- [Narrator] The following is a production of the Maine Public Broadcasting Network.

- Next on Maine Watch.

Getting a handle on student loan debt.

Maine has one of the highest student debt rates in the nation, so it is an important issue here.

There are those who believe the whole student loan industry is predatory and needs to be reformed.

Others say young people and their families need to be better informed about what they're getting into, and some worry that student loan defaults could be the next big financial crisis.

We will discuss it all.

Plus a new show demonstrates what postcards teach us about our past.

(majestic music) Hello I'm Jennifer Rooks, and this is Maine Watch.

'Tis the season when high school seniors all over Maine are getting their acceptance letters from colleges and universities.

Getting in is just the first step, of course.

Finding a way to pay for college is the next, and a growing number of college grads are finding that they wished they had known more about the student loan industry when they started their journey.

Here at John Bapst Memorial High School in Bangor, it is college night for juniors and their parents.

- But with all the options that are out there, there has to be a good option for your student.

- [Jennifer] Every year, there are events like this one throughout the state.

Financial aid experts and college admissions officers offer advice and reassurance and answer questions.

- [Expert] How many of you this is the first child?

Can you get your hands up high for me?

- [Jennifer] Among those in the audience tonight is the Wardell family from Orland, whose daughter Sarah is the first of two children.

The Wardells like many other families are trying to figure out how to manage the cost for college which is rising every year.

- It's scary.

- It's very scary.

Yeah, it's incredible from the time that I was going to college how much it's increased, and we don't want our daughter to graduate from college with enormous loans to start off with.

We don't want to go into tremendous debt ourselves.

- And we do have another student coming along too, so.

- [Jennifer] That worry is not unfounded.

College debt is a real issue for many college graduates.

According to the most recent data available, the average student debt for a college grad in Maine is nearly $23,000, the eighth highest in the nation.

Mary Dyer, a default prevention specialist at the Finance Authority of Maine, worries that many young people don't fully realize what they're getting into when they take out loans.

- I think the place where they're really lacking understanding, obviously the cost and what that really means, but then how much loan are they going to end up borrowing in order to be able to make that happen?

And they generally have a lack of understanding of what their earning potential maybe within a specific career.

- [Scott] What effect does this language have on you?

- [Jennifer] High school teacher Scott Nailor shares that concern, and he makes a point to talk with his students about the cost of college and taking out loans.

He says he doesn't want his students to make the same mistakes he did.

- I didn't realize sort of the full scope of my commitment as borrowing student loans.

I just had no idea.

I figured this is a way to pay for college, and it makes sense.

- [Jennifer] Nailor took out about $35,000 to get his bachelor's degree and teaching credentials, but his first teaching job was part-time, and he couldn't make his student loan payments, so he took out forbearances on his loans, which raised his fees and interest rates and his debt grew.

He now owes more than $70,000.

At one point, Nailor called a lawyer who said he couldn't help him.

Student loan debt is exempt from bankruptcy protections.

- It's kinda funny because if I had paid for my $35,000 in student loans with a credit card, I would at least have an option to go to a lawyer and say I can't do this debt, and we could work something out.

I want to pay back what I borrowed, you know, but I feel like the worse it gets, the less able I am to pay it back.

- [Jennifer] Nailor recently posted his story on the website StudentLoanJustice.org, a group dedicated to strengthening consumer protections for student borrowers.

Pat Perrier posted her story too.

Perrier took out a $5,000 loan in 1984 for nursing school.

- You see the caps we wore?

This is what nursing used to be.

It changed so much during my tenure.

- [Jennifer] She said the trouble began a while later when she went back to school to get an advanced degree.

The lender would not let her defer that original loan.

The fees started to build up, and she did the best she could.

- I was paying regularly.

We're back in the 80s now and into the 90s.

I was paying regularly.

Sometimes I fell behind.

You get all these threatening legal letters and calls, and I said well can I make some arrangement while I'm at school so that I can make payments?

