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DEGREE OF DEBT: Higher education's path leads to a consumer crisis

NEW ORLEANS (WVUE) -

Picture the road of your life, a path that offers infinite possibilities.

“I wanted the American dream,” Danielle Alluto tells us.

Alluto’s dream meant taking the path of a college education.

“I’m going graduate, I’m going to get this really great job,” she recalls thinking to herself, years ago.

At 30 years old, Alluto’s trip on the road of life has a big pothole: $104,000 in college debt. She says this six-figure detour has derailed her plans - her picture-perfect life, erased.

“I’ll never get married or buy a house or buy a new car or any of that stuff, no,” she says. “It's out, out of the picture - kids, all of that.  Why would I do that to my children?“

After nearly a decade of digging out of that financial pothole, she's barely made a dent and is still trying to pay off $90,000 in college debt.

“I’m surviving my life; I’m not living it,” she says.

Danielle is not alone. This picture can be drawn for many of the more than 41 million Americans with college loans. All totaled, they around $1.3 trillion, which dwarfs credit card and auto loan debt.

“It's hugely problematic,” says Debbie Cochrane with the nonprofit Institute for College Access & Success.

The government tracks the colleges with the most students having problems, identifying each school's repayment rate, the percentage of students succeeding in paying their loans back.  And for some schools, the numbers look bleak. The Memphis Institute of Barbering has the lowest student repayment rate in the country: just 6 percent. 

 Mobile readers can view an interactive version of this graphic at this link.

Camelot College in Baton Rouge has the lowest repayment rate in Louisiana, just 12.2 percent. Crescent City School of Bartending has the second lowest at 24.2 percent.  Cameron College in New Orleans ranks third in the state, 26.6 percent.

"That means a lot of students probably are not getting what they bargained for out of that education,” Cochrane says.

Three public universities in Louisiana have average repayment rates less than 50 percent: Southern in Shreveport at 34.5 percent, Grambling at 38.6 percent, and Southern-New Orleans at 41.7 percent.

Students in Mississippi have the lowest statewide repayment rate at 48 percent. Next are Arkansas, Kentucky and Arizona, at 52 percent.

All totaled, 2,100 colleges across the country have less than 50 percent of their former students repaying their loans.  That's roughly a third of the colleges from which the government collects these data.

“When we look at default rates and we look at repayment rates, these are indicators of not just where students are struggling with loan debt, but really indicators where we have severe questions about college quality,” Cochrane says. “And this is a crucial issue. And schools that are just enrolling students, allowing them or encouraging them to take on high levels of debt, knowing that they won't be able to repay them - that's more of a debt factory than anything else.”

Danielle makes between $35,000 and $45,000 a year; half of every paycheck goes to her loan.

“Think about it,” she says, “two weeks of your life goes to someone else, and the other two weeks go to your bills. But then, what do you have left for you?”

Some months, Danielle says all that's left is a few bucks. “If I do it's like, hey, you want to go to breakfast at Dot's Diner?” she says. “That’s the splurge. Or hey, you want to rent a movie off of on-demand? Ya! Six dollars! Like, that's how it goes, you know? OK, I have $46… six, 40… I can make it. Fill up my car, it’ll last me two weeks.

Danielle got her education at the University of New Orleans. She now works as a pharmacy technician; she doesn't even use her degree.

“I’m not saying I don't owe this money,” she tells us. “I’m just saying, give me something to make it more feasible.”

Danielle says that starts with policing interest rates.  On her private loans, they approach 11 percent.  

“I am a part of this country,” Alluto insists. “And if I’m what makes it better, why don’t you want to invest in me? Why are you making so much money off of me? I’m just another part of the cattle you’re milking dry.”

Last month, the Congressional Budget Office projected the federal government will make huge profits off student loans in the next decade: $81 billion, about $8 billion per year.

“It kills me that this is a billion-dollar, money-making industry,” Alluto says, “when we’re cutting education,and teachers are buying stuff for their classrooms, for their kids. And people are putting in their own money. But you’re making billions of dollars off of me? Like I’m a cash cow - why?”

Experts say, for the picture to improve, three changes need to happen:

  • First, some borrowers need relief. Federal laws don't allow students harmed by bloated loans to declare bankruptcy - a process many Americans use for other debt relief.
  • Second, they need better tools and information for consumers to make decisions, to know what these degrees cost and how much they'll make in their field of work.  Many 18- to 21-year-old’s navigating the fine print of contracts need help as they sign up for loans with potentially devastating interest rates.
  • Third, more accountability. Schools not delivering need to be cut off from receiving anymore federally backed loans.

Right now, the government judges schools by what's called a cohort default rate: students in a three-year window of time who have defaulted on their loans. The Obama Administration says those numbers, though, are "susceptible to artificial manipulation".

Under federal guidelines, schools with a default rate at or above 30 percent for three consecutive years can lose eligibility for federal aid. But right now, just one school appears on the government's watch list for having high default rates.

Consider this quirk of the three-year-cohort rate. The Baton Rouge School of Computers topped 30 percent for two straight years. But in 2013 they came in right under 30 percent, keeping their federal aid secure.

“It's incredibly weak,” Cochrane tells us. “It’s also an all-or-nothing accountability structure – where, you know, if you’re 29.9 it’s OK, if you’re 30.1 it's not.” 

The Baton Rouge School of Computers declined to comment for this story.

Camelot College sent this statement:

For the past thirty years Camelot College has trained and placed thousands of deserving graduates into career jobs.  We have an A+ rating with the Better Business Bureau.  Our retention rate is 71 percent and job placement rate is 75 percent, which exceeds most of the national standards.  We provide services that break down the barriers that normally prevent students from succeeding, including daycare, transportation assistance and on-campus student housing.

The Crescent School of Bartending told us:

We deal with an economic disadvantaged clientele. So, they pay back their loans at a lower rate than the general population…and the government takes that into consideration.

Another school, Cameron, advised:

Cameron College is currently under new management. We remain in compliance with state and federal benchmarks, and we are excited about future opportunities to serve the community.

“I don't think there are many people who look at college accountability right now and say what we have is good enough,” Cochrane says.  “There's way too many schools who are leaving students on a regular basis, typical students, with debts they can't repay.  Either they're not, you know, paying down their debt, they're ending up with ballooning balances or they're ending up in default. It's not acceptable.“

“No one ever said look at other alternatives,” says 30-year-old Bess Albritten, who could have used a reality check when she took out her loans. “I owe more on my student loans than on my house.  I owe triple on student loans than I owe on my house.”

Her picture is bleak: $280,000 in student debt, $110,000 of that in interest. 

“We’re in trillions of dollars of debt, on the back of people that… they’re not living their lives anymore,” Albritten tells us. “I’m lucky I bought a house. I have friends that will never buy house. I have friends that will never have children because they can't afford them.”

Albritten earned two masters degrees but has a job that pays her just about $40,000 a year. A quarter of her monthly income goes to pay off a loan - payments she'll likely make until she reaches near retirement age.

She tells us, when she began her college studies, she wanted to help people in any future career. “If I knew then what I know now, would I do it?” she asks “I don't know.”

She's just one of the millions, the future of our country, with a frightening picture - a degree of debt that will last decades.

“It's a very pretty piece of paper,” Albritten says. “It sits on my wall.  It's beautiful. I use it. It was one of my biggest accomplishments outside of my children.  But is it worth $280,000?  Probably not.”

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