point) from the interest rate of your federal loan that a bank or other lender originated. You can also subtract another 25 basis points for both those bank loans and any loans that came from the federal government directly if you agree, once the loans are consolidated, to let the federal government (which will be the new lender of record) pull the payment automatically from your bank account each month.

The new rate will then be a weighted average of the two (newly discounted) rates from the two different types of loans, based on the balances of each loan.

Q. When can I sign up, and for how long?

A. Enrollment should begin in January and is scheduled to end on June 30, 2012.

Q. Can this help me make more of my federal loans eligible for forgiveness if I work in certain public service jobs?

A. Yes. The only federal loans that are eligible for that forgiveness plan are ones in the federal direct program, which is where you end up when you consolidate your federal student loans in this fashion. By consolidating, older federal loans that banks originated for you would then become eligible.

Q. What if I recently consolidated? Can I unconsolidate to take advantage of this new discount?

A. No.

Q. Who is eligible for these income-based repayment plans in the first place?

A. Eligibility is based on something known as “discretionary” income, which the federal government defines as anything above 150 percent of the poverty level. The poverty level depends on your state and the size of your family. The big idea here is to only allow people to qualify whose income makes it hard to afford their full federal student loan payments. (Private loans do not factor into income-based repayment.)

All of this is outlined in plain English on IBRinfo.org, a Web site maintained by a nonprofit group called the Project on Student Debt. Your lender or the company servicing your loan will decide whether you’re eligible.

Q. What is changing with these programs as a result of Wednesday’s announcement?

A. Currently, people who qualify pay no more than 15 percent of their discretionary income toward federal student loan payments each month. You only have to make payments for 25 years, even if there’s still a balance left.

The new plan will lower the cap to 10 percent of discretionary income and waive any balances after 20 years of repayment. (Again, better deals are available for people who are working in certain public service jobs.)

Q. Any other catches?

A. Yes. This new income-based plan is not available to people who graduated in 2011 or earlier and have no plans to take out any new federal loans. Instead, you must have at least one federal loan from no earlier than 2008 and also take out one more in 2012 or later to qualify.

Graduate students are eligible, too, but you have to have taken your first loan out no earlier than 2008 to qualify, in addition to taking out at least one more in 2012 or later. So if you’re a sixth-year doctoral student, this might not work for you. That said, you might be eligible for the older, less generous plan.

Also, here too, your loans can’t be in default. This was disappointing to Robert Applebaum, the founder of forgivestudentloandebt.com. His two-year-old movement along with the petition he started on the White House’s Web site helped inspire the adjustments to the federal loan programs.

“Income-based repayment is fantastic if all you have are federal loans and are current on your repayments,” said Mr. Applebaum, 37, who lives on Staten Island and is current on his own student loans. “But people are drowning in debt and penalties, and the government has made it so that first you have to get your head above water. Another step could have been to eliminate that requirement, and they didn’t.”

Q. What if I still have questions?

A. The financial aid ace Mark Kantrowitz of finaid.org has posted his take on the announcement on the Choice blog. Otherwise, call the Education Department and keep an eye on studentaid.ed.gov and the Project on Student Debt’s Web site for more details as they become available.

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Consumer Borrowing Increased 3.1% in April

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The remote server returned an unexpected response: (417) Expectation failed.

The increase, of 3.1 percent, pushed consumer borrowing to a seasonally adjusted annual level of $2.43 trillion, just above the nearly four-year low of $2.39 trillion, reached in September.

But a category that measures credit card use fell for the second time in three months. It has risen only twice since August 2008.

The overall report includes auto loans, student loans and credit cards, but it excludes mortgages and other loans tied to real estate. The Fed will give a more complete picture of Americans’ debt on Thursday, when it issues a report on household net worth.

Households began borrowing less and saving more to cope with the recession that officially ended in June 2009. Credit card use has fallen nearly 19 percent in the last 20 months and has dropped 5 percent in the last year.

Overall borrowing has increased in recent months. Analysts say the reason for the increase is also a reflection of the weak economy: the gains have been driven by more people borrowing money to attend school.

