In debt from Day One

As a student at Johns Hopkins University, Justin Anderson had fairly idealistic notions when it came to his career. He loved the idea of teaching, and even dreamed of getting a doctorate in history after graduating. Then reality sank in.

His parents had not been able to contribute much to his college education, and yet they earned too much to qualify for most financial aid. So Mr. Anderson applied for student loans - racking up a whopping $101,000 by the time he graduated as valedictorian of his class.

At that point he sat down and did some math, Sadly, he says, "I realized it would take forever to pay down this debt with a teacher's salary."

So instead, Anderson, now 27, took a highly paid job in New York as an investment banker.

It took him 3-1/2 years of frugal living, during which about half his paycheck and all of his annual bonuses went toward paying off his debt, which totaled $2,500 a month.

Eventually, with some savings under his belt thanks to his Wall Street position, he decided to return to school and today is a first-year law student at Yale University.

Anderson is one of a growing number of graduates for whom student loans have both opened and closed doors. Almost 1 in 5 college and professional school graduates says he has changed his career plans because of student debt, according to the 2002 National Student Loan Survey from government-backed lender Nellie Mae.

These graduates may tend to shy away from low-paying jobs in nonprofits, the arts, or government, say some experts.

"The effect on young people is enormous," says Max Stier, president and chief executive officer of the Partnership for Public Service, an organization that aims to attract talent to the federal government. "The kinds of choices they might have had a generation ago are not available to young people today because of enormous debt."

Student debt levels, on the rise since the early 1990s, have skyrocketed in the past few years. In 1997, the average undergraduate came away with $11,400 in debt; by 2002, average indebtedness was up 66 percent to $18,900, according to Nellie Mae's National Student Loan Survey. Graduate student debt has followed the same trajectory, rising from $21,000 in 1997 to $31,700 in 2002. For law and medical students the average is $91,700.

And the percentage of students who borrow to finance their education has also climbed, according to the US Department of Education. In 1993, 46 percent of undergraduates took out loans, compared with 67 percent in 2000, the last year for which undergraduate data were available.

Tuition has been growing faster than grant aid and family income, which has been stagnant, says Sandy Baum, a professor of economics at Skidmore College in Saratoga Springs, N.Y., and a senior policy analyst with the College Board.

Still, the majority of undergrads handle their debt without having to radically alter career plans, says Ms. Baum, who has studied the issue for Nellie Mae since the 1980s. "Think about how many people borrow this much to buy a new car right after graduating," she points out.

But for some pockets of students, debt can become a significant factor in career decisions, she says. These are: arts students with uncertain future earnings; law and medical students, whose average debt load is close to $100,000; and students like Anderson, whose undergraduate debt loads are excessive.

Richard Space will graduate from Columbia University this spring with a bachelor's degree in economics and political science.

A former marine, Mr. Space attended Columbia with the help of the GI Bill, but that only covered about a quarter of his tuition. He will wind up owing between $45,000 and $50,000.

After graduation he wants to start a business with a handful of friends who have drawn up a business plan. But with loan payments coming due, that will have to take a back seat to a day job, probably in management consulting.

"That's a risk you take if you want to come to a school like Columbia," Space says. But he thinks it's worth it: "I've had awesome professors, and I've made so many connections here."

But many entering law students, on the other hand, don't expect to have to make such a trade-off.

"If you ask people when they come into law school whether they want to be public interest lawyers, more than half will raise their hands," says Deborah Ellis, the assistant dean of public-interest law at New York University School of Law. "By the time they graduate, only a few hands will still be raised."

A survey of more than 1,600 third-year law students by Equal Justice Works, a nonprofit aimed at helping law students pursue public-interest careers, found that more than two-thirds of respondents to that survey said their debt prevented them from considering relatively low-paying public interest or government jobs.

Jobs at private firms typically pay enough for students to make high loan payments (the monthly payment for someone with the median level of debt is $854) and still live comfortably, but students with such high debt levels who take a public interest job at $40,000 a year find it impossible to make ends meet, says Richard Revesz, dean of the law school at New York University.

And as debt loads have risen, the gap between jobs at private firms and those in the public sector has widened.

From 1991 to 2001, starting salaries in public-interest law grew by 37 percent, from $25,000 to $35,000. Meanwhile, tuition climbed a whopping 76 percent.

But starting salaries in private practice grew even faster than tuition, rising 80 percent from $50,000 to $90,000 in the same period, according to figures from the National Association of Law Placement and the American Bar Association.

"When I was getting out of law school [in 1992], I made $28,000 at a public interest job, and in Los Angeles, my classmates were making $60,000 at firms," says Lisa Mead, dean of students at the University of Southern California. "Now the difference is three or four times. Students see that widening gap."

NYU has responded by establishing one of the most generous "loan repayment programs" in the nation. The law school forgives the loans of graduates who take public-interest jobs that pay less than $42,000 and partially forgives the loans of those who earn less than $72,000 upon graduating.

But only about one-third of law schools offer any kind of loan repayment program, said Mary Mulvenon, a program manager at Equal Justice Works, and only a handful of top-tier law schools, like NYU and Harvard University, have the money to forgive loans entirely.

Angel Fox's alma mater - Capitol University Law School in Columbus, Ohio - didn't offer anything like that.

Ms. Fox, from Dayton, was the youngest of seven children. No one else in her family had ever gone to college, let alone law school. She scrimped and saved, living for a time in an abandoned farmhouse and later renting a room in a funeral home.

And she borrowed.

Her intention was to become a public defender, and with that in mind, she took classes in criminal procedure and worked at a battered women's shelter and at the Ohio attorney general's office.

"I wanted to help people who don't have the means to help themselves," she says. "I can relate to that. It's my background."

After graduating from law school in 1992, she was offered a job as a public defender. The same day she got a call from an insurance company. They offered her a position that paid $10,000 more a year.

Fox got out a notebook and started making calculations. She owed $60,000, with monthly payments of $365.

She took the job at the insurance company. Today, she continues to do insurance work in Cleveland - and still longs for the public defender's office.

"I liken it to the story of Faust," said Fox. "If it weren't for the loans, I never would have had that choice. But you have to pay it back, and for me the payment was I had to take a job where I could [do that]."