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.

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