High unemployment, steep gas prices and a weakening housing market have also forced people to resist reaching for their plastic.

“When you take out student loans, you’re still seeing credit card use, and borrowing over all, falling,” said Paul Dales, chief United States economist at Capital Economics. “That’s a sign about how people view the economy.”

Most economists say borrowing will increase this year. But they do not expect consumers to increase their debt.

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Community College vs. Student Loan Debt

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The remote server returned an unexpected response: (417) Expectation failed.

One of the articles in our special section on Money Through the Ages (produced in partnership with the public radio program Marketplace Money) is about an 18-year-old high school senior with a choice to make. Should he go into at least $6,500 in debt each year to attend a private college or university like Juniata or Clark, or is he better off working part time and attending community college for two years before transferring to one of those colleges?

Zac Bissonnette, the author of Debt-Free U and a senior in college himself, encourages students and families to take on as little debt as possible. He urged the subject of our profile, Mino Caulton of Shutesbury, Mass., to consider the University of Massachusetts, though Mr. Caulton was worried that he wouldn’t get enough individual attention there.

Mr. Caulton is leaning toward community college, and at the risk of leaning too heavily on what Mr. Bissonnette refers to as the “tyranny of the anecdote,” I’d be curious to hear from young adults who did (and did not) choose community college. How did it work out for you?

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A Tuition Refund Policy That Pays Less for Mental Illness

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The remote server returned an unexpected response: (417) Expectation failed.

In the last couple of years, Sallie Mae has been trying to deepen its financial ties with customers, adding an online bank and a credit card.

And earlier this month, it added a curious product known as tuition refund insurance, which can make you whole if an ill child must withdraw from college sometime during the term.

The insurance, which Sallie offers in partnership with Next Generation Insurance Group, a company it recently bought a stake in, doesn’t treat all sickness equally, though. If a student withdraws because of a physical illness or injury, a family gets 100 percent of its money back. People who leave because of mental health problems, however, get only 75 percent back.

This would probably be illegal if tuition refund policies were deemed health insurance, instead of insurance that just happens to be based solely on your health. Federal law now mandates equal coverage for mental and physical illness in many instances when employers offer any health insurance for mental illness.

Even if disparate tuition insurance coverage is legal, however, it’s still offensive to people who spent their careers fighting for so-called mental health parity. “There should be a buyer beware sign blinking on and off,” said Ken Libertoff, who ran the Vermont Association for Mental Health for 30 years. “Parents need to know that there is a fatal flaw in these plans’ constructions.”

Indeed, that construction suggests a question: Is it even worth taking an insurance offer seriously when it forces you to accept less coverage for the debilitating illness that is most likely to befall you?

•

Tuition refund insurance in the United States dates back to 1930, when a company called A. W. G. Dewar offered a plan that provided tutors to families whose children were home sick for an extended period. Eventually, the insurance became a policy that paid out cash to make up for whatever a private primary or secondary school would not refund.

Dewar’s offering took root at private schools, and today it serves about 1,200 private elementary and secondary schools along with 180 colleges, where the tuition stakes can be even higher.

According to Dewar, just over half of secondary schools (though only one college) that offer the insurance make it mandatory for some or all families — say, for new students, who may have adjustment problems — or for anyone who doesn’t pay tuition in full up front. At colleges, fewer than 10 percent of parents choose to buy the tuition refund plans.

That low take rate at colleges probably reflects the “it can’t happen to me” syndrome, but perhaps some parents who have dug into the details discovered that these policies often covered mental illness differently from physical injury. Not only is the payout less, but the insurance often requires a multiday hospital stay as a sort of proof that the depression or anxiety is real.

A couple of years ago, a University of Vermont student named Sherry Williamson discovered that the Dewar policy available to her fellow students worked like that. As a registered nurse suffering from depression, she found the differing treatment difficult to stomach. “I couldn’t believe that UVM, which tries to promote diversity and be all-encompassing, would take on a policy that was clearly discriminatory,” she said.

