(Photo: Samuel Anthony Masinter/Amherst College via Bloomberg News) With colleges slashing financial aid and family budgets squeezed, freshmen entering college in the fall will probably borrow more this year than last. As it is, the average level of student debt for the Class of 2007 was about $20,000, with borrowers at private colleges owing more than $25,000.
A new federal program, called Income-Based Repayment, which goes into effect July 1, will allow some federal student loan borrowers to reduce their monthly loan payments, depending on income and family size.
How much is too much to carry in student loans? What factors should be weighed? Should a student forgo a top-choice school if it means carrying more debt?
Weigh the Bang for Your Buck
Robert Applebaum, a lawyer, is the creator of the Facebook group, Cancel Student Loan Debt to Stimulate the Economy, and the founder and executive director of ForgiveStudentLoanDebt.com.
For years, parents, teachers and politicians have touted the value of a higher education. From birth, we’re practically indoctrinated with the notion that an advanced degree automatically equates with higher earnings. But is it still automatic? Is your financial well being guaranteed simply by virtue of obtaining a college education? Recent evidence suggests that college graduates are no longer receiving the same “bang for the buck.”
A generation ago, financing a college education included scholarships, grants and modest amounts of loans. Soaring tuition, combined with fewer grants, however, has left the majority of students today with no choice but to incur huge debt.
So now we have the educated poor, with student loan debt leaving ever more college graduates and young professionals unable to buy a house or start a family or a small business.
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Until higher education becomes a safe investment again, borrowers should give greater thought to the financial cost of seeking an advanced degree.
In 1995, when I decided to borrow the maximum amounts on both the “subsidized” and “unsubsidized” Federal Stafford Loans to attend law school, like so many others, I never even considered that I might wind up in a relatively low paying, but highly fulfilling public sector job. There’s little assistance for those who find themselves unable to keep up with their student loan payments for whatever reason.
Student loans cannot be discharged in bankruptcy, there’s a financial disincentive for lenders to help keep you out of default, and the financial options that do exist, like forbearance and deferrals, are ultimately so costly that they border on usury. (I didn’t really give much consideration to what student loan forbearance was until I availed myself of it, and then watched as the amount I owed ballooned by nearly $20,000 during the time I served the community.)
Until higher education becomes a safe investment again, prospective borrowers should give greater thought to the financial consequences of seeking an advanced degree. Community colleges and state schools are probably better places to “find oneself,” than expensive private institutions, particularly if the student doesn’t really know what he or she wants to do for a living. Associates degrees and trade schools are other avenues to consider.
None of this is to suggest that a liberal arts education isn’t good for the mind and spirit — but whether it’s as wise a financial investment as it once was requires serious consideration.
A Good Investment
James Monks is an associate professor of economics at the Robins School of Business at the University of Richmond. He does research and consulting on the economics of higher education.
A great deal has been written about the onerous debt levels taken on by some of today’s college students. Much of this discussion grossly overstates the true degree of burden that student loans place on most graduates. An overwhelming majority of students have reasonable and manageable levels of student loans. The typical four-year undergraduate student loan package totals approximately $19,000 — no more than a midsized car. An automobile begins depreciating the minute you drive it off the lot, while one’s college degree is an investment that will garner you a lifetime of higher earnings.
From strictly an investment standpoint, a college education, even with $20,000 in student loans is a sound investment. The median earnings of a college graduate in the United States is approximately $50,000 per year, while the equivalent for a high school graduate is about $30,000 per year. So having to assume the usual package of student loans will pay for itself in just one year.
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Most students can easily repay their college loans and should not be deterred from borrowing sensibly.
Over the course of a 40-year career this difference in earnings translates into $800,000 (ignoring interest). Clearly, assuming a reasonable level of student loans is well worth the investment.
How difficult will it be to pay back one’s student loans? A total of $20,000 in student loans would require a payment of approximately $250 per month for 10 years. Some personal financial planners suggest that student loans should not exceed 10 to 15 percent of one’s gross earnings. Under this rule, an annual salary of between $20,000 to $30,000 would be sufficient to pay off the loan without due hardship. This level of income is below the earnings of most college graduates, and a new government program adjusts monthly payments based on one’s level of income making repayment even more affordable. (FinAid.org has excellent loan calculators that students can use to input their own information.)
