by Sean Flynn and Nasanin Mahmudy

Penn State graduate student Emma Bedor is watching the clock tick toward graduation.

Bedor is working toward her goal of becoming a college professor. She finished her bachelor's degree in communications at the State University of New York (SUNY) at Geneseo with less than $10,000 in student loans—far better the national average— with the help of financial aid and in-state tuition rates at SUNY Geneseo.

“[Loans] didn't used to scare me,” Bedor said. “Whatever I had to do to go to school, my mom did it for me, and I signed my name.”

Now earning a her master's degree in media studies at Penn State, she is considered an out-of-state student and pays the corresponding out-of-state tuition rate. Like four out of five undergraduate Penn Staters, Bedor receives no scholarship or financial aid from the university. To finish her master's degree, she is taking out student loans to the tune of $20,000 per semester. By the time she finishes her graduate degree, she will be nearly $90,000 in debt—debt which she will have to start paying six months after finishing school.

“Now that I'm an out-of-state student with no financial aid whatsoever, it's important that I go straight into a Ph.D program so that I don't have to pay until I have a solid job,” Bedor said.

She isn't alone.

Florida State University grad Adreanna Early.

PSU grad student Emma Bedor.

Putting loan debt at Penn State in context

According to a November 2011 report, “Student Debt and the Class of 2010” by the Project on Student Debt, college students have been taking on increasing amounts of loan debt in to recent years.

Coleen Killinger is a senior at Penn State, majoring in English. Right now the 22-year-old works at Access, a boutique in State College, to offset the costs of college.

“I take out small loans to pay for tuition costs,” said Killinger, who estimates she will graduate with $40,000 of debt after her time at Penn State.

Killinger worries about paying off her loans, but says she is still “hopeful” about finding a professional career that will let her use her English degree. For now, she will keep working at Access. She plans to accept what she says will be a temporary manager’s position there after graduation.

Penn State graduates like Killinger find themselves at the forefront of the student loan debate. Tuition at Penn State has increased approximately 11 percent since 2007 according to a 2010 Centre Daily Times article. Penn State’s total costs place it on the Project on Student Debt’s list of “high-debt colleges.”

The College Cost Calculator on Penn State’s website shows that the average total cost of tuition, room, meals, books and fees for an in-state undergraduate at University Park is more than $28,000 per year.

According to data published by Penn State’s Office of Student Aid, more than three-quarters of Penn State University Park students take out some form of student loans. The average University Park graduate from the Class of 2010 owes $31,135 in student loan debt after graduation, according to a U.S. News and World Report review.

This is about 23percent more than the national average of $25,250, and it means that Penn State students graduating from University Park finance, on average, roughly one-quarter of their education.

At for-profit colleges and universities, 97 percent of students also take on loans, and according a study written by the Pew Research Center. Low-income females from minority groups are disproportionatey represented in their numbers. More than one-quarter of graduates with bachelor’s degrees from for-profit institutions borrowed more than $40,000, compared with five percent of graduates at public institutions and 14 percent at not-for-profit institutions.

A bleak employment landscape for graduates

The Class of 2010 graduated into a recession with an average unemployment rate of 9.1 percent, up from 8.7 percent in 2009. But high unemployment, according to the report “Student debt and the class of 2010,” hits those without college degrees hardest.

Of 20- to 24-year-olds with only a high school diploma, 20 percent are unemployed, making a college degree more vital than ever. But the ever-increasing cost of college drives more and more students to take out loans, according to the report.

Moreover, sharp cuts in state funding have caused many institutions to raise their tuition rates, and while federal student aid programs increased to help meet rising costs, the Project on Student Debt reports that student debt loads have only increased.

With student debt rising, unemployment at a decades-long high, and job prospects looking gloomy, an increasing number of graduates are taking whatever jobs they can find.

Adreanna Early graduated in 2008 from Florida State University with bachelor’s degrees in political science and international affairs, a combination she hoped would land her a job in either nonprofit or diplomatic work. She took out nearly $15,000 in student loans to help pay for her education, a prospect that didn’t worry her until her senior year.

“I really thought I’d get a job after college and just start paying,” Early said..

But as graduation came and went and her job applications went unanswered, Early found herself unemployed in the first months of a bitter recession. That’s when “things got scary, because I had to very quickly figure out what my next step was.”

Early moved back to her hometown of Fort Walton Beach, Fla., and back in with her parents. She took the only work she could find: a part-time job at Edible Arrangements, a “fruit boutique franchise,” at $9 per hour. It barely paid her student loans, on which she owed $174 every month.

“Luckily, my parents were willing to help out—we did a 50/50 sort of thing while I was working,” Early said. “The only reason I was able to afford 50 percent of my student loan payments was because of my parents. If I'd been on my own, I probably wouldn't have been able to afford my student loans with cell phone, car insurance, that sort of thing.”

Early spent a year and a half at Edible Arrangements, looking for work. She finally found it in Americorps. The national service organization offered her loan deferment for the length of each 11-month term, plus $5,000 in loan repayments for every term she completed. But it was at the cripplingly low salary of $900 per month. She took the offer and spent the next 22 months working in New Orleans and Denver assisting Rebuilding Together, a nonprofit organization that rehabilitates houses for low-income homeowners.