She found her way to Mr. Libertoff, who got her complaint in front of the appropriate state agencies. Like the federal government, Vermont had its own mental health parity law, but the state ultimately used a separate nondiscrimination statute to force Dewar and the university to equalize its coverage.

In the wake of that decision, another insurance company called Markel that offers tuition refund policies decided to offer equal coverage on all policies nationwide that it sold through schools, rather than risk the wrath of state insurance commissioners.

Sallie Mae, however, chose to adopt the disparate treatment approach even though it’s using Markel as its underwriter. According to John Fees, president of the Sallie partner Next Generation, it had no choice if it wanted to offer affordable premiums to everyone in the United States and do away with any mental illness hospitalization requirement.

How much more would it have cost to offer equal coverage? “I’m not at liberty to say that at this point,” he said. “It’s a confidential business relationship with Markel.”

Mr. Fees seemed a bit miffed by my suggestion that his policy might be discriminatory on its face. “I live with a clinical psychologist, and I had this conversation with her,” he said. “The aim is never to discriminate against anyone.” When I asked Dana Tufts, Dewar’s president, about the potential for discrimination, his public relations representative, Carmen Duarte, interrupted and refused to let him answer.

Discriminatory or not, it’s possible that Sallie’s policy is actually too generous. The price starts at $599 for the maximum $50,000 in school year coverage for tuition, room, board and other related expenses, with some identity theft and medical evacuation insurance thrown in gratis. The price goes down from there if families want less coverage. Also, undergraduates who borrowed money from Sallie Mae starting July 1 get $5,000 in tuition refund coverage free.

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Student Debt and a Push for Fairness

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The remote server returned an unexpected response: (417) Expectation failed.

But if you borrow money to get an education and can’t afford the loan payments after a few years of underemployment, that’s another matter entirely. It’s nearly impossible to get rid of the debt in bankruptcy court, even if it’s a private loan from for-profit lenders like Citibank or the student loan specialist Sallie Mae.

This part of the bankruptcy law is little known outside education circles, but ever since it went into effect in 2005, it’s inspired shock and often rage among young adults who got in over their heads. Today, they find themselves in the same category as people who can’t discharge child support payments or criminal fines.

Now, even Sallie Mae, tired of being a punching bag for consumer advocates and hoping to avoid changes that would hurt its business too severely, has agreed that the law needs alteration. Bills in the Senate and House of Representatives would make the rules for private loans less strict, now that Congress has finished the job of getting banks out of the business of originating federal student loans.

With this latest initiative, however, lawmakers face a question that’s less about banking than it is about social policy or political calculation. At a time when voters are furious at their neighbors for getting themselves into mortgage trouble, do legislators really want to change the bankruptcy laws so that even more people can walk away from their debts?

There are two main types of student loans. Under the proposed changes, borrowers would remain on the hook for federal loans, like Stafford and Perkins loans, as they have been for many years. To most people, this seems fair because the federal government (and ultimately taxpayers) stand behind these loans. There are also many payment plans and even forgiveness programs for some borrowers.

In 2005, however, Congress made the bankruptcy rules the same for the second kind of debt, private loans underwritten by profit-making banks. These have no government guarantees and come with fewer repayment options. Undergraduates can also borrow much more than they can with federal loans, making trouble more likely.

Destitute borrowers can still discharge student loan debt if they experience “undue hardship.” But that condition is nearly impossible to prove, absent a severe disability.

Meanwhile, the volume of private loans, which are most popular among students attending profit-making schools, has grown rapidly in the last two decades as students have tried to close the gap between the rising price of tuition and what they can afford. In the 2007-8 school year, the latest period for which good data is available, about one third of all recipients of bachelor’s degrees had used a private loan at some point before they graduated, according to College Board research.

Tightening credit caused total private loan volume to fall by about half to roughly $11 billion in the 2008-9 school year, according to the College Board. Tim Ranzetta, founder of Student Lending Analytics, figures it fell an additional 24 percent this last academic year, though his estimate doesn’t include some state-based nonprofit lenders.