And I was thinking keep the interest, but the interest kept going up, and at some point, so I kept getting behind, and paying these fees and penalties, and okay, finally I graduated, and I was ready to look for a job full time of some kind, and my credit, I had no credit.

- [Jennifer] Perrier has received several degrees and said she's paid off several other student loans, but never got control of that one.

And now, her Social Security check is being docked 20%, the money garnished by that lender.

- [Jennifer] What was your reaction?

- I thought I could do something about it.

You know, I thought I could show why I had not been paying for the few years that I wasn't paying, how I had not been able to make money.

- [Jennifer] Perrier says she's repaid that original $5,000 loan four times over and still owes $9,000.

- So they'll make money off of me forever.

What can I do?

- [Jennifer] She's begun contacting elected officials because she believes something has to change.

- You have no recourse.

- Oh what, what's that?

- [Jennifer] Meantime, Scott Nailor and his wife Heather now have a plan to boost their income and pay off his student loans, hopefully before his own kids are ready for college.

And he is hoping his own story will open some young eyes.

- These are kids who are gonna be in the same shoes, if not worse, than me if they don't know what's going on, so I started talking to my students, and I'm very honest with them, and I tell them, look, I made a huge mistake, and it was well-intended what I was doing, and so I try to inform them, I try to tell them think ahead, not just to what do I want to be, what do I want to do, where do I want to go to college?

That's what they get caught up in, like you said, but think about what am I going to do when I finish college?

And if I am paying for college, how am I paying for it?

And be smart about that.

I really try to encourage them to just know what they're getting into.

- And joining me now to discuss student loans and the student loan industry, Beth Bordowitz, who is the acting CEO of the Finance Authority of Maine, also called FAME, and Christopher Kessler who is the head of the Maine chapter of StudentLoanJustice.org.

Thank you guys both for being here on Maine Watch.

Now I want to start by throwing out kind of the big question to you that I think that has occurred to a lot of people.

Here we are in a historic recession, and we have these young people with high unemployment rates, young people graduating with this student loan debt.

Is it too much to worry that this might be our next big financial crisis?

- I don't think it's going to be our next big financial crisis.

I think there is a concern, and people with student loan debt need to understand what some of their rights are and how they can pay back.

There are certainly income contingent repayment opportunities.

There are different ways to, perhaps, defer your debt to make it work.

Default rates are going up, and.

- What does that mean?

- It means that people are having more trouble paying on their loans, as would be expected at this time, which means that agencies like FAME across the country are stepping up their efforts to let people know about default, trying to prevent defaults before they happen.

We saw on the tape our default prevention specialist, and what we try to do is identify at risk students.

Those would be students who didn't complete their degree or had to not have a complete session for whatever reason.

They got sick, their car didn't work, they dropped out before they completed their degree or their certificate, and yet, their loan is still owed, and that does happen to people.

They're, by far, the most at risk for default in student loans, and we try to get them early, identify when they should start their payments, so that they don't get behind at the beginning, or identify opportunities for them to defer their payments if deferments are available.

- What about you Chris?

Are you worried that this could blow up into a bigger crisis?

- I definitely think that it's already there.

It just hasn't really been publicized on the news as much as with the mortgage crisis or the current credit crisis right now.

I do think that as more and more college students graduate with a lot less jobs, there's going to be a lot more defaults on student loans, and with an average debt of $23,000, that adds up to billions.

- Now I know it's really hard to get a finger on what the default rate is because the federal government only studies how many loans are defaulted on within two years of graduating from college, so if you find yourself in a financial pickle five years out or eight years out, if you've just been laid off from your job, you don't even count into the statistics, right?

What do we think it is, though?

How many students are out there, or graduates are out there, who are not able to pay off their student loan debts right now?

- From my research, they have the statistic of the cohort default rate, which you might be able to explain that a little bit better than myself.

- Well that's what Jennifer was talking about.

It's based on the cohort, so it's a two year number.

- And it's like 5% right?

