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Their cost to bear

Is 'Generation Me' being set up for failure by entering adulthood with mountains of financial baggage?



Michael Phillips raised his hand and shouted, "$310!"

He stood close to the makeshift stage at Sutra Lounge in Midtown. A first-year Emory law student with dark auburn hair and freckles, he was decked out in a sleek black suit and tie. On stage, a leggy blonde named Kristi giggled nervously as Phillips and several other men barked out bids to win a date for a charity auction.

A LIFETIME OF DEBT: Michael Phillips will graduate with approximately $220,000 in student loan debt. - JOEFF DAVIS
  • Joeff Davis
  • A LIFETIME OF DEBT: Michael Phillips will graduate with approximately $220,000 in student loan debt.

A friend turned to him.

"Dude, what are you doing?" he asked. "None of us can afford to pay that much for her."

"I'm going to be a lawyer when I grow up," Phillips, 24, replied as the emcee announced him as the winner. "Lawyer Michael 10 years from now is going to say that this was worth it."

People in the crowded club stared at him. Some cheered and others patted him on the back. He'd already purchased three other dates that evening to benefit victims of a Pakistani earthquake. He felt like the richest man in the room.

But his friend was right -- Phillips couldn't afford the dates. He was living on student loans and credit cards. It's just that it felt like free money. Paying back that debt seemed abstract, something to deal with sometime in the future.

The next day Phillips wrote a check for $700 for the four dates he'd won. He never went on any of them because he didn't have a car, and he was too embarrassed to ask the leggy blonde to pick him up. Sure, that night was expensive compared to the $50 he regularly dropped at a bar on the weekends. But he chalked it up to good fun for a good cause.

After all, for Phillips, it was a drop in the bucket. What does $700 matter when you're going to be $220,000 in debt?

Phillips and his contemporaries will enter the adult world with the kind of economic baggage no previous generation has ever faced. They are part of what has become known as "Generation Me." They've grown up with a sense of entitlement that's set them up for failure as adults. And they've been indulged with a "gotta have it now" consumer appetite that's translated into an unprecedented amount of debt before they're even out of school.

At the same time, the traditional safety net has been pulled out from under them: Student loans and tuition are more expensive, and banks and credit card companies tease them with more ways to go into debt.

More than 50 percent of today's students take out loans to pay for college. According to the Consumer Credit Counseling Service of Greater Atlanta, they graduate with an average student loan debt of $20,000. And students, like Phillips, typically owe $100,000 for medical or law programs.

"College is just so much more money," says Clark Howard, the WSB-AM (750) consumer talk show host. "I went to college back with the dinosaurs and my tuition for an entire year was $2,400."

In the 1970s, when Howard attended school, student loans were virtually unheard of because federal grants covered 84 percent of a student's tuition; today, they cover just 39 percent. In the early 1980s, 52 percent of all federal undergraduate student aid came in grants and 45 percent in loans. And by the end of the 1990s, notes Anya Kamenetz in Generation Debt: Why Now Is a Terrible Time to Be Young, the numbers were more than flipped: Loans made up 58 percent of financial aid and grants only 41 percent.

Although Georgia touts its much-heralded HOPE scholarship, it only helps students with a B average or higher. And a recent report by the National Center for Public Policy and Higher Education gave Georgia an "F" on the affordability of its colleges because the state does so little to help its neediest students. In 1995, the state removed an income cap, allowing wealthier students to get HOPE scholarships even though they didn't need, or sometimes want, the free ride. Instead, many students want the best, private-school educations, meaning they'd rather start out in the red than settle for a public education.

Howard sees that attitude himself, with his 17-year-old daughter. "I told her I will pay the equivalent of in-state tuition, room and board for a Georgia state college," he says. "But she doesn't seem to want to go to a state school. I think she's in denial."

On top of student loans, Generation Me has racked up debt on plastic. The average student carries three to six credit cards and owes between $3,000 and $9,000.

"Credit card companies want to give cards to the college kids because they're the most profitable customer," Howard says. "If they get behind [in payments], most college students get bailed out by their parents so there's almost no risk to the credit card companies."

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