There is no strong evidence that young adults would line up at bankruptcy court in the event of a change. That gives Democrats and university groups hope that Congress could succeed in making the laws less strict.

In Congressional hearings on the efforts to change the rule, last year and then in April, no lender was present to make the case for the status quo. Instead, it fell to lawyers and financiers who work for them. They made the following points.

BANKRUPTCIES WOULD RISE At the April hearing, John Hupalo, managing director for student loans at Samuel A. Ramirez and Company, made the most obvious case against any change. “With no assets to lose, an education in hand, why not discharge the loan without ever making a payment to the lender?” he said.

Once you set aside this questionable presumption of mendacity among the young, there are actually plenty of practical reasons why not. “People don’t like to go through bankruptcy,” said Representative Steve Cohen, Democrat of Tennessee, who introduced the House bill that would change the rules. “It’s not like going to get a milkshake.”

Andy Winchell, a bankruptcy lawyer in Summit, N.J., likens student loan debt to tattoos: They’re easy to get, people tend to get them when they’re young, and they’re awfully hard to get rid of.

And he would remind clients of a couple of things. First, you generally can’t make another bankruptcy filing and discharge more debt for many years. So if you, in essence, cry wolf with a filing to erase your student loans, you’ll be in a real bind if you then face crushing medical debt two years later.

Then there’s the damage to your credit report. While it doesn’t remain there forever, the blemish can have an enormous impact on young people trying to establish themselves with an employer or buy a home.

Finally, you’re going to have to persuade a lawyer to take your case. And if it seems that you’re simply shirking your obligations, many lawyers will kick you out of their offices. “It’s not easy to find a dishonest bankruptcy attorney who is going to risk their license to practice law on a case they don’t believe in,” Mr. Winchell said.

Sallie Mae can live with a change, so long as there’s a waiting period before anyone can try to discharge the debts. “Sallie Mae continues to support reform that would allow federal and private student loans to be dischargeable in bankruptcy for those who have made a good-faith effort to repay their student loans over a five-to-seven-year period and still experience financial difficulty,” the company said in a prepared statement.

While there is no waiting period in either of the current bills, Mr. Cohen said he could live with one if that’s what it took to get a bill through Congress. “Philosophy and policy can get you on the Rachel Maddow show, but what you want to do is pass legislation and affect people’s lives,” he said, referring to the host of an MSNBC news program.

BANKS WOULDN’T LEND ANYMORE Private student loans are an unusual line of business, given that lenders hand over money to students who might not finish their studies and have uncertain earning prospects even if they do get a degree. “Borrowers are not creditworthy to begin with, almost by definition,” Mr. Hupalo said in an interview this week.

But banks that have stayed in the business (and others, like credit unions, that have entered recently) have made adjustments that will probably protect them far more than any alteration in the bankruptcy laws will hurt. For instance, it’s become much harder to get many private loans without a co-signer. That means lenders have two adults on the hook for repayment instead of just one.

BORROWING COSTS WOULD RISE They probably would rise a bit, at least at first as lenders assume the worst (especially if Congress applies any change to outstanding loans instead of limiting it to future ones). But this might not be such a bad thing.

Private loans exist because the cost of college is often so much higher than what undergraduates can borrow through federal loans, which have annual limits. Some lenders may be predatory and many borrowers are irresponsible, but this debate would be much less loud if tuition were not rising so quickly.

So if loans cost more and lenders underwrite fewer of them, people will have less money to spend on their education. Some fly-by-night profit-making schools might cease to exist, and all but the most popular private nonprofit universities might finally be forced to reckon with their costs and course offerings.

Prices might come down. And young adults just getting started in life might be less likely to face a nasty choice between decades of oppressive debt payments and visiting a bankruptcy judge before starting an entry-level job.

View the original article here

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Fixed-Rate Private Student Loans Are Still Risky

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The remote server returned an unexpected response: (417) Expectation failed.

The first is to cheer. Borrowers now have a choice similar to people buying homes. Those who want certainty can pay extra for it, while those who wish to roll the dice and hope interest rates don’t rise too much can do that, too.

