There's not a lot of good news to report in today's note. I'm continuing to look for coverage of one of the broadest economic issues that isn't making the major-media's radar screen -- college debt, and the impact it has on our economy -- and finding out a lot of unfortunate twists and turns about the matter.

Here's a point that was well-made by the St. Joseph News-Press of Missouri on April 13 this year: Students graduating from college today aren't starting the careers they want, they're taking the jobs they DON'T want in order to begin paying off their student loans. I think someone called it a "dream deferred" but in a completely different context in the 1950s or 1960s.

Making the monthly minimum payment on $20,000 in loans stretches the budget of the small-town school teacher or social worker. Often within the same conversation about the lack of state funding for public higher education, university administrators bring up a scenario that involves students with a dream of teaching who are forced to jump to something more "lucrative" to keep their heads above water post-graduation.

Two weeks later, the Houston Chronicle published a report saying that the fear of high debt is forcing some college applicants to choose a college or university they wouldn't otherwise have attended:

Tuition and fees at public universities have risen 40 percent statewide since 2003, when lawmakers allowed the schools to set their own rates. Now add another factor: Turmoil in the credit markets has created fears that private student loans will be harder to find and more expensive for those who can get them. So students weigh their options. Community colleges report a surge of new students, but four-year schools say the cost and uncertainty have had little impact on enrollment, for now.

"We're not seeing it," said Chris Muñoz, vice president for enrollment at Rice University. That's partly because Rice and other colleges are working to meet a rising demand for financial aid. Still, not everyone qualifies for financial help, and available money in some grant programs can't stretch to cover everyone who is eligible.

"I'm concerned about the cost," said Robin Branham, of Alvin, whose son, Cody, plans to study business at A&M. She also has a son at UT. Cody, she said, is not particularly worried. Cody won't qualify for need-based grants, and Branham has heard that student loans are becoming more difficult to find. "We need to start filling out the paperwork," she said, referring to a process that has become a rite of passage for the college bound.

In the same article, the student financial services director at the University of Texas-Austin says pending legislation may raise the amount of grants and loans available over a student's career.

Grants are great, in my opinion, for the obvious reason that they don't have to be repaid. But raising the amount of loan availability only exacerbates the problem, which the student aid offer clearly understand:

But sometimes, not even a combination of grants, scholarships, savings and federal loans can cover the cost. And there are growing concerns about private loans, which some students rely upon to fill the gap. Joe Pettibon, assistant provost for student financial aid at A&M, said people with poor credit may have trouble qualifying for a private loan because of the unsettled credit market. Those that do qualify may have to pay higher interest rates, he said. Students generally don't apply for those loans until summer, so it's too early to predict the impact.

But rather than making more grant funding available to students who clearly qualify for student aid based on academic achievement, or based on financial need, or both, so they can avoid a career-crushing debt load upon graduation, the student aid industry offers a different strategy. It tells students and new graduates to pay close attention to their finances while paying back those tens of thousands of dollars in loans.

A June 22 article in the St. Louis Post-Dispatch does exactly that.

New graduates are about to enter a world that can be as daunting as their first days on campus: the world of work, money and bills. For some, the end of college means it's time to begin paying back loans: The average graduate has more than $19,000 in student debt. For the lucky few who have no loans or credit card debt , the expenses of finding a job and possibly settling in a new location loom large. In either case, one of the first things to do is take stock of your spending.

Rob Weagley, chair of the personal financial planning department at the University of Missouri-Columbia, said that he is not a great budgeter, but he believes in making an effort to get on the right financial track. "You never get a second chance to make a good financial start in your life," he said.

If you have money left over at the end of bill-paying, the financial planner advises that graduate sock it away in savings. If there isn't money left over, those graduates should find places to cut spending.

Of course, he doesn't suggest cutting the amount being remitted to the loan company.

If you did borrow money for school, find out when you need to start paying it back. Many loans have a six-month grace period. You will need to find the money for regular payments in your budget. To make sure you don't get behind and incur late fees, set up automatic payments from your bank account. Graduates have many options for repaying student loans, said Patricia Nash Christel, a spokeswoman for Sallie Mae, a leading provider of student loans.

Graduated payments allow students to make smaller payments when they're starting out and bigger ones as their incomes grow. They also can opt to pay a percentage of their paycheck, ranging from 4 percent to 25 percent, as long as the payment covers the interest each month.

