Our troubled economy

College debt a heavy burden

  • Article by: JACKIE CROSBY , Star Tribune
  • Updated: October 11, 2008 - 4:17 PM

Saddled with big student loans, this young couple rents out their basement and taps their line of credit to make ends meet.

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Eva and Matt Johnson, with their dog Cami, live in their Blaine home with Eva’s brother Dexter Spilman, who rents their basement. They all agree that the arrangement is a financial necessity.

Photo: Glen Stubbe, Star Tribune

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Matt and Eva Johnson considered their college degrees as an investment in a better quality of life. Instead, the $69,000 in debt from their private-school education has become a financial albatross they never anticipated.

"We pay just under $800 a month in student loans," said Matt, 25, who got an associate degree in graphic design from Minnesota's Brown College in 2004. "Almost my entire paycheck, just gone. Then throw in gas, groceries and a house payment, and it's no wonder that we dip into our line of credit each month."

With a combined income of about $60,000, the couple is chipping away at a middle-class life that's feeling harder to sustain because of the college debt, even with steady jobs and modest spending habits.

Weighed down by an increasingly pessimistic view of their future, the Johnsons are putting their dreams on hold.

"We don't have children because we know we won't be able to afford day care," said Eva, 26, who graduated with a marketing degree from Augsburg College in 2005. "We're now thinking, let's wait until we're 30."

Student loans on average have risen at roughly double the consumer price index since the early 1980s. The average debt carried by a 2006 graduate now punches in at about $21,100, according to the Project on Student Debt.

And, unlike some other forms of debt, student loans must still be repaid even after filing for bankruptcy under revisions to the law passed three years ago.

"I got a great education, but I feel like I got screwed over by the college and by the government," said Eva, who works as a sales manager for a national hotel chain. Matt is an installer for a family-owned residential remodeling company.

"You can only take out so much per loan, so between us, we have five separate loans, some of them with variable rates. We can't consolidate them, and nobody will even talk to us about options," she said.

While government statistics show that a typical full-time worker with a four-year college degree earns 62 percent more than the typical worker with only a high school diploma, the Johnsons aren't at all confident that they'll see the returns anytime soon.

"Adults tell us it'll get better, but it isn't getting better," Eva said. "You turn on the TV, the stock market is plunging, our 401(k)s are decreasing, people are getting laid off."

Still, the couple is aiming squarely for the American Dream.

A year ago, they bought a modest two-bedroom, one-bathroom house in Blaine for $172,000, which already has increased in value by more than 4 percent, according to property tax records.

To make the budget work, Eva's 22-year-old brother, Dexter Spilman, immediately moved into their basement and pays $400 a month for rent, utilities and groceries. All three consider the arrangement a necessity.

Spilman, too, is trying to dig out from debt -- mostly from a decision to finance a new 2006 Chevy Silverado pickup for $30,000. It's a gas-guzzler he'd gladly sell for a loss today -- if he could.

"Three years ago, I had lots of money. I could afford gas. I bought a brand-new truck, no problem," said Spilman, a mechanic with Metro Transit who brings home $2,600 a month and faces $2,400 in bills.

After their bills get paid, the Johnsons say they've got $300 to $400 to pay for gas, groceries, emergencies and entertainment. Lately their entertainment has consisted of building a back-yard bonfire and splitting a six-pack of cheap beer three ways. Matt recently decided he didn't even want to splurge $7 a month on the cable TV football package this season.

"We have to push off buying groceries for two weeks because we don't have enough money," Matt said last week. Added Eva: "We've been eating a lot of chicken-noodle soup and potatoes."

Matt goes on Craigslist daily to try to pick up side jobs, which are getting harder to come by. Eva coaches soccer seven months of the year, which brings in about $1,000.

The couple's $1,200 tax rebate went to pay down credit card bills, which have crept up to about $5,000. They also have a car loan of nearly $9,000 plus a $1,000 line of credit on their checking account, which they seem to exceed -- with fees -- nearly every month.

"The bummer in all of this is that we never get ahead -- health care or the cost of living eats up any raise we get," said Matt, who has been putting money away in a retirement account since he was 18, and now can see little wisdom in putting aside cash only to lose it in a volatile stock market.

And there are other worries that come with living without a cushion. Their water softener broke recently and the washing machine seems to be hanging on by a thread. The refrigerator and other appliances are decades old.

"There are a lot of people much worse off than we are and we aren't looking for pity," Eva said. "But I feel like our country's government cares more about supporting oil millionaires ... than it does about helping out young people or making college affordable."

Jackie Crosby • 612-673-7335

  • about this series

  • The Star Tribune's coverage of the housing crisis, the credit crunch and their effect on Minnesotans.

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