The second response is to rail against the fact that these loans are even necessary. After all, the federal government will lend most undergraduates up to $31,000. That this is not nearly enough for many families to cover the bills at all sorts of colleges is some kind of national disgrace, right?

Both reactions, it turns out, are valid. So let’s consider them one at a time.

But first, a review (and a semiofficial renaming of the loan at issue here). Not so long ago, federal student loans were variable and you could get them from a bank. Now, they are fixed at as little as 3.4 percent for this coming school year, and you borrow directly from the government.

The federal loans are a good deal, but they are often not enough make up the difference between what a family has saved or can spend out of current income and what the student gets in grants and scholarship money.

This is where private student loans come in — and proceed to send some undergraduates’ total debts spiraling into the six figures by the time they manage to earn a bachelor’s degree. While the government recently introduced lower federal loan payments for graduates with limited income and loan forgiveness for people in public service jobs, the banks don’t have similar programs for their private loan borrowers.

And about this name — private student loans. It’s factually inaccurate. To get the lowest rates, a teenager with limited credit history will need a co-applicant, which usually ends up being a parent.

The vast majority of these loans end up being a joint effort, so let’s call them what they are: private family loans. Yes, banks will often absolve the co-signer of responsibility after a couple of years if every payment has arrived on time, but forgetful young adults don’t always do that. (This, by the way, creates black marks on everyone’s credit history, not just the student’s.)

So here come U.S. Bank and Wells Fargo with their new fixed-rate family loans. Both last for 15 years. The crucial difference is that U.S. Bank offers only one rate: an annual percentage rate of 7.8 percent. An upfront fee can raise the actual annual percentage rate on the loan to as high as 8.46 percent.

Wells Fargo’s fixed-rate loans have no origination fee and are as low as 7.29 percent (or as much as another percentage point lower if you’re a current Wells Fargo banking or education loan customer). But if you don’t have excellent credit, the fixed rate could be high as 14.21 percent for community colleges or trade schools.

The current variable rate ranges from an annual percentage rate of 3.39 to 10.22 percent at U.S. Bank and 3.4 to 11.74 percent at Wells Fargo. Given the size of the gap and no signs that rate increases are imminent, why introduce this option now?

“We think that students and parents are looking for some level of certainty in the long run,” said Lucille Conley, senior vice president of consumer lending for U.S. Bank. “They’ve seen things happen in the housing market that may cause them more concern than they might have had four or five years ago.”

The bankers aren’t suggesting that borrowers actually try to do the math. In fact, it’s nearly impossible. The banks haven’t created calculators that allow you to input a series of interest rate spikes and declines at various points along a 15-year timeline and then compare it with a fixed rate. And since the professionals have no idea themselves what interest rates may do, it makes little sense for them to encourage their customers to guess.

Instead, this is a product for people who sleep better at night knowing what their payment is. Turns out there are lots of people like this. Kirk Bare, Wells Fargo’s business head of education financial services, said the bank was expecting a fairly low adoption of the fixed-rate loan and has been surprised by how many families have chosen it so far.

This is a fine thing, as far as it goes. Fine, that is, until you stop to think about what the mere existence of the private family loan actually means.

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Entry-Level Salaries and the Indebted

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The remote server returned an unexpected response: (417) Expectation failed.

One of the articles in our special section on Money Through the Ages profiles Courtney McNair, a 25-year-old who is living at home in Los Angeles and going further into student-loan debt while training to become a teacher.

For the article, by Tess Vigeland of the public radio program Marketplace Money, we paired Ms. McNair up with Lauren Lyons Cole, a financial planner just a few years her elder, for advice. Ms. Cole made reference to a maxim that I’ve heard once or twice before, the notion that your student loan debt should be no higher than whatever your starting salary will be.

Ms. McNair may be able to keep her student loan balances in check. We’ve written in the past about others who did not. How have the rest of you fared when your debt was higher than your starting salary?

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How Debt Can Destroy a Budding Relationship

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The remote server returned an unexpected response: (417) Expectation failed.