Much has also been said about student loans forcing young people to make career choices that they otherwise would not have made (i.e. pushing them into more lucrative fields like business or law rather than careers in public service or the non-profit sector). But there’s little convincing evidence that that is happening.
While some students may have onerously high levels of debt, most have quite manageable levels of borrowing. With a dose of caution and planning students should not be deterred from taking out loans for their college education.
‘No’ to Student Loans
Alan M. Collinge is the founder of StudentLoanJustice.org
The most obvious advice for incoming or prospective students is this: Don’t borrow. Based on a 2003 study by the Inspector General of the Department of Education, it is probably conservative to say that about 1 in 3 borrowers wind up in default on their student loans, and the consequences of this are often catastrophic.
Despite the various repayment programs that make student loans seem friendly and generous, make no mistake: most standard consumer protections — including bankruptcy protections, statutes of limitations, refinancing rights and others — have been stripped from student loans, and there is no indication that these will be restored anytime soon.
This has led to a large number of decent citizens being forced to either pay back many multiples of what they originally borrowed, or drop “off the grid” when they cannot pay. In the absence of meaningful Congressional action to address this problem, avoiding student loan debt altogether is clearly the first and best piece of advice for prospective students and their families.
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Don’t be overly swayed by a college’s claim that it’s “the best” in a given field of study.
While this advice is easy to give, it is much harder to follow, especially given that nearly 70 percent of college students leave school with student loans. However, it is worthwhile to keep this as a goal, even if it cannot be completely met. Students should exhaust all non-loan financial aid opportunities to the greatest extent possible. Scholarships, work study, grants and other forms of aid that do not require repayment should be actively pursued.
When considering one’s choice of college, cost to the student should be a primary factor. Students should apply to multiple colleges and examine closely the financial packages of each. In many, if not most instances, students should not be overly swayed by a college’s claim of being “the best” in a given field of study. Students should look at the school’s graduation rates, average length of attendance (i.e. are students likely to graduate in 4 years or 5?), default rates for graduates and any other student data. Most schools have this information available on request.
In general, be very, very wary of new schools with no track record, or any for-profit schools — particularly those that advertise incessantly on television. Culinary schools, photography schools, chiropractic colleges, cosmetology schools, truck driving schools, flight schools and other specialized institutes have notoriously bad track records with those in the StudentLoanJustice community, and these schools can cost in the tens of thousands of dollars, if not far more.
Often these schools are non-accredited, and students applying for loans for them have no choice but to take out high interest, private loans. They have an alarming propensity toward closing, leaving students with the bill, but no degree or an education.
Live at Home, Work More Hours
Anya Kamenetz, a staff writer at Fast Company magazine, is the author of “Generation Debt” and blogs at The Huffington Post and elsewhere. She is writing a book on the future of higher education.
A good rule of thumb for student borrowers is that your total graduating debt should be less than the expected starting salary in your likely field. That can range widely, of course, from $36,000 for liberal arts majors to more than $60,000 for engineers. It’s also a good idea to stay to the low end of that scale if you plan on pursuing any kind of unpredictable creative field — journalism comes to mind — or if you want to go on to graduate school, which usually requires taking on more debt.
Don’t be afraid to take some time off before starting college.
I think it’s important for high school graduates to think long-term in this way about the connection between their degree and their eventual job. Lots of 18-year-olds have no idea what they want to do, of course; that’s all the more reason to err on the cautious side in terms of debt.
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In fact, for young people who completely lack a sense of direction and, more important, zeal for their higher education, I would urge them to think about taking some time off before going to college. Burn off steam, work, travel, volunteer, explore creative interests and tickle your academic fancy by browsing through free course material at sites like M.I.T.’s OpenCourseWare. If you need some time to find yourself, that’s great; it doesn’t have to cost you and your family thousands of dollars in tuition.
Once you are ready for class, there are several ways to limit borrowing without necessarily giving up your dream school. Plan diligently to finish that degree faster by supplementing your study with summer or online classes. Attend a two-year college at first and then transfer — this is an increasingly popular option. Live at home for a year. Work more hours (although more than 20 hours a week can be hard to balance with full-time learning.)
Most students I know who really let the loans pile up did so without planning it. These days, no one can afford to be without a plan.
