Jacob Schutz | There'll always be student debt

In May, I was dumped by e-mail.

I received an notice from Student Financial Services telling me I would need to select a new lender for my Federal Stafford Loan. My original lender - along with 136 other institutions - had stopped offering the loans. A couple months later, a friend at another school updated her Facebook status to say she "thinks student loan companies can suck it." And the bad news followed me back to Penn, with a Daily Pennsylvanian article that read, "Loans a problem for students."

Indeed, as I watched the "Bailout Bill" wind its way through Congress - failing in the House before the Senate could resuscitate it with pork - I felt only one connection to those dreaded financial markets: "What does this mean for student loan rates?"

That's because, like many Penn students, my education depends on federal and private loans. For the average student, this means a tumultuous relationship with a hidden trouble in the American economy.

And although Penn has recently done an admirable job expanding its financial aid, the "no-loan" aspect of its program is somewhat deceiving. Penn's efforts, which affect families making under $100,000 this year and will cover all students starting next fall, eliminates loans from financial-aid packages. The fact is, however, that many students will continue to use loans.

When you apply for financial aid, you receive a statement that takes total education expense and subtracts what they think your family can pay (based on acronym-heavy forms like FAFSA and the CSS Profile). The remaining sum is your financial-aid eligibility, which used to consist of Penn grants, other scholarships, work-study jobs and loans. Now, however, Penn won't expect you to take out loans as part of your financial aid.

But there's still that expected family contribution. And often, this number is larger than what parents feel they can afford on a yearly basis, so they turn to student loans as an answer.

"What they use to calculate family contributions is vastly unrealistic," one College junior told me, who wished to remain anonymous. She told me that although she now qualifies for the "no-loan" program, this was the first year she had to take out private loans on top of her federal ones, because her family couldn't cover their expected contribution.

As a student interested in nonprofit work, she's especially frustrated with the thought of having to pay back loans after graduation.

Mark Kantrowitz, publisher of finaid.org, told me that Penn's "no-loan" financial-aid package is "much more generous" than your average university program. Kantrowitz explained that "no-loan" programs help insulate our student body from the current turmoil in the financial markets.

But he also pointed out that some students "borrow to cover their family contributions," exposing them to either the federal or private student-loan markets. Federal loan programs are okay, he says, because Congress has acted to ensure their stability. As for private loans - "It's very hard to predict what will happen."

For an already sensitive matter, a false belief that all Penn students graduate debt-free holds the danger of suppressing an important dialogue on campus. Especially in an economy that continues to negatively affect family wealth and leave interest rates volatile, it's important to continue to ask whether Penn is affordable for every talented mind lucky enough to be accepted.

I absolutely commend the University for its efforts. I know President Gutmann has placed a great deal of importance on financial aid, and her work is reflected in how far Penn's programs have gone in these last few years. But many students still feel some significant financial pain.

Fostering an open discussion about the real burdens of paying for a world-class education will help University leaders know exactly how far we have made it and how far we have yet to go.

Jacob Schutz is a College junior from Monument, Colo. His email is schutz@dailypennsylvanian.com. The MacGuffin appears every Monday.

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