Newspaper headlines suggest that many students graduate from college
with hundreds of thousands of dollars in student loan debt. But is
this really the case?
A report, Who Graduates College with Six-Figure Student Loan Debt?
finds that only 0.2% of undergraduate students and 6.4% of graduate
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students graduated with $100,000 or more in student loans in
2007-08. Far from being the 99-percenters, these students are among
the 1-percenters when it comes to student loan debt.
Graduate and professional students are more likely than undergraduate
students to graduate with six-figure student loan debt. Among students
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graduating with six-figure student loan debt, 10% were undergraduate
students and 90% were graduate and professional students. More than a
third of law school graduates and almost half of medical school
graduates graduated with six-figure student loan debt.
Excessive student loan debt does not appear to be due to parents being
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unable or unwilling to help pay for college. Among undergraduate
students who graduated with six-figure student loan debt, more than
half had parents borrowing from the Parent PLUS loan program, with an
average parent PLUS loan debt of about $50,000. Some parents even
borrowed more than $100,000 in Parent PLUS loans on top of the
student's six-figure student loan debt.
So what seems to cause undergraduate students to graduate with
enormous debt, other than a lack of awareness or caution?
Students graduating from more expensive colleges are more likely to
graduate with six-figure student loan debt. More than half of
undergraduate students who graduate with six-figure student loan debt
attended the most selective colleges and universities. Nearly
three-quarters of undergraduate students graduating with six-figure
student loan debt graduated from non-profit colleges, compared with
almost a quarter graduating from public colleges and less than 3% from
for-profit colleges. If the net price of a college represents more
than 18% of total family income, the student is four times as likely
to graduate with six-figure student loan debt.
Undergraduate students who graduate with six-figure student loan debt
must necessarily borrow from private student loan programs, since the
federal Stafford loan limits are not enough. But even among graduate
students, who are eligible for the Grad PLUS loan, students who borrow
from private student loan programs are more likely to graduate with
six-figure student loan debt.
Some majors are more likely to graduate with six-figure student loan
debt and some majors are less likely. In particular, undergraduate
students majoring in theology, architecture and history are much more
likely to graduate with excessive debt and undergraduate students
majoring in computer science, mathematics and health care are less
likely to graduate with excessive debt. Unfortunately, the students
who will be least able to repay their student loans are also the ones
who are most likely to graduate with too much debt.
Education debt may be good debt because it is an investment in your
future. But too much of a good thing can hurt you. Keep your student
loans in sync with your income after graduation. Do not borrow more
for your college education than your expected annual starting
salary. If your total student loan debt is less than your annual
income, you'll be able to repay your student loans in 10 years. If
your debt exceeds your annual income, you will struggle to repay your
student loans and will have to use alternate repayment plans like
extended repayment or income-based repayment to afford the monthly
loan payments. But this means you will still be repaying your own
student loans when your children enroll in college.
The report makes several recommendations for addressing the student
debt problem, such as clarifying the difference between loans and
grants in college financial aid award letters, providing free
financial literacy training for students (and parents), better
tracking of student loan statistics by the federal government,
increasing government grant funding, allowing federal and private
student loans to be discharged in bankruptcy, and setting student loan
limits based on estimates of annual starting salaries after