What a College Is Really Worth
Neal P. McCluskey is the associate director of the Center for Educational Freedom at the Cato Institute.
There are countless decisions to make, based entirely on what you want, when choosing a college. Is an institution too big or too small? Urban U. or Leafy Tech? The list goes on and on.
There is one crucial factor, however, that is heavily influenced by much more than your personal preferences: the cost. What you’ll be willing and able to pay depends very much on what other people –- sometimes voluntarily, often against their will –- will pay for you. And that’s the cause of the biggest problems in college selection: Rampant inflation that renders prices nearly worthless in judging any institution’s real value.
According to inflation-adjusted College Board data, in the 1990-91 school year the average, full-time-equivalent undergraduate received $2,640 in grant aid and $1,548 in inexpensive federal loans. By 2007-08, the former had risen to $4,656 and the latter to $3,650.
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In light of that, it’s no wonder that total, inflation-adjusted charges in that same period rose 63 percent at four-year public schools and 55 percent at four-year private colleges –- people other than the customers were handling ever-bigger chunks of the bill.
So is a college really worth the price? Who knows? You may only be willing to attend after taking into account the aid you’ll receive. But then the college will soak someone else, often taxpayers, for the amount that you didn’t think worth paying.
Ultimately, how you weigh the innumerable factors in choosing a college is entirely up to you. But the cost? You’d do well to consider how inflated college prices are, and who will be paying much of your bill.
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There really should be some sort of across the board forgiveness in bankruptcy court available for student loan debtors who are in over their heads.
Many of these people are partially to balme for their predicaments. Nevertheless, it is shameful that credit card debt that is often used for frivolous expenses is completely dischargable, while student loan debt will follow you to your grave, under the current law.
In the long run, this will be better for taxpayers bacause it will force lenders to weigh the risks involved in making subprime educational loans. Accordingly, with fewer options for funding their outrageous tuitions, schools that are dregs on the economy will go out of business or be forced to lower their inflated tuition.
Bankruptcy is not about giving students a free ride, and does not have to equate to total debt forgiveness. Education is like every other business investment, and the debt incurred should be viewed like the debt obligations a small business owner incurs to start a small business-dischargable in bankruptcy if the venture fails.
And make no mistake, with tuition going up, the economy going down, and private loansharks running the student lending business, there will be many more horror stories in the coming years.
— Andrew PecotaWhen Robert Applebaum writes “A generation ago, financing a college education included scholarships, grants and modest amounts of loans”, I can only wonder if my memory is failing. Scholarships? As I recall (it has been a generation, after all), only the fairly small (New York) Regents’ Scholarships, which were awarded by competitive exam, were generally available. The rest went to high school athletes and the socially active. Grants? Loans? Maybe for some, but for me, the only option, after exhausting the little bit I’d saved, was a visit to the recruiting center.
Fifteen years later, after student loans became available in something like their present form, a college education was finally possible. Between undergrad and grad school, my total borrowing was close to today’s average $20K. Paid back well ahead of schedule, and I’m damned grateful to whoever made the loan program possible.
Maybe the problem is not the student loans themselves, but the number of college students who fail to take a realistic look at their employment and salary prospects before choosing a program of study.
— JamesAssuming you are qualified, if you really want the most bang-for-your buck, choose a service academy. Education equal to any school in the country; actual retail price = $0.
ROTC scholarships can also make the education free at almost all of the nation’s top colleges and universities.
Speaking of which, it is high time for those schools that kicked ROTC off campus during the ’60s to bring them back. Federal funding should be denied for any that refuse.
— DCJames Monks writes “A total of $20,000 in student loans would require a payment of approximately $250 per month for 10 years. Some personal financial planners suggest that student loans should not exceed 10 to 15 percent of one’s gross earnings. Under this rule, an annual salary of between $20,000 to $30,000 would be sufficient to pay off the loan without due hardship.”
He is so ignorant of the real costs of living that he doesn’t begin to grasp how asinine his numbers are. A real world budget includes rent (say at least $800 a month for a studio or 1 bedroom apartment in an urban area), utilities (electric, Internet which is no longer an optional utility service, phone and possibly heat if not included in the rent), car insurance, vehicle costs of maintanence, fuel and purchase, health insurance with its premiums, deductibles and copays, food, clothing, personal care (haircuts and dry cleaners) and other miscellaneous expenses.
