Graduating into debt

Posted by Kendall Harmon

As students pile up ever-increasing education loan tabs, some colleges and universities are starting to question whether they should be counseling these young borrowers -- before they end up with debt that will take them decades to work off.

Educational institutions have not seen financial counseling of students as their responsibility, although many students have little understanding of debt and their own personal finances. Most schools focus solely on getting students the funds needed to graduate, skirting discussions about the risks of credit even as a typical debt load soars into the tens of thousands of dollars.

"There has been no discussion about whether this might be to the detriment of the student," said Mark Oleson, director of the University of Missouri's Office for Financial Success, which counsels student borrowers. "It has always been assumed that staying in school is all that matters."

"Education has never been thought off as an investment that involves risk, but it does," he said. "Just like the stock market."

Kristen Overmyer, a University of Missouri student in journalism, didn't take out enough student loans during her freshman year and so turned to credit cards, compounding her debt. She then borrowed $22,000 in 2006 and $23,000 this year from private banks but still needs several more years to complete her degree and anticipates similar loans each year.

"When I started taking out the loans, I didn't realize what I was getting into," said Overmyer, who said she hopes to be out of debt by the time she is 40 years old -- 19 years from now.

Read it all.

Filed under: * Culture-WatchEducation* Economics, PoliticsEconomy

15 Comments
Posted October 25, 2007 at 11:09 am [Printer Friendly] [Print w/ comments]



1. Dale Rye wrote:

I know lawyers who have been out of school for twenty years who still owe huge sums (after seven years of loans and compound interest, it isn’t hard to owe far more in student loans than your house is worth). At the rate tuition is rising, even in state schools, a college education is on the way to becoming an upper-class prerogative, as it was before World War II. At some point, it becomes difficult to justify a university education on purely economic grounds; i.e., the additional lifetime earnings potential from having 16 years of education over 12, or 19 over 12, never compensates for education costs plus lost wages and seniority due to late entry into the job market. This is particularly true in professions with high education requirements and generally low compensation, such as college teachers, scientific researchers, and certain public-sector positions (including the public health and safety services). When the current aging incumbents in those professions retire, where will we find replacements?

October 25, 12:24 pm | [comment link]
2. DarkHelmet wrote:

I think we’ve alrady reached the point of absurdity on tuition.  One of my daughters is looking at a third-tier private liberal arts school which charges about $25,000 per year tuition and another $8,000-$10,000 for room, board, books, fees, etc.  That works out to something like $136,000 for an undergraduate degree.  You can buy a house for that.  Another of my daughters is looking at top tier schools like Stanford.  Figure $45,000 per year.  That’s almost $200,000 for a degree.  You could capitalize a decent small business for that.  Amazingly, the schools claim that tuition doesn’t cover the full cost of teaching a student.  Hard to believe, considering what they pay graduate students and junior level faculty (not much).  I could probably hire two liberal arts PhDs to teach my kids full time as an exclusive job for less than it’ll cost me to send them to college.

October 25, 12:51 pm | [comment link]
3. midwestnorwegian wrote:

Forget tuition.  Take a look at what students of this generation consider a necessity.  I scraped by on a part time job all four years of school at Nebraska and didn’t have any money to push into a pop machine.  Computer?  I used the schools’.  Transportation?  I begged rides to and from home (200 miles away) from people I knew to be going back and forth so I went home only based on their schedule not mine.  Books - bought every one I could used.  Room?  Shared a dorm room the first year (no air conditioning because I had selected the cheaper plan) and I moved off campus with 5 other individuals ALWAYS sharing a bedroom with at least one other person all 4 years. 

Grad School - Lived in the Episcopal Student Center at Tennessee and scrubbed their floors on weekends to pay for my room there.  The organ blowers starting up on Sunday morning ensured I never missed a service.

What WAS a luxury, is now deemed a necessity - and parents wouldn’t dream of coaching their children to find another way.  The .75 cent Coke machine that I couldn’t afford to plug is now replaced by a $3.75 Starbucks and served right in the lobby of the student union.  Schools are telling students they need “x dollars” to live upon and nobody is asking questions.  Then, when the tally of all of those “necessities” are added up post-graduation…start blaming the lenders who gave you the money on rates that are lower than any other money you will ever borrow….EVER.

