THE UNIVERSITY DARY KANSAN
WEDNESDAY, MAY 7, 2008
NEWS
5A
Adam Wood Junior
Borrowed: $20,900
Plans to borrow: $20,000 more
Total debt upon graduation: more than $41,000
$41,000+
Senate obligations prompted him to visit Watkins Memorial Health Center in March.
"When you're getting no sleep, you're really stressed and on top of that, you have no money to buy food, you really can't function that way for long," Wood said. "I think this semester was the first time I ever thought about robbing a grocery store," he said jokingly.
Wood now works at the Hawk Shop in Watson Library, where he's struggling to meet his financial obligations until he makes it to the summer when he can start saving money for next year.
"If I can make it to this summer,
I should be fine," he said, "But,
even then, stuff always comes up."
JULIE CONNOLLY
LIVING WITH DEBT
Julie Connolly, who is five years out of college and works full-time styling hair at Headmasters, is paying back the $28,000 she borrowed to finance her KU undergraduate degree and to attend cosmetology school in Chicago. The interest had compounded her debt to about $35,000 by the time she graduated in 2003. She $*t*will owe $26,000.
Connolly said she paid $214 of her student loan debt every month
but only $50 of that paid for principal while the other $164 paid the interest.
"My goal is to pay back all of my student loan debt by the time I'm 40 years old," she said, "But I'll probably be paying back at least some sort of debt for the rest of my life."
Connolly moved overseas after she graduated from high school and attended University of Maryland classes in Germany, where her dad was stationed in the military.
She borrowed about $10,000 over two years from Nelnet to finance her tuition and worked full-time as a bartender, which covered her living expenses.
She transferred to the KU School of Theatre & Film in 1999 where she said she borrowed about $9,000 from the government to finance three years of tuition and worked full-time at the Kansas Union to pay her living expenses.
She decided to switch gears in 2002 and moved to Chicago, where she borrowed another $9,000 from Sallie Mae to attend Pivot Point International, a cosmetology school.
"I decided one day that what I really wanted to do was hair and makeup and they didn't have that program at KU so I went to
Chicago," Connolly said.
She said she used part of her loan money to pay $140 per month toward the interest on her Sallie Mae loan, and when she graduated in 2003, she owed Nelnet about $16,500, Sallie Mae about $9,000 and the government $9,000 — a total of about $34,500 in debt.
"I'm not really sure what my plans are for the future," Connolly said. "For now, I'm just trying to enjoy myself while I climb out of debt."
WHERE THE INDUSTRY IS HEADED
Lanning said he had planned on borrowing the $200,000 he needed for dental school from GMAC Bank, which also lent him the $55,000 he's already borrowed.
The only problem: GMAC Bank no longer makes student loans.
"It sucks because all the money I borrowed I owed back to one company and now I have to find another lender and it's a huge pain." Lanning said. "I don't know where I'm going to get the money now"
As capital continues to dry up in the global credit market, the availability of cash for student loans is drying up as well.
Mark Kantrowitz, publisher of FinAid.org, said a combination of the subprime mortgage credit crunch and new federal legislation limiting profits for private lenders caused a growing number of lenders to suspend their federal or private loan programs.
He said this trend began when investors, spooked by an increase in defaults in the subprime lending industry, began pulling out of the asset-backed securitization market in August 2007. Asset-backed securitization (ABS) provides lenders with the liquidity needed to issue loans, plus some up-front profit, known as a premium.
Kantrowitz said that as turmoil spread from subprime-mortgage securitizations to the rest of the market, demand dropped and education lenders found it harder to invest investors to secure their loans.
"Lenders get money from investor and the then lend that to students," he said. "The capital market that's supplied the money has been drying up, so when these lenders run out of money, they have to stop issuing loans."
On top of that, Congress passed the College Cost Reduction and Access Act in July 2007, which Kantrowitz said cut the subsidies it paid lenders to encourage them to
cost of four years
Students graduating this year:
In-state students: $60,000
Out-of-state students:
$90,000
Incoming freshman
in-state students; $72,000
Out-of-state students;
$113,000
Source: Office of Student Financial Aid estimations
issue student loans. He said congress used the savings from these cuts to increase the availability of government grants and cut the interest rates on its subsidized loans.
Kantrowitz said the credit crunch and the new legislation have prompted 73 lenders, which represented about 14 percent of the federal loan volume and 76 percent of federal consolidation loan volume, to suspend their student loan programs.
He said the interest rates will rise by about 1 percent on private student loans that aren't federally insured as lenders who stayed in the business try to compensate for their losses.
He also said student with bad or marginal credit will be denied private student loans.
"There's no signs of the problems getting better so it's going to continue," he said.
According to the National Association of Student Financial Aid Administrators (NASFAA), the government is attempting to offset this loss of private loan money by injecting $11.4 billion into its Federal Pell Grant Program over the next five years.
NASFAA reports that the money will be used to gradually increase the maximum government grant from $4,310 to $4,731 per student for next year and $5,400 by 2012. Congress will also gradually cut the interest rates on its undergraduate, subsidized loans from 6.8 percent to 6 percent next year and 3.4 percent by July 1, 2012.
Kantrowitz said the U.S. Department of Education should be able to absorb the influx of students who need financial aid, but, "it's never been tested at this level before so it's unclear whether it will
Julie Connolly Five years out of college
Borrowed: $28,000
Total debt at graduation:
$35,000
Paid back: $9,000
Still ounce $26.000
Added monthly interest: $164
Average monthly payment: $214
Job: Hair stylist
$35,000
GRAPHICALLY SPEAKING Private borrowing made up about 25 percent of student loans in 2007,up from only 6 percent in 1997. Private borrowing (red) Federal borrowing (blue)
1997
be able to handle it. In other words, you could call them up and have a busy signal for hours."