That $20,000 wouldn’t even begin to cover those costs. A $30,000 would provide a very very restricted lifestyle and a bare bones budget.
Typical pie-in-the-sky nonsense from someone with no idea of the real world. Food, housing and other expenses are not charged to the purchaser as a percentage of income. All hose things have a minimum cost no matter what ones income.
By the FESS standards, 6 years ago, one adult needed the income set out below to barely survive:
Massachusetts - $21,262 with only $57 allowed for transportation and $95 for all healthcare
New York City - $28700 with only $63 for transportation and $657 for housing
Now add the rate of inflation for the past 6 years to those numbers! The man is delusional. It would take at least a $40,000 income for one person to pay all living expenses and a $250 a month loan.
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On the issue of ‘how much is too much’ , the answer is it depends.’
Borrowing $16,,000 or even $8000 to get an associates in business administration from the local community college is stupid. The community college associates would only bring a job as a retail store manager for something like a conveniece store paying $10-12 an hour with no health insurance.
Borrowing $60,000 to a degree in engineering from a no-name state college is not the same as borrowing $60,000 to get an engineering degree from MIT.
It isn’t a question of how much the future job type pays but what the graduates of that school earn in those jobs. The prospective student should very carefully examine the following information about the school:
(1) The job placement rate upon graduation in the job desired. If, for example, only 25% of the grads in that field find jobs in the field, look elsewhere. If their graduates don’t get jobs in degree field, why pay them for the degree?
(2) The wages or salaries of the newly minted grads. If the engineering degree from the no-name state college will cost $60,000 but the graduates have only been obtaining jobs that pay below the median for that job, look elsewhere. Engineering grads from Ferris University do NOT command the same salary as an MIT grad - no matter what sales pitch the lesser school may give you.
(3) Compare the salaries of grads in your field from that college to a real-world budget and see what is left to pay the student loan. If the loan payment would be more than you could afford, look elsewhere.
Hint: You can NOT just rely upon the on-line data about what a job typically pays. Yahoo articles are not useful nor is the wage data on various job boards. You have to contact the college’s placement office and push them to give you the real data about their graduates.
Only if a high percentage (and I mean over 85% of those not going on to grad school) of the graduates of that particular school obtain employment in their field upon graduation, and if the real jobs they obtain pay enough to allow you to cover living expenses, have some savings, and repay the student loan should you borrow money to attend that school. Do not borrow more than you can repay in the type of jobs that the graduates of that particular school with that particular degree are able to obtain upon graduation.
— AnnSDear Students and Parents,
Here is some free advice that is the result of many before you taking the wrong path and getting burned.
1. In high school, take as many AP classes as possible. This is free college credit later on and will serve you well.
2. Take advantage of any concurrent enrollment programs during the senior year where you go to community college 1/2 the day and finish your high school requirements the other 1/2 of the day. Again, this is college credit - very cheap to obtain - and very likely, along with any AP classes, will get you 1, 2, 3 or more semesters ahead of the crowd and, of course, at little to no money.
3. After high school, enroll in community college and get all your basics there or finish the 2 year degree and transfer. Again, cheap and will serve you well.
4. After community college, it’s time to transfer to university. Be wise, and only choose in-state public universities. The piece of paper you get at the end is basically the same as any other university with a few small exceptions. You don’t need a fancy private out of state college but, again, with a few small exceptions, it won’t make a bit of difference where you got the degree contrary to popular belief. Just make sure they are accredited.
5. Don’t finance graduate school. Do a pay as you go method. Many before you have gotten into unsurmountable debt with graduate school.
6. Start looking for grants, scholarships, low cost loans, etc., very early and apply to everything. Lots of work involved here but worth the effort.
7. Never take out a private student loan. Figure out another way but stay clear of private loans. The former students in the worst shape all have private loans and they would be making it okay if they weren’t straddled with those usury loans. This really is a warning to save yourself lots of heartache and do not take out any private student loans regardless of what the school says.
8. Don’t expect the school to help you with showing you the best financial avenue to take and be wary of their “preferred lender” list.
9. Finally, learn as much as possible about student loans before you start college. No sense making the same mistakes as others have already made.
Good luck!
— AnonymousNone of the commentators even mentioned IBR!