- It depends on the state or the school.

It's measured by state, by guarantee agency, by school, and so the average, it has been approximately 5%.

It's gone up and down, and certainly, most recent numbers have gone up, I think nationwide.

- But some people worry that in reality, if you look at the long term, that really, it's more like 30% of people are unable, and you're nodding here.

I mean this is not a hard number by some government agency, but anecdotal evidence.

- Actually it was the US Office of the Inspector General in 2003 made the statement that in that year, he anticipated that the current freshmen and sophomores in college were likely to default on their student loan within the course of their loan, and that rate would be between 19 and 31%.

That's.

- 2003, long before this recession hit.

- And that's one out of three people.

That's a lot of people.

- Beth, describe for us how the student loan market works briefly.

- [Beth] Briefly.

- And FAME's role in it.

I mean, you know, a parent goes to one of these lectures like we saw in the tape piece and learns about Pell Grants and things like that, then what happens?

- Well, hopefully the first thing that any student has to do anywhere across the country, and what we absolutely people to do, by the way, is to fill in their financial aid form because all student financial aid, Pell Grants and loans, start with the financial aid form, the FAFSA form, so everyone needs to get that in, they need to get it in on time.

They need to get it in before on time and particularly in these tight times because money is tight at all of the colleges as well, so you want to be the first in line for scholarship money and for institutional aid.

You don't want to be last in line and get in at the deadline.

- And when you're turning in this form, where are you turning it into?

Are you turning it into the college or university you might go to?

Or are you turning into the federal government?

Where are is it going?

- It goes to the federal government.

It's an electronic process for the most part.

People can do it by paper, but most people do it electronically.

They fill it in, it goes through the powers of electronic magic into the federal government, and then it then is disbursed by the federal government to the 10, up to 10 colleges that you have identified on your form, and you can identify more.

There's a way to do it, but 10 slots, it goes to the 10 colleges, and then it also will come to the guarantee agencies around the country such as FAME, so we get that data as well, and then that's what's used to determine a family's expected family contribution, how much they're going to pay for their student's education, and all financial aid is based off the expected family contribution.

There's the federal expected family contribution, which comes off the FAFSA form, and there also can be an institutional number which can be different and determined by the institution based on their own information that they gather from you.

Whether or not your eligible for a subsidized or an unsubsidized federal guaranteed student loan is based on your expected family contribution, and so if you have a higher need for financial aid, then you're eligible for what's called a subsidized federal Stafford loan, and your interest will be paid, well you won't accrue interest while you're in college, and you don't have to pay interest.

They'll be covered by the federal government.

- If you get the loan, where does FAME come in?

You know, there's the money has gone to the college in your name.

- Yeah, FAME has two roles.

We are the guarantor of that loan.

There's a state based guarantor, and so we provide the initial guarantee to the bank that if the student doesn't repay the loan, then we repay the loan, and then the federal government can buy it from us, and then they pay the loan.

It's a little, it's got a bunch of steps, but basically we provide that guarantee service, and allowing us to provide that guarantee service means that we can help the student if their loan's not processing right, if the money doesn't get to the school.

We can help them afterwards if they are having trouble paying their loan to understand what their options are to have a deferment, or understand what their options are for loan forgiveness.

There's been changes in the federal law to allow students to get loan forgiveness.

That's later on in the story, but we can help with all of those pieces as the guarantor, and it's our role as the guarantor as well as doing those financial aid nights and other outreach so students know about financial aid.

- The organization you're here in Maine working for, StudentLoanJustice.org.

Explain to me what laws you feel as though you'd like to get changed and why are you here in Maine.

- Well the laws we want to see changed right now is so that we can restore standard consumer protections to student loans.

One being that would include full bankruptcy protections, statutes of limitations, refinancing rights to all student loans, both public and private.

Another one is to pass legislation that allows the borrowers who are in default for five years or more to pay back what they had borrowed plus a reasonable amount of interest, or to repay the amount that the government paid for on the loans and place repayment caps on these loans, so people don't pay these into perpetuity.