Nash Christel said graduates need to look at all their debt and first pay off whatever has the highest interest rate. But they must make at least the minimum payments on the rest of their debt . If they get a cash windfall, there's no penalty for paying off student loans ahead of schedule, she said.

At what point did America decide to begin producing indentured debtors rather than educated leaders? Does the Bush administration's definition of "ownership society" include ownership of tremendous debt?

That is, of course, a rhetorical question because I read the news too: "WASHINGTON -- President Bush will leave his successor with a record-high budget deficit of $482 billion, according to an administration estimate released Monday."

So debt is nothing new; only the new, lower standard of living is new, and the student aid officer advises that graduates get used to it.

Weagley said graduates may need to adjust their living habits to their new situations, especially if their parents provided them a higher standard of living than they can afford on their own. He suggests shopping at garage and estate sales and keeping an older car rather than buying a new one.

"They want to live like they're accustomed to living," Weagley said, "and they cannot do that when they are getting started."

In fact, graduates might want to consider moving back home to live with their parents; it's becoming a trend according to another article published on the same date, June 22, in the Post-Dispatch:

They're coming home.

Many parents already know this, but it's likely that after four, perhaps five or even six years of school, many college graduates - facing a tight job market, higher gasoline and food costs as well as mountains of debt - have no choice but to move home to get their financial bearings. And you know what? Despite assurances that they will stay only for a little while, this time next year many of those graduates still will be living at home. That's what MonsterTRAK found in its annual nationwide survey of college students, recent graduates and entry-level employers.

Continuing a three-year trend, just under half of prospective graduates, 48 percent, plan to boomerang - or move home - after graduation, according to the online career-resource company. While only 22 percent of last year's survey respondents said they planned to live at home for six months or more, 43 percent have yet to leave, citing limited financial resources, MonsterTRAK found.

Chief among the reasons they say they can't leave home: college-loan debt . Forty-two percent of 2007 graduates said they had student-loan debt of $25,000 or more, while another 33 percent have a credit card balance of more than $5,000. Graduates may not earn as much as they had planned, either. Thirty-two percent of employers expect to offer recent college graduates starting salaries that range between $30,000 and $40,000, according to CareerBuilder.com, the nation's largest online job site.

But that's not the kicker.

What advice does the president of Kent State University give to parents facing the prospect of their recent graduates coming back home to live? It's "unhealthy," he says.

Lester Lefton, a scholar in the field of experimental psychology and president of Kent State University, thinks this trend is unhealthy.

"Students went to college to become independent and gain the expertise to make a living for themselves," said Lefton. "Therefore, it is not a good thing for college graduates to move back to their parents' home."
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"It needs to be temporary," Lefton said.

And Lefton advises that parents charge rent to their under-employed graduate boarders, and that they impose late fees if the rent doesn't come on time -- because "paying bills late is the No. 1 way to ruin one's credit rating."

Unfortunately, if that graduate spent much time shopping around for the best interest rates on college loans, his credit score may already be in need of rehabilitation.

Why? Because shopping around for the best rate on a student loan from a private lender can hurt your credit rating. "Since lenders quote higher interest rates to applicants with lower scores, some students could end up paying thousands of dollars more in interest over the life of their loans," says a report in Saturday's New York Times.

In few other areas of consumer life are you at risk of being penalized for seeking out the best deal. Indeed, mortgage and auto loan seekers who comparison shop within a relatively short period of time do not see their credit scores suffer. But Fair Isaac, the company that helps credit bureaus calculate credit scores, does not extend the same break to private student loan applicants or their parents, who often co-sign for loans.

The basic inequity here — the fact that people borrowing money for higher education are not given the same benefit of the doubt as people shopping for mansions and BMWs — is unfortunate enough. But the real head-scratcher is how little anyone in the industry seems to know about how often students and their parents suffer damage. Fair Isaac thinks it’s rare, if it happens at all. Lenders and student loan brokers think it’s common.
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This issue matters because even a small credit score decline can lead to a more costly interest rate. Every point counts at a time of tightening credit standards, when many lenders have been requiring higher minimum credit scores. In addition, banks have been getting stingier with another source that parents tap for tuition money, home equity loans.

In short, it's a racket. Someone's earning a great profit, and it's not students entering college, students in college, students graduating from college, or any of their parents. Instead, they're the ones getting squeezed, and data suggests that very few decision-makers are bothered by it.