— ChrisThe government should be providing money through scholarships and low-interest loans to enable qualified students to get a college degree. This support should include graduate education for professionals, such as research scientists and doctors.
Private loan companies should get out of the business altogether.
It is not good for our nation to saddle young people with large amounts of debt early in their lives. Education will help them become productive and help them contribute. A smart government would recognize that and begin aggressive financial support of the education of qualified students.
— marik7To Mr. Monks,
I’d like to see how your perspective plays out at the upper end of the scale, i.e. private, ivy-league level institutions. I graduated from one 2 years ago, and the loan levels of many of my classmates were staggering. I studied architecture, a field with notoriously low starting wages, and many of my classmates had $60,000 or $80,000 or even in one case $110,000 in loans by the end of the program. At these colleges, the education has become fetishized and the students often refuse to put a price on the cost of going to the #1 college for our field, etc. The institutions are quite generous, but at the same time the essentially charge as much as they want to, and the students once they’re in the program will do anything they can to fund it lest they feel like a quitter. Its exciting to be at a place like that, and “buy now, pay later” is very seductive to the 20 year old who has never failed at anything and wants to stay at the top. Many were told to forget the cost, forget the low wages, and do “what you love” no matter what. Add that to the fact that the students in these top programs must travel to where the suitable work is and rarely can move back home to pay off their loans, and you have a really toxic situation.
I ended up finishing with approximately $20,000 in debt due to the generosity of the university and my parents. This is the lowest amount of nearly any of my classmates who were also middle class, and I very much believe that a large part of those high loan levels was due to the fact that they are represented as something that is irrelevant to your education and that you’ll just pay off when you have time.
— AndrewI think many experts are missing the mark on some important things that have to do with the cost of college. First, the whole concept of transfering, or attaining a two year degree before going on. It is important to note that this isn’t just a given track, you have to get INTO a good college after finishing a two year degree or in order to transfer. Many Ivy leagues as well as top private schools are notorious for allowins single digits for transfer students, with acceptance rates that drop below 5%, its true that they also take little numbers to begin with, but if you are a bright student and get in don’t be swayed by the idea that you can cut on cost and later just transfer in. Many schools are even discouraging transfers from applying (such as Stanford, which openly on its website says it only accepts transfers in rare circumstances). So, yes if you want to end up at a public university transfering might be a good option, but if you want to go private you should research the rate of transfers that are accepted. Also, in some career fields the name on your diploma still matters today. It might not be true if you are an engineer, doctor, or a teacher because those professions are typically in demand but if you are majoring in political science/international affairs, law, or journalism a university with a ’strong’ program can make all the difference. I have gotten multiple internships in DC that many out of towners say they couldn’t get simply because I knew professors who had connections, or because the employers personally went to my university which gave me a foot in the door. I hate to say, that I really doubt this would have happened if I came from an out of town state university (I am a transfer student from the University of California system, and people need to look at the transfer acceptance rates because they are dropping quickly, and many schools are getting very competative. Also, if you don’t get in you will still end up paying for a college diploma, but one you didn’t really want). I think people need to be smarter, and do their research on what their field of study pays, and how competative it is, and that should help you decide if you have the option of saving on college, or if you really are going to have to go to a four year university, or a top university.
— lidiaI have been out of college for a little over a year now. As much as I enjoyed my four years and everything I accomplished in that time, some times I do wonder if it was worth the price of admission. I am still without a full time job or any real constant work. I freelance at about 5 or 6 different jobs. I currently have about $30,000 worth of debt from college loans but it was quite a bit more. The most frustrating thing every month is not the paying of the loans. It is the fact that I have very little money after paying the loans. It forces me to still live at home and makes it very difficult to get out and start my life. I appreciate the value of higher education but because of the fact that many more people have a degree than even a generation ago, the value of a bachelors has been watered down. Now it almost feels like you have to have a Masters degree to distinguish yourself and I’m afraid to think where I would be financially if I was currently pursuing one.
— MattThe technical-bureaucratic nature of student loans has intentionally or unintentionally created a mechanized, unfeeling administration that’s only goal is to justify its own existence and be profitable. In student loan administration, “profitable” means all that serves the government and banks to collect loans, fees and of course interest. Often the decision on what is profitable is based on data as vague as those that led to the suspension of student loan bankruptcy rights in the first place.
