Dianne Cawood graduated from San Diego State University in 1991 with an MFA in musical theater (opera emphasis) and $40,000 in student loan debt. Twelve years later, she owes $80,000 on that same loan and works only part-time as a professional singer.
Despite eight years of college and many more of private voice training, Cawood was unable to find a job teaching after graduation, and she couldn’t begin to make ends meet with sporadic singing gigs.
“When I got my MFA and couldn’t get a teaching job, I found myself unemployed and ready to be thrown out on the street. My student loan payments were more than $400 a month. I couldn’t pay them because I was unemployed. I tried to negotiate lower payments, but the lenders said no and gave me a deferment for a while. Meanwhile, my interest was going higher and higher.”
After a foray into the corporate work world, a series of health problems and several deferments, Dianne consolidated her debt. Today, a victim of corporate downsizing, she’s unemployed once again (except for the occasional singing job) and doing all she can to make the interest payments on her inflated student loan debt. She feels betrayed by the system.
“It’s like they want you to default on these loans,” she explains. “The people who invest in student loan operations cannot lose. They provide unsecured loans with high interest, and defaults are the way these people make their profit. If the borrower defaults, the government pays it. Lenders have no incentive to help people to pay these loans off.”
A Growing Dilemma
While Dianne’s case may sound like an extreme nightmare scenario, this kind of spiraling debt is becoming increasingly common for graduates today as tuitions rise, scholarships and grants cover less of the overall cost of an education, and job prospects diminish.
The National Center for Public Policy and Higher Education revealed in February of this year that students at public, four-year colleges in 16 states faced tuition hikes of more than ten percent for 2002-2003. And MyRichUncle.com reported recently that, over the past decade, costs at public institutions have risen 27 percent, while median household income rose only six percent. The number of work-study students has increased by 37 percent while the amount of work-study aid per recipient has decreased by 14 percent, and the cost of attending a four-year university today represents over 160 percent of the family income for people in low income brackets.
More and more, lower income students hesitate to enter four-year programs as the specter of unmanageable post-graduation debt looms. Others careen headlong into such programs, utilizing every financial aid tool at their disposal with little thought to the consequences down the road. To make matters worse, college students today often use credit cards to fill in gaps in educational funding.
According to Mother Jones magazine, universities are enhancing their revenues by making deals with credit card companies at the expense of their students. University of Tennessee has a seven-year deal with First USA that gives the company the names and addresses of alumni, employees and more than 40,000 students, and University of Michigan and Michigan State have struck similar deals with MBNA. Every major university has a credit card agreement of some kind that offers students an easy line of credit. Many of these students have no credit history and no job. The result is that 10 percent of all college students owe $7,000 or more to credit card companies today. (MotherJones.com. March/April 2002. “Don’t Leave College Without It.”)
To sum up the scenario, students are enrolling in more expensive programs, receiving less financial aid, accruing greater amounts of student loan and credit card debt, and entering into a highly competitive job market with few opportunities for generating the necessary income to meet their financial obligations. This is a recipe for disaster.
Many mature singers have been grappling with these hard realities for years. Some, like Dianne Cawood, feel that student loan debt crippled their chances at success in a singing career. “I would advise other singers to not take student loans. They are very bad. I’ve heard about plenty of bad situations, and I’ve seen a lot of younger people working two jobs in order to pay off their student loans.”
Arming Against
Unmanageable Debt
Unfortunately, students with rich parents or full scholarships are a privileged minority. For most singers set on an educational path, student loans are a necessary evil. These loans are the primary source of financial aid (about 60 percent) for students at public institutions and comprise a substantial portion for those in private institutions as well.
In order to avoid the pitfalls of unmanageable debt, therefore, prospective students should educate themselves as thoroughly as possible about educational funding sources, explore other income generating avenues, and create a financial plan that will get them through the desired vocal program and into the real world as unburdened as possible.
The following are proactive steps you can take to minimize accrued student loan debt:
* Research the schools you are interested in and costs such as tuition, fees, books, housing and miscellaneous expenses.
* Establish a relationship with a financial aid officer at the institution of your choice. This person can be a valuable resource in guiding you toward grant and scholarship opportunities.
* Do your own research into scholarships and grants for singers and/or teachers.
* Investigate paid singing opportunities in and around the university, college or conservatory you wish to attend. Apply in advance.
* Don’t use student loans for expenses rather than tuition.
* Get information on the terms of these loans directly from lenders.
* Interest rates vary dramatically between lenders. Get the lowest rate you can.
* Visit your aid officer periodically throughout your educational journey to keep track of your loans. You can also visit the National Student Loan Tracking System (www.nslds.gov) for this purpose.
* Live simply and within your means.
Entering into your education with awareness and knowledge can help to keep student loan amounts under control, which may make the difference between success and failure when you finally earn your degree and set out on a career path.
For singers not yet ready to enter a college or conservatory, there’s hope for an easier ride in the future. The College Board, a New York-based nonprofit known for running the SAT, is urging the federal government to boost Pell Grant funding enough to cover the average cost of tuition, fees, housing and miscellaneous expenses for four-year public schools. They are asking for an increase from the current ceiling of $3,750 to about $9,700 per year for low-income students, and for an expansion of loan forgiveness for students who serve high-need areas such as teaching.
But for many singers, this encouragement comes too late. Already saddled with college debt, they are looking for relief so that they can focus on their true goals.
Conquering the Debt Demon
All too many college-educated vocalists are fighting for their professional lives against monster debt payments that keep them locked into non-singing jobs. For these, another kind of plan is needed, one that will bring their payments into a manageable range so that they can follow the dream for which they accrued the debt in the first place—to sing!
In the current economic climate, one of the best strategies for lowering monthly payments is refinancing to consolidate all debts into one low-interest loan. Agencies exist that can help guide you through the process of debt consolidation and repayment. If your debt has gotten dangerously out of hand and you’ve accrued late fees and other penalties, a debt counselor can negotiate new terms with your creditors (including student loan lenders), eliminate penalties and lower your monthly payments.
One possible resource is the National Non Profit Consumer Credit Agency. Its AMMEND program provides debt repayment and budgeting assistance free of charge. Their website, www.non-profit-credit-counseling.org, offers college graduates with high student loan balances the following tips:
* Consolidate school debt if you have multiple or high-interest loans.
* Pay off higher-interest debts first (could be credit cards, car, etc.)
* One of factors institutions use to determine your credit rating is the amount of student loan debt. If it’s too high, it could keep you from qualifying for a home.
* Refinance your loan while interest rates are low. (Now’s the time!)
* Refinance multiple student loans into one larger loan to save time and money.
* Thoroughly research the rates of various lenders—they will vary greatly.
* To consolidate you must have at least $7,500 in college debt. This amount can include private loans for eligibility, but private loans cannot be consolidated with direct loans.
* You have the option to extend the term of your loan up to 30 years, which will give you a lower payment but extend overall interest costs. (This is a good idea if you have a lot of high-interest credit cards you need to pay off. Only do this if you can discipline yourself not to use credit cards!)
* You will pay off your loan faster if more of your payment is used against the principal.
Once you begin making student loan payments, you should also be aware of the Student Loan Interest Deduction, available for interest payments made on qualified student loans. This can reap you a tax break of up to $2,500 per year for the life of the loan. Then you can take that tax return and use it to pay down the principal on your loan.
Paying back student loans and debts is an important step towards building your financial future and achieving your career goals. If you plan on taking such action, do it now while interest rates are at a 40-year low. Work out a viable payment plan, either on your own or with a debt counselor, and set specific financial goals for yourself.
