Bend resident Scott Miller might never have been able to pay off his student loans if he hadn’t dropped out of college.

Now the owner of Miller Irrigation, Miller realized after his third year in flight school that it would be hard for his dreams to take off if they were weighed down by $100,000 of debt.

Miller, 28, said he was concerned about how he was going to make his $400 monthly loan payments on a beginning pilot’s salary – between $17,000 and $23,000 annually at the time.

So Miller, a Bend native, changed course. In order to make payments on an overwhelming amount of debt, he is now watering lawns instead of flying airplanes. He says he is very happy, has a flexible schedule and is financially secure.

Student loan debt wasn’t the only thing worrying Miller at the time. When he started college at the University of North Dakota in 2000, he watched the airline industry nose dive into financial distress.

Pilots were getting laid off or furloughed, and new pilots were scrambling for jobs.

”We even had professors tell us, ‘You might want to consider a second career,’” he said.

While his job prospects were going down, his college debt was quickly rising. At that point, it had reached $80,000. If he completed his last two semesters, Miller would have owed $100,000 combined to US Bank and the U.S. government.

Now in a new career, Miller still has plenty of debt to pay off, but his backup career has worked out well.

”In the three years I’ve been home,” he said, ”I’ve built my own company, I own my home, I own a brand-new truck,” he said.

More loans, higher payments

Student loan rates have been a hot-button topic this year. On July 1, the rates went up nearly 2 percent after a period of historically low rates.

Future borrowers and those who did not lock in a low interest rate will now see their monthly payments go up.

Also, college tuition is rising steadily. In Oregon, tuition prices have climbed by 50 percent in the past six years, said Courtney Sproule, communications director for the Oregon Student Association.

Oregon graduates are left with some unsavory options. They may have to take longer to pay off their loans, fork over a higher percentage of their salary toward payments or – in Miller’s case – choose an entirely different career.

More Central Oregon Community College students are taking out loans, said Kevin Multop, director of financial aid.

”There are more students borrowing, and the ones who do borrow, borrow more,” he said. ”We look at stuff like this and we do kind of scratch our heads.”

He attributed the trend to either better communication with students about the benefits of loans, or increased tuition costs.

In 2004-05, the average COCC student borrowed $2,790. In 1997-98, the average loan was $1,834.

In 1992-93, tuition at COCC cost $31 per in-district credit. In 2005-06, the same credit cost $61.

At Oregon State University, the average undergraduate loan debt for students who graduated in 2004-05 is $15,132. The university calculates financial aid numbers universitywide and could not provide specific numbers for OSU-Cascades, said Jane Reynolds, director of enrollment services for the Bend campus.

Tuition and fees at OSU for in-state students are about $5,604 for undergraduates and $9,687 for graduate students, according to the OSU Web site.

The debt trap

One way to stay ahead may be to put aside money in a retirement account. An IRA could be a wise way for either a parent or a child to save for college. Retirement account assets do not usually count against borrowers looking to qualify for need-based financial aid.

Plus, parents who set aside money for their child’s college savings in an individual retirement account can earn money tax-free that can count toward the child’s future education, according to www.fairmark.com, a Web site for investors.

The average student debt for a full-time student at a four-year institution was $9,188 in the 1992-93 school year, and fewer than one-third of 1993 college graduates left with loans, according to a report from the state Public Interest Research Groups’ Higher Education Project. But by the 2002-03 school year, the average college graduate owed about $17,094.

More than two-thirds of four-year college students in the U.S. borrow money to finance their education, according to the National Association of Student Financial Aid Administrators Web site.

And while college costs have gone up, federal and state aid have remained stagnant.

Since 1991, Oregon has had the largest decline in the country in state aid per full-time student, according to the Oregon Student Association, a nonprofit advocacy group for post-secondary students.

”As federal and state grants aren’t keeping pace with the increasing cost of college, then the loans have to come,” said Jennifer Satalino, manager of the Northwest Education Loan Association’s Center for Student Success. The group is a nonprofit organization that helps students secure college loans.

Higher tuition costs and interest rates logically lead to higher monthly loan payments. In some cases, that could be up to $30 more a month, said Sandy Baum, a senior policy analyst with the College Board and professor of economics at Skidmore College in Saratoga Springs, N.Y.

Debt also hits home in other ways.

”It certainly affects your choices with starting a family and buying a house,” Sproule said.