The principle of modern technical production, in which both the worker and the engineer are completely alienated from the product of their work, is characteristic of a modern bureaucracy. They perform technical tasks in accordance with the general plan of management, but often do not even see the finished product; even if they do, it is none of their concern or responsibility. They are not supposed to ask themselves whether it is a useful or a harmful product-this is a matter for management to decide; as far as the latter is concerned, however, “useful” simply means “profitable” and has no reference to the real use of the product.
Modern aerial warfare destruction follows the principle of modern technical production as well. The men dropping the bombs were hardly aware that they were killing or burning to death thousands of human beings in a few minutes. They were concerned with the proper handling of their complicated machine and they were hardly aware of an enemy. That as a result of their acts many thousands, and sometimes a hundred thousand people, would be killed, burnt, and maimed was of course known to them, but hardly comprehended affectively; it was, paradoxical as this may sound, none of their concern.
The student loan machine is a huge bureaucracy run by those who are concerned with the proper handling of their complicated machine and are hardly aware of the students. As paradoxical as it sounds, this is none of their concern. Technique and intellect when not balanced with feelings and reason will inevitably lead to life defeating policies and destruction. A good example is the case of defaulted loans where perversely and in my opinion sadistically, students who couldn’t afford to pay back their loans in the first place are penalized an additional 25% or more and then are saddled with interest rates ranging from 8% - 19%. Quite easily, this situation spirals out of control and a vicious cycle is created where the student is likely to live with this debt for the rest of their lives – affecting not only his/her life, but the lives of their partner, children, parents and ultimately society.
Considering the consequences, do we support a society that feels, that sees and reasons both with the mind as well as with the heart? In short, that is human. Or, on the other hand, do we prefer to trust our future to the machine with its team of technical-bureaucrats? Administrators faraway that don’t see the people or families whose lives they have destroyed.
— SamThese are great essays, though we as Americans continue to dance around one critical issue that is rarely addressed: do all kids really belong in college and do intellectually average kids _benefit_ from a 4 year degree?
Colleges of all sorts was happily take your tuition dollars even if they think you might not finish the 4 year degree. Colleges will inflate grades to keep tuition revenue coming. Frankly, 4 year college should be for the _genuinely_ bright kids but there has been a push since the late 70’s to bring average kids into 4 year programs. That’s where the expensive mistake lies. Many of these graduates graduate with low B averages didnt learn much, their grades are inflated but dont know that, and they leave without a good enough job that will pay their loans off. Parents would do well to send some of their kids to a 2 year college part-time and see how that goes. And the problem is ultimately parents who want the best for their kids and expensive colleges are playing on those parental emotions.
— k hendersonOne of the best ways to manage debt at a public institution is to limit your time to four years or less. Far too many students are spending far too much time in college, and the costs of an undergraduate degree are often more driven by housing and living expenses than tuition and fees. Get good academic advising and follow it (and keep your records in case your college can’t follow through on it’s part, in case you might manage a concession on a requirement). Take a full load and don’t withdraw from courses. Take summer courses. Try to work on campus rather than off, and no more than 20 hours per week.
— Chris CaplingerMonks’ analysis is clearly oversimplified. Remember, the college student, even if he/she could finish in only four years–increasingly not the case for most college grads these days–would be missing out on the $120,000 in earnings that the high school grad will me making during that time. Ah, opportunity cost!
Add one other odd bit of reasoning: he claims that the total loan debt is only $20,000, which could be paid back in just one year by the difference in college and high school salaries. But then later he admits that it will take ten years of $250 monthly payments. By my calculations, that’s $30,000.
So the real cost, even using his hopeful figures, is not the cost of a car, but the cost of a small condo (at least in the midwest).
— Vern LindquistWork a job off campus and share an apartment with a few friends. I managed to graduate college with very little debt because I waited tables three nights a week (free dinner on those nights) and shared an inexpensive off campus apartment. I was able to graduate Cum Laude and paid off my student loans in two years. Yes, I wasn’t on Spring Break in Florida or Cancun but today I am debt free and owe nothing.