- Why did the organization choose Maine as a place to set up chapter?

- Maine is just one of the 50 states where we have chapters.

Right now, it's really a grassroots efforts that's people in all 50 states are just starting to stand up for their rights and really start questioning how the whole system of higher education works and fight for some social justice.

- Beth I want to ask you, I know that FAME doesn't take a position, you didn't write the law, but you understand why the law was changed and why student loan debt maybe doesn't have the same kind of protection that, you know, a homeowner does on their mortgage or a credit card owner.

- Right, well student loans are heavily regulated, and so they have actually a lot of protections that might not exist for a homeowner or a mortgage company.

You don't go into default until you haven't paid your debt for 270 days, which is a lot longer than the 30 days given under most consumer credit laws.

I think a lot of the things in place that concerned Chris are things that Congress has put in place to protect taxpayers because ultimately, student loans are a debt to the United States of America, so every taxpayer is supporting the student loan debt, but banks are being asked to do and making student loans is giving a loan to an 18 year old who has no established credit, and so it's, you know, the expectation and the hope is that they're going to go to college and have an education and be able to earn enough to pay that back, but there is a side of it of protecting taxpayer funds, and so I believe that's where a lot of the legislative concerns that Chris's group raises stem from, that sort of walking that line between protecting the student, helping the student get through college, establishing that public policy of sending students to college, and yet protecting the taxpayer on the other side.

- Right, and I know a lot of your frustration is that there's such great profits in organizations, especially Sallie Mae at the same time that these big fees and interest rates are being, you know, added to some young people who are having trouble paying their loans.

We just have a little bit of time left, so I want to definitely ask you both, what advice would you give to students or parents watching tonight when they are thinking, when they are facing this recession, and they're facing a rising unemployment rate, yet they have a child that they so much want to send to college and to a good college and will face student loan debt.

What kind of advice do you have Chris?

- Well, the first thing is do not take out a student loan unless you absolutely have to.

You know, do well in school as always, try to get grants and scholarships, but also don't necessarily feel that you have to rush right into college.

Take the time to figure out what you want to do with your life and weigh your options.

Is it really financially worth the extreme debt that you may have when you graduate?

- And Beth what about you?

What kind of advice do you have?

- Somewhat similar.

I think everyone needs to be a smart consumer.

People need to understand what they are taking on.

They need to understand as the teacher in your tape said what the ramifications are, and we have on our website several tools to help people understand, to calculate what their debt will be, to understand what, and then to understand if they were to have a particular career that they're seeking, what type of income they might have from that career, and to understand whether their income from their career is going to cover the debt that they are undertaking.

I also urge everyone to get their financial aid form in early, make sure that if you're eligible for scholarships that you get them.

People need to understand the difference between a federally guaranteed student loan and a private alternative loan.

The federally guaranteed student loans come with many protections for students.

They come with many options for repayment opportunities, they come with options for loan forgiveness.

They change regularly.

- [Jennifer] And the privates do not.

- The private loans don't have as many protections.

Those are credit based loan that people can get to help pay for college.

The terms of federal student loans are set by the federal government, so the interest rate is set nationally.

That's not true of private loans.

They're market rate, and so they are going to change, and it could be different depending what loan company you get your loan from, so you really need to look at it.

You need to be careful, you need to understand when you're online what you're looking at, and shop around.

- Really understand it when everything comes in the mail.

Thank you both, Beth Bordowitz, Chris Kessler for being here on Maine Watch.

- Thank you.

- Thank you.

(majestic music) - There is nothing like coming across an old postcard of a town you're familiar with, comparing the storefronts, automobiles, even the lamp post with their modern day descendants.

Some fine postcard images are now on display at the Maine Historical Society.

Keith Shortall takes us there.

- [Keith] The St.

John Valley town of Leale, circa 1910, looked like many a rural small town of that era.

A big church in the center of town, Main Street is just a dirt road, but there were also signs of change.

