Immigrant parents may be accustomed to a cash-only economy in their homeland. Once they arrive here, they distrust banks and don’t accept loans as a viable way to finance their kids’ education, Santiago said. In Mexico, it’s a pay-as-you-go economy, and people rarely have a relationship with a bank, she explains. “Your financial literacy is more limited.”
In the end, these students make financial decisions that may impinge success. A cost-conscious student may choose to attend a community college to avoid loans. But other roadblocks exist. That same student may not complete a degree or advance to a four-year institution because of family, work, or other responsibilities. “If they enroll part-time, they’re less likely to get a bachelor’s degree," Santiago explains.
Collectively, students owe more in student-loan debt than credit-card debt. Many students are entering the workforce during a sluggish economy, putting them at greater risk of remaining unemployed by the time they need to begin repaying their college debt. Autumn figures released by the Education Department show that the default rates three years after graduating was 13.4 percent, slightly lower than the two-year cohort default rate of 13.8 percent.
Last year, undergraduates completed their degrees with an average of $26,600 in student loan debt, up from $25,250 in 2010, according to a recent report by the Project on Student Debt at the Institute for College Access and Success. The 2011 figure was 5 percent higher, following a growing trend that worries policymakers and students alike.
The thought of having nearly $100,000 in student loans for her law degree makes 25-year-old Anna Encinias nervous. Encinias is a third-year law student at Michigan’s Thomas M. Cooley Law School, a private, nonprofit, independent institution that dubs itself “among the nation’s most affordable.”
“It scares me. It stresses me out,” she says about her forthcoming September graduation. “Not only do I have to get a job, I have to get a well-paid job just to pay back the loans.”
After paying upfront for LSAT courses and college application fees, and having some money for room, board, and unexpected expenses, Encinias is getting through school with loans. She had little aid from her parents in helping her select a school or walk her through the financial responsibilities she will have when she completes her degree.
While her father helps her cover part of her housing, books, and food until her next student-loan disbursement, Encinias says she often stresses about how she will repay what she’s borrowing. “We’re all out of money,” she says, commiserating with other law students. “We’re running up our credit-card bills.”
“When I go home, when I finish here, I’ll have to live with my mom until I have a job that pays well.” As for her plans to get married, have a family, or start saving for a home, she says, “It’ll have to wait another 10 years.”
As for Martinez, the Texas student who initially dropped out with strong grades and a large tuition bill, she eventually returned to a community college after two years of working at a grocery store to repay her student loan. In the fall of 2010, she transferred to West Texas A&M University. This time, however, she read everything before she signed any papers and was more proactive about searching for outside scholarships and grants.
She graduated in December with $20,000 in student loans. Along the way, she is left knowing more than just what she read in textbooks.
“What I learned as a first-generation college student is that your parents don’t know how to pay for it either, so they’re looking to you to figure it out,” she told Next America. “You have to ask questions. You have to be your own advocate.”