And…since you can’t afford to pay back your student loans…go right ahead and buy a $300,000 first home on an ARM mortgage.  And…make sure it has a three car garage.  When they come to foreclose on the house…again…blame the lenders…..heck…its impossible to make those payments when I have to spend 10 years paying off all those Starbucks mochas long forgotten from college days!  Ah….the American way…..it’s never our fault even if we do not have the ability to say “no” to our children….EVER.

October 25, 1:19 pm | [comment link]
4. Chris wrote:

Universities are out to pamper these days, with a “can you top this” mentality of luxurious rooms, amenities, extra curricular programs.  And while they have not increased their commitment to faculty, they have hired an ever increasing number of administrators (this is true of K-12 schools too).

And we foot the bill for it.  And “it” is no better an education that what we got 20, 30, 40 yers ago…..

October 25, 1:42 pm | [comment link]
5. Andrew717 wrote:

If it’s even as good.  I consider my undergrad tutition payments simply as a tax to the credential givers in order to support the middle class communisits so they never need to find productive work.  I learned virtualy nothing from the “professors” except to hold a phd in contempt.  I learned a good bit in my own reading, but could have simply paid room and board and done the same.

October 25, 2:30 pm | [comment link]
6. Charming Billy wrote:

Re: #1
At the rate tuition is rising, even in state schools, a college education is on the way to becoming an upper-class prerogative, as it was before World War II.

You’re right. And when you compare the quality and value of a pre-WWII K-12 education with what’s available nowadays, things look even worse. My grandmother for instance only completed 8th grade—pretty common in early 20th century rural Texas. But to her college educated children and grandchildren, she never appeared to lack the knowledge or intelligence we found in our peers. I was surprised to learn as an adult that she only had an 8th grade education.

October 25, 2:31 pm | [comment link]
7. Saint Dumb Ox wrote:

Chris said “And “it” is no better an education that what we got 20, 30, 40 yers [sic] ago…..”
LOL
I can’t spell either.  Well, I can spell, I just can’t type and proof very well either.  No harm intended, just mild ribbing.

When I look at how much I owe from my college years I day dream about sueing the school for false advertising.  They claim that by going to college I’ll get a good job that will pay me well and provide for all my needs.  The filthy liars.

October 25, 2:34 pm | [comment link]
8. Courageous Grace wrote:

For my husband and I it turned out living with his parents and then renting an apartment when we married was more affordable than living in the student dorms, and we had a lot more freedom and amenities.  Apartments are much quieter than dorms and we weren’t woken up every other night by the fire alarm because some idiot was smoking pot in his room.

Unfortunately buying used books isn’t always an option, many of my classes used a newer edition or required a workbook that couldn’t be resold.  As nice as it would have been to save money by scrimping on things, some things just couldn’t be scrimped on.  I was an art major which requires a LOT of supplies and they don’t exactly come cheap.

Since I went to a state university (University of Texas at Arlington) my tuition was much lower than my freshman year at Baylor.  While I don’t have a job now due to my pregnancy and I plan on going back to work in the next year or so, my hubby and I don’t have a problem making more than the minimum monthly payment on my student loans (the total left after a year of payments comes to less than $14,000) from UTA.

No, my problem is Baylor.  I’m not going to rehash that frustration here, but I have posted about it on my blog.

Sometimes I wonder if it was worth it to go to college in the first place.  I’m not in a really bad place with paying back my loans, but I’m not sure it was worth it to begin with.  I’m not even using my degree (which still hasn’t been framed yet), and when I go back to work I plan on teaching which doesn’t have anything to do with a BFA.  What a world.  Methinks I’m not going to pressure my child(ren) into that “you have to go to college” mentality, especially if they show talent in a vocation that does not require a degree.  College is not for everyone.  Oh well.  Sorry for rambling.

