DETROIT – Sean Doerr, like thousands of college graduates this spring, is trapped between a rock and a hard place.
To get a good job, he knew he needed a college degree. But getting it cost the 22-year-old Detroiter dearly. He graduated Thursday from the College for Creative Studies in Detroit with more than $85,000 in debt.
He's far from alone: Millions of Americans now owe more for student loans than credit cards. The loans can top $100,000 — even $200,000 — and often translate into payments of more than $1,000 a month.
The debts will climb even higher if Congress can't agree to hold down interest rates on federally subsidized loans. But even if that bill passes, Doerr still faces years of college bills.
"I am afraid of the payments six months from now" when he must start repaying the loans, he said.
The issue of college costs is gaining steam as a presidential campaign issue with President Obama and presumptive GOP nominee Mitt Romney talking about the issue on campuses.
Obama has been hammering on the need to hold down college costs and for Congress to pass a law preventing federally backed loans from doubling their interest rates. Romney has echoed the same concerns, differing only on the federal government's role.
The average student debt load tops $25,000 in the U.S., while the job market for recent graduates continues to struggle. More than 95 U.S. colleges report that their 2010 graduates — the most recent data available — owed on average more than $35,000, and 73 colleges reported that more than 90% of the 2010 class had student loan debt, according to an analysis by the nonprofit Institute for College Access & Success' Project on Student Debt.
That has some economists worrying that federal student loans could become the nation's next huge financial crisis, like the mortgage bubble that plunged the U.S. into a recession from which it's still recovering.
It also worries many parents, educators and experts that the huge burden of student debt is putting a college education out of reach for many families.
The Federal Reserve Bank of New York estimates 37 million Americans have student loan debt, totaling $870 billion. Bankruptcies are on the rise, with 81% of bankruptcy attorneys reporting more clients with student debts in the past few years.
"I look at the loans my daughter is taking out, and I've got to wonder what it's going to be like when my son, who is in eighth grade, gets there," said Tony Pollack, 55, of Detroit, whose daughter is a sophomore at Grand Valley State University. "We can't help them out — they've got to shoulder all that cost and get so many debts."
A Democratic bill under debate in Congress would extend the current 3.4% interest rate on subsidized Stafford loans for another year. The rates will grow to 6.8% without congressional action. because a 2007 law that gradually lowered the rates expires July 1. While those loans cap the amount of money students can borrow, private loans are available for any amount.
Debt load jumps
The amount of debt for college graduates jumped 5% between 2009 and 2010, for an average total of $25,200 per student in 2010, according to the Project on Student Debt.
Much of the increase is attributed to tuition hikes at the nation's universities.
Maria Worthy, 22, doesn't bother hoping for a decrease in her tuition bill anymore.
After three years at Michigan State University, the Detroit senior is simply hopeful the increase will be small — somewhere between 3% and 5%. She estimates she already has more than $30,000 in debt.
"It goes up every year," said Worthy, a political science major. "I can't afford to pay any more, so I'll just add it on to my loan and pay it off later."
University leaders blame the tuition hikes on a decade of cuts in state aid to public universities, which they say equates to about the same amount as the additional tuition revenue.
State legislators say they would like to provide more aid, but a shrinking state budget gives them less to work with. They say universities should cut more costs to hold down tuition.
Graduate after graduate tells stories of owing so much money on student loans that they're spending half of their monthly salary on the payments, which means in many cases they can't afford rent on a place to live by themselves.
That appears to be changing attitudes toward higher education, said Andre Dua, senior partner at McKinsey & Co., a global management consulting firm that has studied the issue.
"There are increasing issues of affordability," he said. "That's leading to issues with trust and causing people to think: Is this worth it?"
He said universities can do more to help make college affordable. That includes working to hasten student graduations so they don't spend years racking up debt, and looking at how much money universities are spending on capital construction projects.
"There is no silver bullet," U-M President Mary Sue Coleman said. "We need to be concerned about the economic pain people are suffering."