Her term with Americorps expires soon, but even with two years in government service, her job prospects look grim.

“I have more experience,” she noted, “but experience isn’t everything. I think right now personal connections between [a job-seeker] and a potential employer are the best chance to get a job.”

Early said she isn’t sure how to solve the problem of increasing tuition, spiraling loan debt or tough job markets.

“It’s just a vicious cycle.” she said. “I don't know what the answer is. But everyone deserves the chance to go to college. If we can push through healthcare reform, why can’t we push through higher education reform?”

Now, three years after Early graduated, students are still finding themselves in similar predicaments. Kelsey S., a junior and classical history major at Penn State’s University Park campus, said she is carrying $36,000 in student loans and worries about finding a job to pay them off.

“A degree in classical history isn’t like a degree in engineering, where you get a job for sure,” said Kelsey S..

Instead of pursuing a position in her field, Kelsey S. says she will stay in retail sales. American Eagle has offered her a position as a manager, she said, from which she hopes to make somewhere between $40,000 and $50,000 per year. That should be enough, she said, to let her “survive.”

Not everyone is so lucky.

A rising trend in loan defaults

The U.S. Department of Education defines a defaulted student loan as any loan which has been unpaid for more than 270 days. After the Department has attempted to collect on a defaulted student loan, it may take more drastic actions, such as 15 percent wage garnishment, tax refund offsets and direct legal action.

AuBree Goedde is very familiar with the process. Goedde graduated from Eastern Michigan University with a degree in Elementary Education in 2005.

“Teaching jobs were few and far between,” wrote Goedde in an email. “One job opening [had] 500 applicants.”

As a single mother, she lacked the extracurricular activities that would have set her apart from other applicants. Unable to find a job in her field and expected to pay of $369 of her student loans per month, Goedde defaulted on her student loans.

As a result, the federal government seized her income tax refund, which she says came to about $4,000.

“When I got the new bill reflecting that ‘payment,’ my balance didn’t change at all because of the insane interest rate,” she wrote.

She wants to go back to school to “actually get a good job.” But with her loans in default, she didn’t qualify for more; college was out of her financial reach. Goedde said she has since worked her way back out of default, but still has thousands of dollars to repay.

According to data published by the U.S. Department of Education, stories like Goedde’s are becoming more common.

The national student loan default rate rose from 7 percent in 2008 to 8.8 percent in 2009. These numbers include all loans for all types of colleges and universities. The biggest increase of loan defaults were in for-profit institutions, increasing from 11.6 percent to 15 percent. Default rates at public institutions increased from 6 percent to 7.2 percent over the year, and private institution default rates increased from 4 percent to 4.6 percent.

The federal government has not been blind to the increasing numbers of students defaulting on their loans. The U.S. Department of Education has implemented several programs designed to help graduates in dire financial straits pay off their loans.

The Income Based Repayment (IBR) plan allows eligible students with financial hardships to make reduced payments on their student loans. IBR caps monthly payments at a maximum of 15 percent of disposable income. The new “Pay As You Earn” program introduced by the Obama administration in October of 2011 lowered that maximum to 10 percent, with provisions for even lower payments based on income level and family size.

But IBR helps only students with demonstrable financial hardship. Another repayment program called the Income-Contingent Repayment (ICR) plan helps any borrower with outstanding loans repay their debt. ICR is available only for federally guaranteed Direct Loans from the U.S. Department of Education. Both ICR and IBR have a maximum repayment length of 25 years, after which any outstanding debt is forgiven.

Borrowers with either Direct Loans or Federal Family Education Loans may also opt to participate in Public Service Loan Forgiveness, in which the borrower must make 120 payments while employed in a public service position. The U.S. Department of Education defines a wide range of government occupations as public service, including military service, education, public safety and employees of 501(c)(3) nonprofit organizations.

Besides the government programs that have been phased in, the Project on Student Debt suggests a few more ways the nationwide student loan default rate can be reduced. In its report “Student Debt and the Class of 2010,” the organization recommends two specific actions to reduce nationwide student loan default rates: increasing access to need-based student aid and requiring school certifications of private loans.

But the best way to lower the student loan default rate, according to writer Sean Brandon with the Keystone Research Center, is to bring down the unemployment rate.

“Too many of today’s graduates are left holding a diploma but not a job,” said Brandon.

Young graduates, especially, should be hired, Brandon suggested.

“If the unemployment rate rises, like in the last three years, hundreds of thousands of young graduates will default on their student loan payments each year,” he said.

If all goes as planned for Emma Bedor, she will have five and a half years before she enters the job market. She isn’t sure where she’ll be working, or even where she’ll do her doctoral work, but she is sure of at least one thing: she is done with loans.

“I won’t go somewhere if I don’t get full [financial] aid,” she said. “It’s scary, because our generation, we’re taking out more loans than anyone before. It’s a lot to think about.”