— RD NYCThere are two problems leading to increased - and frankly outrageous - student debt. First is that the increase in college tuitions has outpaced inflationa and wage growth systematically for 2 decades or more. That’s another way of saying that institutions of higher education have failed to make the same sort of productivity increases that have become routine in other knowledge based industries. Instead they’ve hidden behind their non-profit status, elitiest notions of their mission and craft, and the ability to call loans “financial aid” in order to lower their apparent cost. Step one: put the institutions on a diet, and insist on real productivity gains in education.
The second problem is that the Federal government, and society as a whole, has retreated from funding students seaking valuable higher education. Compared to the early 70s, when I was in school, available aid to middle classe students from the government is paltry, and also often loan based. It is simply ridiculous that a society would routinely spend tax all work to pay for old age pensions, but skimp on the kind of taxation and spending policy that provides the educated people to build the next generation of society. I would strongly favor additional targeted aid, focused on science, math engineering, teaching, and other fields with high potential to contribute to the future welfare of society. This aid should be pay for peformance aid - loans that are rapidly forgivable for students who enter one of the targeted fields, by allowing, say, half of these students’ income taxes to count as loan repayment. They should also target lower cost, but still quality institutions - perhaps by graduating the amount of aid available to a student by institution quality (graduation rates, first five year employment/income records - another reason to tie aid to the income tax system - and rations of incoming student exam scores - SAT and ACT - with outbound testing using GRE, LSAT, MCAT, NCLEX and the like).
This country needs to invest in education in fields where we need more young minds. Raise my taxes to do it if necessary - I certainly am reaping the benefits of my own education, payed for largely by the Federal government years ago.
— Iowa BeautyIt says something about our culture when the primary (and many times the only) reason we consider going to college is to increase the potential for our salary earnings over time.
How far we have strayed from the original intention of the university, which was intended to be a ‘community of teachers and scholars’ and a place to deepen knowledge and wisdom, via learning and research.
— cranioObviously it is important to keep the amount of loans a student carries to a minimum. I am currently a Doctor of Pharmacy student, and unfortunately it is loans that are allowing my to continue my education.
I am in my early twenties and finished undergrad a year ago with minimal student loans by working while in school (and full-time in summers), attending a public university, and obtaining an academic scholarship.
Although pharmacy programs are considered graduate programs, the same opportunities are not available as in many other graduate programs (if I were working on my PhD in biology, I would have tuition paid and be receiving a stipend).
Upon graduating, I will have acquired more than $175,000 in student loans (not including interest). Even with a typical pharmacist salary, it will take years to pay back. I am very interested in working to improve access and quality of health care in low income areas. I’m not sure I will be able to do that for some time though because I will likely need to pay off all of my loans first due to lower salaries available in those areas.
— SarahAs parents, we have about $75,000.00 in Parent Plus loans that we are repaying. Our children also took out Stafford loans. Yes, our children went to state universities and held part-time jobs. Now, contrast this with the fact that my husband and I married while still in college in the late 1970’s, We were both working part-time jobs during semesters and picked up extra work in the summers and Christmas breaks. We paid for our tuition and books up front without loans. Tuition for a full time course load was well under $300.00 per semester for each of us. We were also able to pay for decent health insurance that cost about $65.00 a month. We paid for rent on our apartment, a small loan on a used car, car insurance, etc., and were generally careful with our money. We enjoyed an occasional meal out and even several modest weekend getaways. Surprisinlgy, somehow, we still managed to actually save several hundred dollars most months!
The cost of living is expensive these days. Too expensive.
— ElizabethThe argument that student loans are worth the cost assumes that education should be thought of as a commodity — like the midsized car James Monk cites — rather than as a right.
— B.I would be fine with my enormous levels of student debt if my loans were with the government and it were willing to cut me some sort of break for pursuing a scientific career (not in industry). I will probably be able to consolidate with Federal Direct, but there is little chance the government will consider reducing my student loans, even for years of service at a national lab.
What this means is the following: when I apply for jobs as a university professor, there is going to be a hard salary floor. Maybe this means I won’t get a job as a professor, but I bet there are enough folks out there like me to make a difference in market salaries. So perhaps the high cost of college and the dwindling of (direct) government support of universities leads to something of a vicious circle.
— dlaI have $90K in student debt.
When I signed up for the loans I figured I’d have a steady-paying job, and could easily pay off the full amount in under 20 years. Right now, all my monthly payments only equal up to the interest cost ($400), and my principal remains untouched.
