I Owe U

Student debt is on track to top $1 trillion this year. What happens when diplomas stop opening doors?

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Brian Finke for TIME

Kohle Nixon, Ohio University '09, B.A., specialized studies. currently in $67,000 of school debt.

Like many of the protesters at Occupy Wall Street in New York City, Amanda Vodola is young, underemployed and loaded with student debt. She spends her days running around, helping organize the movement, and her evenings bussing tables at a dine-in movie theater in Brooklyn. Last spring, Vodola, 22, graduated from Fordham University with a degree in English. "I grew up with this narrative that to get a good job I need to go to school," she says. But the job she has "is not enough to pay the bills." And the bills she's dreading most are the ones tied to that narrative: the $30,000 she owes in college loans.

In November, when their six-month grace period runs out, Vodola and millions of other students who graduated in May have to start repaying their loans. Repayment requirements for private loans kick in regardless of whether borrowers have found jobs. Since employment rates for recent college grads have plummeted in the past two years, as have starting salaries, the possibility of a sharp rise in student-loan delinquencies has led some analysts to predict that this could be the next subprime-mortgage crisis, rippling into the wider economy. Total U.S. student-loan debt, which exceeded credit-card debt for the first time last year, is on track to hit $1 trillion this year.

The members of the class of 2011 have a frightening footnote on their diplomas: Most Indebted Class Ever--and this year's seniors are on track to surpass them. Average student-loan debt for new graduates has reached $27,300, according to Mark Kantrowitz, publisher of FinAid.org and FastWeb.com sites that help students plan and pay for college. Add the loans parents took out for their children's education, which students frequently pay back themselves, and the number rises to $34,400. That's a nearly 8% increase over last year and a 36% hike (adjusted for inflation) from 10 years ago. And with student loans, unlike real estate or business debts, you can't walk away through bankruptcy as General Motors did.

But neither these statistics nor the voices of students, crushed by debt, at protests in cities and on campuses throughout the nation are likely to keep the families of high school seniors from seeing a brand-name education as a ticket to a better life. They've long been told that higher education, much like buying a house, is an investment in the future--even as the cost of college has soared 538% over the past 30 years. That's more than four times the growth of consumer prices and almost twice the increase in health care costs. Meanwhile, says Lawrence Mishel, president of the nonpartisan Economic Policy Institute, "the wages of those with a college degree have been roughly flat for 10 years, and it's not really improving relative to those with less education." In other words, all those tuition hikes aren't necessarily leading graduates to better paychecks. That letdown, coupled with rising debt loads, could stunt economic growth in the long term if today's grads end up being too poor to start a business or buy a house or send their own children to university.

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