While it will likely be easier for students to pick up extra government grants, it also means students such as Lanning, who need more than the $73,000 the government will lend him, will have to turn to the few remaining private lenders for higher-interest, unsubsidized loans.
According to the U.S. Department of Labor statistics, the median salary for a dentist is about $136,000. If the interest rates on his loans don't change, he should be able to pay off all his debt 10 years after he graduates by making monthly payments of about $3,476 — roughly 30 percent of his projected, monthly salary.
"I feel like I better kick in my sixth gear and keep trucking through school to become a dentist so I can live the good life and still pay back all these loans," Lanning said.
— Edited by Matt Hirschfeld
2007 SOURCE: The College Board
new legislation
COLLEGE COST REDUCTION ACT OF 2007
The maximum government grant a student can get increased from $4,310 to $4,731 for next year and $5,400 by July 2012
Interest rates on subsidized undergraduate loans cut gradually from 6.8 to 6 percent for next year and 3.4 percent by July 2012
Lender subsidy cuts and the economy have forced 73 lenders to leave the student loan industry
> CRIME
SOURCE: The National Association of Student Financial Aid Administrators (NASFAA) and FinAid.org
96 arrested in drug sting at San Diego State
ASSOCIATED PRESS
SAN DIEGO — Dozens of San Diego State University students were arrested and six fraternities were suspended after a sweeping drug investigation found that some fraternity members openly dealt drugs and one even sent a mass text message advertising cocaine, authorities said Tuesday.
A five-month investigation prompted by a cocaine overdose death last year led to the arrests of 96 people,75 of them San Diego State students. A second drug death occurred while the investigation went on.
Twenty-nine people were arrested early Tuesday in raids at nine locations including the Theta Chi fraternity, where agents found cocaine, Ecstasy and three guns. Eighteen of them were wanted on warrants for selling to undercover agents.
Two kilograms of cocaine were seized in all, along with 350 Ecstasy pills, marjuana, psychedelic mushrooms, hash oil, methamphetamine, illicit prescription drugs, several guns and at least $60,000 in cash, authorities said.
"A sad commentary is that when one of these individuals was arrested, they inquired as (to) whether or not his arrest and incarceration would have an effect on him becoming a federal law enforcement officer," said Ralph Partridge, special agent in charge of the U.S. Drug Enforcement Administration in San Diego.
Profits may have been used to finance fraternity operations, they said. Those arrested included a student who was about to receive a criminal justice degree and another who was to receive a master's degree in homeland security.
During the probe, investigators discovered that in some fraternities most members were aware of "organized drug dealing occurring
from the fraternity houses by its members," the DEA said in a news release.
"Undercover agents purchased cocaine from fraternity members and confirmed that a hierarchy existed for the purpose of selling drugs for money," the DEA said.
The district attorney's office said search warrants were served in San Diego and suburban La Mesa, including the Theta Chi fraternity house and several apartments.
The undercover probe, dubbed Operation Sudden Fall, was sparked by the cocaine overdose death of a student in May 2007, authorities said. As the investigation continued, another student, from Mesa College, died Feb. 26 of a cocaine overdose at an SDSU fraternity house, the DEA said.
A member of Theta Chi sent out a mass text message to his "faithful customers" stating that he and his "associates" would be unable to sell cocaine while they were in Las Vegas over one weekend, according to the DEA. The text promoted a cocaine "sale" and listed the reduced prices.
San Diego State suspended Theta Chi and five other fraternities Tuesday pending a hearing on evidence gathered during the investigation. Members of at least three fraternities were arrested, according to law enforcement.
Two defendants in the case pleaded not guilty to drug charges Tuesday in San Diego Superior Court — Patrick Hawley to selling cocaine and Omar Castaneda to possession of cocaine.
Investigators infiltrated seven fraternities in the course of the probe.
Theta Chi's San Diego chapter declined to comment. The chapter occupies two low-slung homes a block off Fraternity Row, with large red-and-white Greek symbols propped on the roof.
"We're talking to our advisers."
said John Phillips, a past president of the chapter.
Dale Taylor, the fraternity's national executive director, said he was "obviously shocked and saddened" by the allegations.
Theta Chi has prohibited the San Diego chapter from group activities like parties or sports and will investigate additional disciplinary measures, up to expulsion of members or the entire chapter.
Theta Chi, based in Indianapolis, has 131 chapters in the U.S. and Canada and more than 161,000 initiates. It was founded in 1856.
The San Diego chapter was founded 61 years ago and has 65 members.
University police and federal drug agents worked together in the investigation, making more than 130 undercover drug buys at locations including fraternity houses, student parking areas and dormitories, authorities said.
"They were on the upswing," Taylor said. "They had improved their recruitment. They were trying to raise money for a new house."
Students from two other fraternities, Phi Kappa Psi and Delta Sigma Pi, were among those arrested, according to Deputy District Attorney Damon Mosler.
Shawn Collinsworth, executive director of the national office of Phi Kappa Psi, said he was told by two of the SDSU fraternity chapter's leaders that four of its members were arrested. He added the fraternity is cooperating with the investigation.
"It isn't behavior becoming of Phi Kappa PsI", Collinsworn said.
A phone message left with Delta Sigma Pi's national office after business hours was not immediately returned.
San Diego State is one of the largest schools in California's state university system with about 34,000 students. The campus has an active network of fraternities
ASSOCIATED PRESS
San Diego State University president Stephen Weber, right, and SDSU chief of police John Browning, left, stand over guns and drugs seized during the arrest of 96 people on drug charges on Tuesday in San Diego. Seventy-five SDSU students and 21 non-students were arrested after an undercover investigation of the college drug ring.