I am in a situation where my husband-to-be resents my student loans and wants me to focus on paying them off “as soon as possible” so that our (his) credit remains “clean”. He and I have both been out of grad school for 2-3 years; he has a great job with benefits; I’m self-employed.
All this debt-mentality is rolling into other areas of my life.
We’ve wanted to start a family for the past several years and the biggest reason we have not yet is my student loan debt.
I feel like I can’t start my life until I own my education by paying off the balance. No new purchases or experiences because my mantra is “not until I pay off my student loans”.
It’s as if I’m not even a visible part of society yet until I’m out from under this student loan rock. I didn’t know earlier that my student loan debt would become so all-encompassing.
— GradYes the cost of higher education is a problem and rising every year and yes one should be able to consolidate loans more than once (right now some folks are paying 8% when interest rates are at historic loans and they are locked in).
But, most of my peers who went to professional school with me are still paying off student loans 10 years later (mine were paid off in the first 5 years) but they are on their second or third home and on their second or third leased luxury car. After I graduated I continued to live like a student for the first few years, continued to drive the same car, continued to rent and worked hard at paying down my student loans, my credit card debt and a loan from family (all related to my three years in school).
— SamWhat better way to keep unemployment rates lower, funnel money to private (education) business, and burden students with a lifetime of indebtedness, than to require and/or encourage additional (and often both needless and ineffectual) education that will often have little if any positive impact upon earning potential — let alone guarantee any form of viable, decent employment.
No, the real effect of higher education for most is simply to ensure their debt bondage for decades to come.
Talk about The Great Ameri-Con! …Worse Than Slavery?
— Dean ChampionI can’t disagree more with Professor Monks. If you’re looking at in-state, public school students who receive Pell Grants, scholarships, et cetera, your $20K figure may be correct. However, that’s not as typical as you are making a case for.
I, for example, attended 2 out-of-state public schools before settling into an in-state public school. I graduated with roughly $36,000 in debt, despite working 2 jobs and attending school full-time, commuting to save on loan debt, and receiving many grants. I received enough federal aid to not take out any loans for my junior year in college!
Upon graduation, the jobs in my field were (and still are) best found elsewhere, but by then, my plans to reduce my amount of student loan debt left me with a car payment, rent, utilities, and a small amount of credit card debt. I worked hard to get myself into a situation in which I could afford to move, but it never happened. 2 1/2 years later, I am still in my hometown, living in my mother’s house with my fiance and my 10-month-old son, struggling to make ends meet because in my field, I need a master’s degree to find work. I cannot go back to school now, due to defaults that happened when lenders and I could not find a solution together for my inability to pay due to unemployment about a year ago, which happened due to complications in my pregnancy. After I exhausted our entire life savings trying to save us from my loans defaulting, they defaulted anyway.
As a hard-working, intelligent, well-educated college graduate, I have yet to make over $18,500 in a year. The year I made that much, I was working in a call center selling cell phone service. I am now a part-time elementary school teacher, and the entirety of my paycheck goes to childcare and the cost of commuting. It’s hardly worth working, but at least my lenders don’t require me to be looking for work now. By the way, that’s why I was denied an unemployment deferment; I wasn’t looking for work while I was going in and out of the hospital because I didn’t know when I would be able to work again, but my lenders required me to be looking for work while I was unemployed. You can’t just say you’re looking for work; you have to be registered with unemployment or with a temp/job search agency. I tried that, but I kept having to turn work down due to being in the hospital or on some form of bed rest, so they stopped calling me. My lenders saw this as I was unwilling to pay back what I owed, and defaulted my loans.
How much is too much loan debt? I’m not sure, but $36,000 is definitely too much. Oh, did I mention that in 2002, I was accepted to a big-name prestigious university from which my degree could have taken me around the world, anywhere I wanted to go, for work, but I turned them down to go to a smaller state school, because I didn’t want to pay the undergraduate tuition then of $41,000 per year? That doesn’t include room & board, books, etc. That’s solely tuition. 7 years later, you can bet that tuition is significantly higher. Sure, that school may have graduates going out into the world making 6 figures, but it takes awhile to get there, and in the meantime, you can get stuck on the debt.
When your student loan monthly payments rival your rent costs, double each of your other bills, and you have to choose between making your loan payment or eating, or being evicted, you have too much student loan debt.
— Mariah