October 25, 2:58 pm | [comment link]
9. Matthew A (formerly mousestalker) wrote:

Colleges and universities have absolutely no incentive to discuss credit management with their students. The rapid rise in tuition (far in excess of inflation or interest rates or any other metric) have allowed the schools to use debt generated fees to pay for increased administration salaries, job creation and, most significantly, contributions to the endowments.

The last thing the schools want to clue their students onto is the relative worthlessness of their prospective degree, when compared to the monies paid for said degree.

Disclosure: I have a BA, a JD and an LLM. I know whereof I speak.

October 25, 3:45 pm | [comment link]
10. Kate Stirk wrote:

Part time- no one has to go to school full time. I earned both my BA and MLIS part time on the “pay as you attend classes” plan, working during the day, classes at night or online. No debt when I graduated. However, both my sons have $100,000 loans from Law School - undergrad they did with scholarships and jobs. I wish schools would encourage work-study plans. Too many students have no idea “why” they are in college.

October 25, 4:00 pm | [comment link]
11. Rev Dr Mom wrote:

There are still plenty of students who work long hours all through college and still end up with lots of loans.  My three kids did; they did not have a lot of amenities either.  In my part of the country state schools are historically underfunded, making tuition almost as much as private liberal arts schools. 

The value of a college education, however, is far greater than the earning power it may bring.

And I’ll be paying off my own loans until I retire, having earned four degrees as an adult.  But I don’t regret any of it.

October 25, 4:45 pm | [comment link]
12. DonGander wrote:

I know a young lady with a degree and $100,000 of debt and can’t get a decent job. It was a bad investment for her and I keep asking my wife who would marry her? A bad investment? I’d sure say so.

I think of my “searching for a wife” days. I remember that I was impressed by a young lady that had no debt, a nice job, and worked well with children and got along well with her parents. The other qualifications were also excellent. I didn’t even care if she had an 8th grade education. 30 years later I’m even happier with my decision than at first.

October 25, 6:59 pm | [comment link]
13. Albany* wrote:

A real liberal arts education doesn’t have to cost so much. A few General Steel Buildings—both instruction and dorms—and some tables and chairs. The library and bookstore need only the Great Books. Only graduate education in the sciences, medicine and high-tech fields justify present tuitions. Of course, undergraduates are frequently subsidizing those at the universities. A few General Steel Buildings and the Great Books—truly, that’s all it takes.

And anyone who asks the question, “Where can I use this in the real world?” really doesn’t want an education.

October 25, 7:40 pm | [comment link]
14. Bob (aka BobbyJim) wrote:

Another ‘part-time’ and ‘pay as you go’ learner here. For about 20 years, I tried to complete engineering school on a part-time basis, but lost credits about as fast as I could earn them. Technical courses usually are considered obsolete after 7 years.

I finally discovered CLEP, DANTES, and other examination programs after years of trying to balance completion of technical courses with liberal arts requirements. Copious amounts of reading, and passing many CLEP, and other examination programs finally allowed me to get beyond my general education (liberal arts) requirements and finish both my degrees – debt free.

Another program for folks with work experiences to consider looking at is the American Council on Education (ACE) college credit equivalency program. ACE reviews many corporate and military schools and recommends equivalent college credit. Many colleges accept their recommendation.

Colleges normally will not advertise these programs, because they do not make $$ on these exam programs. Not to mention the student cost savings at 5 % to 20 % of tuition cost. Colleges will sometimes limit the credit allowed to 25% or less of degree requirements.

October 25, 10:14 pm | [comment link]
15. Courageous Grace wrote:

#10

While the theory of work-study programs is admirable and a good idea, unfortunately students enrolled in these programs are not eligible for financial aid (or for a drastically reduced amount).  And by financial aid I don’t mean loans.  I tried to apply for a work-study program and found that if I succeeded, I would no longer be eligible to receive a Pell Grant, which made up the majority of my financial aid.  The pittance I would have made in a work study program would not have countered the loss of that grant.

October 26, 12:30 pm | [comment link]
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