In 2002, 17 percent of graduates changed their career plans significantly because of loan debt; 38 percent delayed buying a home; 30 percent delayed buying a car; 21 percent delayed getting married and 21 percent delayed having children because of student loan debt; according to Nellie Mae’s most recent national Student Loan Debt Survey.

Words from the wise

How people deal with debt depends on their circumstances.

Miller decided to go into another field because he had experience in another area. Throughout high school and college, he did landscape work to make money. When he returned from North Dakota to Bend in the summer of 2003, he saw a niche. There were lots of landscape businesses, but not companies that specialized in irrigation.

So Miller took lemons and made lemonade.

Although he had a negative balance after leaving the University of North Dakota, he had good credit that allowed him to purchase equipment. He bought a trailer and took the Landscaper Contractor Board exam.

He would have made an annual salary in the low 20s as a beginning pilot, but Miller’s irrigation company stands to make between $150,000 and $170,000 this year. He estimated his take-home portion will be about $70,000.

Miller is not concerned about his $400 monthly loan payments now. In the past two years, he has been able to purchase a house and a brand-new truck after building his own company from scratch.

”I see it as an asset,” he said of his education. ”I based a lot of my company off what I learned – how airlines run their businesses.”

While not everyone may be able to build a new business, people can prepare themselves for post-graduate loan payments in other ways.

Multop encourages students to think about how much money they take out in loans.

”Don’t borrow more than what you expect to make your first year,” he said.

Following that advice may cause some students to think twice about their career choice.

In April, the Oregon Student Association released a report with the Oregon Student Public Interest Research Group addressing student borrowers who take out more than they will make.

The report found that 15.9 percent of starting teachers who graduate from Oregon public four-year schools have unmanageable debt. Nationally, the report found that 37 percent of public school graduates would have unmanageable debt as starting social workers.

”If you want to be an artist, then you should think really carefully about how much you should borrow,” Baum said. ”If you think you’re going to go into an occupation where you’re not going to make $30,000 when you graduate, the fact is no matter how much you borrow, those monthly payments are going to be pretty burdensome.”

Another piece of advice: Aim to graduate in four years, said Reynolds of OSU-Cascades.

”Not everybody can do that, but students who can go through school full time, four years, or just maybe slightly longer than that, come out with less debt. And they can start working faster, so there’s two sides,” Reynolds said.

Above all, don’t live beyond your means. Getting a credit card in college can make your post-graduation debt a deadly burden. Satalino of the Northwest Education Loan Association urged students to be aware that they are dealing with real money, not Monopoly money. No matter what the offer, she said, resist the credit card ploys.

”Don’t get the free pizza or the T-shirt or the chocolate bar,” Satalino said. ”Avoid that temptation.”

If you do want a credit card, use it only for emergencies and get a $500 limit.

”Remember, when you’re a student, live like a student,” Satalino said, ”Or you’ll be living like a student for the rest of your life.”

The costs of higher education

Average …

… U.S. debt per graduate: $19,300

… debt per Oregon graduate: $18,105

… federal loan debt at a U.S. four-year public institution: $15,982

… OSU student debt: $15,132

… federal loan debt at a two-year public institution: $8,004

… COCC student debt: $2,790

… Average federal loan debt at a U.S. four-year private institution: $18,206

Percentage of …

… family income needed to pay for one year at a four-year public college after financial aid: 34 percent

… Oregonian undergraduates with loans: 63 percent

Oregon tuition increases:

* Public four-year school: $9,397 in 2000-01 to $12,177 in 2004-05

* Private four-year school: $23,306 in 2000-01 to $27,493 in 2004-05

* Median Oregon family incomes have decreased 3 percent since 2000, but public college costs increased by 30 percent.

Interest rates …

… for borrowers who are out of school and repaying or deferring a Stafford loan rose from 5.3 percent to 7.14 percent after July 1.

… for borrowers who are still in school or in a grace or deferment period on Stafford loans rose from 4.7 percent to 6.54 percent.

… for parents?226-130? PLUS loans rose from 6.1 percent to 7.94 percent.

… for new borrowers who took out loans after July 1 came with a fixed rate of 6.8 percent, while parents?226-130? PLUS loans are set at 8.5 percent.

Helpful Web sites:

* www.finaid.org

* www.nasfaa.org

* www.nela.net

* www.ed.gov

Sources: COCC, OSU-Cascades, ”The College Crunch: A State-by-State Analysis of Rising Tuition and Student Debt,” www.nasfaa.org, the College Board.