College debt 101

College debt 101

This post is from staff writer Jeffrey Steele.

A few weeks back, by sheer coincidence, I happened to meet a young woman currently enrolled in the same journalism school master’s degree program from which I graduated more than a third of a century ago.

We got to talking about all the opportunities she and her classmates enjoyed. From studying at a Chicago news bureau to working in Washington, D.C. while still a master’s candidate, these were openings not offered me or my fellow members of the Class of 1979. Noting my astonishment, she said her parents were just as dumbfounded by the opportunities awaiting today’s collegians.

“My parents say that if they’re ever reincarnated, they want to come back as their own kids, ” she added with a smile.

More opportunities — and debt

I can understand that sentiment, but I bet student debt is not one of the areas that leaves parents envying their college-age offspring. The severity of the college debt crisis continues to mount, as discussed in a recent report by the Squared Away blog from the Center for Retirement Research at Boston College.

Here are a few factoids from that blog. The nation’s student debt burden has reached $1 trillion and continues to rise. Eighty percent of bankruptcy attorneys report student loans are driving more clients through their doors. Payments on half of all student loans are being deferred, an indication those with large loan balances are facing perilous financial circumstances. Student debt is held by 44 percent of American households headed by people under age 35, and it’s concentrated in poorer households, according to the Pew Research center.

Yes, it is true college degrees add an average of $1 million in lifetime earnings for every man and woman holding the sheepskin, the reports says. But that notwithstanding, what’s the societal fallout when students emerge from college with $50, 000, $100, 000 or even more in debt hanging over their heads?

The issues resulting from the punishing college debt include some surprising emotional landmines, as well as a few crucial lessons today’s high schoolers and their parents can learn from the debt-burdened students who went before. Let’s look at the lifestyle and psychological fallout, then turn to a few critical lessons.

Wedding bell blues. Women with no debt are more likely to marry than those who come out of college with large student debt loads. Fenaba Addo, a post-doctoral fellow at the University of Wisconsin’s Department of Population Health Sciences, studied the effect of student debt on single women in their 20s. The probability of marrying declined steadily with amount of student loan and credit card debt. Interestingly, there was no similar impact on a man’s ability to marry.

Stressed, depressed, but not repressed. Studies have found that people with extensive student debt are more likely to feel stressed out and depressed. But they’re not repressed. The rates of cohabitation with their significant others are higher for both men and women carrying substantial debt, Addo found.

Perplexing self-esteem issues. Among the most intriguing findings related to student debt is that it is linked with higher, not lower, levels of self-esteem among the debt burdened, at least initially. Part of the reason may be that college has become so difficult to afford that taking on mountains of debt is almost seen as evidence one has gone far in his or her college career. However, one study found the effect evaporated when reality set in a few years out of college.

Lessons learned

Many families won’t be able to eliminate the reality of college debt. But they can minimize its damage now and down the line. Here are some strategies:

Rethink the conventional wisdom. Many believe state institutions are going to be the cost-effective option. Not necessarily. Many smart, middle-class high school students may be better off applying to private colleges, where competition for merit aid is not as stiff as at huge public universities, Squared Away reported.

End of the romance. A lot of parents feel they must surrender to their sons’ and daughters’ idealistic feelings about the college that “feels right” for them. Phooey, say experts. With college degrees commonplace today, says one, “You have to consider very, very carefully how much of your life and how much of your money you’re going to invest in that educational experience.”

* Debt reducers. Consider strategies like summer work, work-study programs during the school year and even living at home as ways to trim costs.

Be practical. Majoring in literature, history or philosophy was not unusual for yesteryear’s collegians. Today, that’s impractical. Students need to link their passions to disciplines associated with good-paying jobs, Squared Away says.

Plan B: Community colleges and vocational schools. A four-year college degree isn’t right for every student. Some would be better off logging the first two years at a community college, or forsaking college altogether for the hard-edged, very practical training afforded by vocational programs.

* Have the conversation. Parents must have serious discussions about what higher education costs will do to family finances. It’s a way to counter what in many families are unrealistic expectations on the part of college-bound young people.

If you’ve gotten this far and are coming away from this blog with the notion that economizing on college costs ought to be as big a priority as grubbing for grades at midterms and finals, go to the head of the class.

5 Responses to “College debt 101”

  1. Anonymous

    I worked 25-40 hours per week while going to college, living on my own. I did have about $10,000 in debt when I graduated and have since paid back.

    Now as a widow, I’m raising my two sons (9 and 12). I bought a home in a college town and they know they’ll live at home while attending college. They will also get as many of their credits at the community college beforehand as I did.

    They know that they will not have a car, this town is very bike-friendly. And they will graduate with zero debt. Period.

  2. Anonymous

    Student debt is very much a serious problem. As the other commenters pointed out – there are many variables to consider when deciding to pursue a degree. I agree with Adam that many see an expensive, high-profile college as the norm and will go out of their way to go there. Unfortunately, the benefits may not outweigh the drawbacks of student loan debt…

  3. Anonymous

    I’ve been out of college for 26 years (yikes!) with a Bachelors degree in accounting. I can honestly say that in all of that time, WHERE I went to school has never been an issue. Further, if one was to go to community college for the first couple of years, no employer would even know or care. Quite frankly, if I was hiring someone, I’d respect the fact they had enough financial sense to go CC first as it’s a much less expensive option (unless you had a large or full-ride scholarship).

  4. Anonymous

    People who have inflated senses of self and of entitlement have high self-esteem–for example, felons have higher self-esteem than average people. That doesn’t mean that committing felonies gives you self-esteem. It means that being out of touch with what you really “deserve” leads to felonious behavior. Same with excessive student debt–students who are unhinged from the reality of what their debt means are more eager to take on more debt.

    And the $1 million figure is an AVERAGE. Many degrees don’t pay for themselves, if taken from an expensive university. Others pay for themselves many times over. Talking about “a bachelor’s degree” when expected starting salaries range from $28k to $85k, depending on the major, makes no sense. You have to look at the ROI of individual majors.

  5. Anonymous

    I think there is a serious problem with entitlement that you allude to in this article. Students assume that getting a college degree is their right, and therefore they will do whatever needs to be done to get it. This often leads to disastrous financial consequences. I agree, that much more care needs to be placed on deciding whether or not to get a degree and then which college to get that degree from.

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