Ms. Eastman said she had told him early on in their relationship that she had over $100,000 of debt. But, she said, even she didn’t know what the true balance was; like a car buyer who focuses on only the monthly payment, she wrote 12 checks a year for about $1,100 each, the minimum possible. She didn’t focus on the bottom line, she said, because it was so profoundly depressing.

But as the couple got closer to their wedding day, she took out all the paperwork and it became clear that her total debt was actually about $170,000. “He accused me of lying,” said Ms. Eastman, 31, a San Francisco X-ray technician and part-time photographer who had run up much of the balance studying for a bachelor’s degree in photography. “But if I was lying, I was lying to myself, not to him. I didn’t really want to know the full amount.”

At a time when even people with no graduate degrees, like Ms. Eastman, often end up six figures in the hole and people getting married for the second time have loads of debt from their earlier lives, it should come as no surprise that debt can bust up engagements. Even when couples disclose their debt in detail, it poses a series of challenges.

When, exactly, are you supposed to reveal a debt of this size during the courtship? Earlier than you’d disclose, say, a chronic illness?

Even if disclosure doesn’t render you unmarriageable, tricky questions linger. If one person brings a huge debt to a relationship, who is ultimately responsible for making good on the obligation? And if it’s $170,000, isn’t the more solvent partner going to resent that debt over time no matter how early the disclosure comes? After all, it will profoundly affect every financial decision, from buying a home to how many children to have.

These were the questions that weighed on Kerrie Tidwell. A third-year student at the Medical College of Georgia and an aspiring emergency room doctor, she doesn’t worry so much about her ability to pay back her loans.

Ms. Tidwell, 26, is involved in a serious relationship with Stefan Kogler, an architect who is a native of Austria and living in Vienna. To Europeans, who often pay little or nothing toward their university studies, the idea of going deeply into debt to get educated is, well, foreign.

Ms. Tidwell feels no guilt about the $250,000 in debt she will probably run up, including some from a master’s degree program she completed in London, where she and Mr. Kogler met. “I didn’t acquire it because I go out and shop a lot,” she said. “It’s because I’m doing something that I’ll love for the rest of my life.”

Still, if she and Mr. Kogler are going to move in together and get engaged, she wants their financial arrangements to be clear and fair. But how do you define fair when you’re bringing a quarter of a million dollars in debt to a relationship?

Mr. Kogler, 30, said he’s not so worried about it. “In the long run, it will equal out,” he said. “In the short run, you have to support each other, and I will support her as much as I can.”

His stoicism is admirable. It’s all the more so, given that if he moves to the United States permanently, he’ll probably lose the chance to run his family’s business in Austria. Supporting Ms. Tidwell as she begins to pay back her loans also means he doesn’t have the freedom to, say, make a career change that involves a big pay cut. “I know he has his own dreams, and they will require money,” Ms. Tidwell said. “Will my debt take away from that?”

Lisa J. B. Peterson, a financial planner with Lantern Financial in Boston, specializes in counseling young couples and has heard this story before. About half the people she sees are both bringing significant debt to the relationship, and about a quarter of the others have one person who has a pile of student loans.

When I told her about Ms. Tidwell and Mr. Kogler, one of her first suggestions was for them to make sure that Mr. Kogler did not have to make all the compromises when they prepared a joint household budget. “They can make some kind of sacrifice so that a goal of his is achieved, too,” she said.

Then there’s the question of how to plan for the unknowns. “What would happen if I got hurt and couldn’t practice or got sued for malpractice?” Ms. Tidwell asked.

While insurance (which is itself expensive, alas) can reduce this anxiety, it can’t cover the desire to stay home with children. Ms. Tidwell is resolute about having children and working full time, but Sheila G. Riesel, a matrimonial lawyer and partner with Blank Rome in Manhattan, said Ms. Tidwell ought to consider potential extreme circumstances as well. “It could happen that she wants to be a stay-at-home spouse for a while. What if she has triplets?” Ms. Riesel asked. “All of this is worthy of discussion.”

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