Listen: Debt Economy (Hughes)-6440

MPR’s Art Hughes meets with Spencer Anderson and discusses his business endeavor and how he and his family are paying for his current education at University of Minnesota. Hughes also interviews financial officers for their take on student loans and the economy.

Students heading to college this fall are sorting through financial aid and scholarship offers, making final decisions about which school is the right fit--and which they can afford. Financial aid officials say the souring economy offers a cautionary tale for families thinking about acquiring loans to pay for school: borrow carefully because you can't count on the economy to be strong when it comes time to repay the loans.


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ELAINE ANDERSON: When you're done, you clean it up. You put it--

ART HUGHES: University of Minnesota senior Spencer Anderson has set up a small scale brewery in his parents' Plymouth garage. The home beer-making operation with his identical twin brother, Colin, is a serious affair that involves some sophisticated homemade equipment and intricate temperature and timing controls. It's a hobby that marries Spencer's apparent interests in business, chemical engineering-- his area of study-- and college social interaction.

SPENCER ANDERSON: Mom, can you take these inside please?


ART HUGHES: Spencer Anderson is grateful to his parents for paying for his undergraduate degree so he was able to zero in on his education and have some free time.

SPENCER ANDERSON: Well, it was nice that they were so willing to help out with it. A lot of my friends had experienced to have to get jobs all the time. They're always worried about loans. And I didn't really ever have to worry about that, so it helped me focus on school and also do extracurriculars, which allowed me to really live a fun life while I was at school.

ART HUGHES: Spencer's father Marc Anderson says he wanted his sons to have an educational experience unencumbered by finances because that wasn't the case for him and his wife, Elaine.

MARC ANDERSON: I think it was important from our observation that our children have the opportunity to go to one place and have four years building education with relationships that would perhaps go on the rest of their life.

ART HUGHES: The Andersons' income was too high to qualify for grants, so they borrowed against their house to put Spencer through the U of M where tuition and fees are now about $10,000 a year and Colin through Carlton College with an annual tuition of $36,000. But then Marc lost his job as a housing developer in November as new housing construction ground to a halt. He's piecing together real estate and mortgage brokering work where he can to pay the bills.

MARC ANDERSON: Even though the economy's down, you got to be creative. You got to be coming up with new ideas, looking for opportunities to keep the cash flow up because we've got to pay off these loans.

ART HUGHES: Elaine Anderson says she's a little more worried about their situation than her husband is.

ELAINE ANDERSON: Because now that the economy has turned down, and my husband's been laid off, and my income as a consultant is down, so paying it back looks much more ominous than it did to me a couple of years ago, even one year ago.

ART HUGHES: Both Marc and Elaine say, if they had to do it over, they would have saved more money for their sons' educations beforehand so they wouldn't have had to take out so much in loans. As work becomes more scarce and the student loan market tightens, experts, like Saint Mary's University assistant financial aid director, Annette Collins, advise families to think carefully before they borrow.

ANNETTE COLLINS: It's always been good for students to be credit-conscious but even more so now. Being an informed borrower, doing that comparison shopping with the lenders, and also creating a plan for their educational needs-- borrowing only what they need for school.

ART HUGHES: Collins also urges students to shop around for deals. Some lenders of federally-backed Stafford loans offer to cover fees or other incentives like reducing the loan principal after 36 consecutive payments.

ANNETTE COLLINS: The loan limits are the same, the interest rates are the same, but the benefits that they offer, like the origination fee or the guarantee fee, that is something that a lender can choose to cover for a student.

ART HUGHES: Financial aid officials also warn borrowers to not take on more than their long range earning potential. In the Andersons' case, Spencer is entering the working world but is holding open the possibility of getting an MBA. Colin has been accepted to medical school. He plans on being a surgeon. Their parents say the boys will need to cover any additional education costs themselves.

Art Hughes, Minnesota Public Radio News, St. Paul.

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