- And you can see the presence of a telephone pole with probably both telephone and electrical wires on it, bringing modernism to this town.

- [Keith] Photo archivist Kevin Johnson says the evidence is even more obvious 15 years later as captured in a 1925 image of downtown Princeton, Maine.

- You can see the early gas pumps in front of many of the business establishments on this street.

There are cars in the picture, which is not true for every image in this collection.

In this one in particular, there are two small children in the back of the vehicle on the right, peering curiously at the photographer as he probably fumbled underneath his dark cloth getting ready to make that exposure.

- [Keith] Johnson works for the Penobscot Marine Museum in Searsport, which owns the glass plate negatives in this collection produced by the Eastern Illustrating and Publishing Company.

Eastern Illustrating emerged as the largest manufacturer of photo postcards on the East Coast and made over 30,000 negatives between 1909 and 1947.

Johnson says the owner of Eastern Illustrating at the time was less interested in capturing the history of small Maine towns than in exploiting the new popularity of postcards.

- [Kevin] Rudolph Herman Cassens, the founder of the company, saw a niche.

There were many postcard companies around at this time, and the big cities like Portland and Bangor were inundated with postcard companies, so he avoided those and focused on mostly the small rural villages.

He was a businessman.

There was not even a mention of photographer in his obituary.

And this was a money making operation, and for many years, he was quite successful at it.

- [Keith] What's striking about the images, says Johnson, is the detail.

Take for example one photo of downtown Belfast, the home of Eastern Illustrating and Publishing.

- [Kevin] All the negatives are five inches by seven inches, and they were made on glass plates, which was the film that was used at that time, and because the negatives are so large, you can enlarge them quite a bit and see all the details that these images hold.

The Belfast image is great.

It looks very much like downtown, or Main Street Belfast, looks today, with the exception of a paved road.

One of my favorite aspects is a little boy dressed as an Indian standing on the side posing for the camera, and you can see the signs for the barber shop and the phonograph store, and then the post office in the distance.

- [Keith] There are nearly 30 Maine communities visited in the exhibition, from Fort Fairfield to Northeast Harbor, to Kennebunk to Saco.

- The images in here are really remarkable.

I think both because of the composition and the time period, that just really pull you in to these communities.

- [Keith] Stephen Bromage is assistant director of the Maine Historical Society.

- [Stephen] It was a moment in history where there was a lot going on in Maine and in communities around the country where modern life was arriving, you know you see the arrival of cars and electric lights and advertising, and you just have the sense that a lot of these places may have been outposts, but modern life was arriving, and you could see that something was happening here.

- [Keith] Bromage says the show may also appeal to those who are interested in revitalizing Maine downtowns.

- I think there's just a lot of interest and appreciation for what these downtown centers represent to us.

People are looking to be more connected in communities after getting out of downtown areas for a long time.

There's appeal to walkable lifestyles and connecting with neighbors.

I think there's beautiful architecture in downtown, so I think there's a lot of draws there.

- [Keith] Main Street, Maine, Downtown Views from the Eastern Illustrating and Publishing Company is on view at the Maine Historical Society Museum through May.

For Maine Watch, I'm Keith Shortall.

- If you'd like to learn more about this exhibit, or if you'd like to learn more about student loans and the organizations mentioned during that segment, you can always go to our website, www.mpbn.net/mainewatch.

We've provided several informative links.

As we say good bye, a look at bear cubs.

MPBN radio producer Anne Ravana reported on the state's bear monitoring efforts for Maine Things Considered a couple weeks ago.

She took along a video camera.

Here are some of her pictures.

Thanks for joining us.

(bear cubs crying) - [Anne] They sort of stick like velcro right to you.

- Yeah, well it's their own instinct to climb, you know, and get up high so.

(indistinct talking) Do you see the camera?

(bear cub crying) - [Woman] Nose down.

- [Man] There are always like twisting, trying to right themselves.

(bear cub crying)