Rebecca Rose
A Brookings Institution study released last week claimed that though student debt levels have been increasing at a fast pace for at least two decades, there is no crisis in the offing. The authors say that increases in average lifetime incomes of college-educated Americans have more than kept pace with increases with debt loads. However, critics of the study say the authors cherry-picked data to support their conclusions.
Q. What’s your opinion on the status of student debt? Is it a crisis, and if so, is it getting worse?
A. There is a growing concern with the level of student loan debt college students are obtaining to supplement the cost of higher education. For years now, we have seen the cost of college rise; recently, the maximum amount a student can borrow in federal student loans increased, and the cost of living continues to climb. Yes, we are seeing the increase in student loans; however, the debt incurred and the repayment of the loans for most students can be manageable and not paralyzing as it is sometimes portrayed.
The federal government offers multiple repayment options, including income-related repayment plans, deferment options and student loan forgiveness. The key is for the students to be their own student loan advocate and stay aware of the terms and conditions associated with their student loans.
Q. Is a college degree worth going into debt for, and are some universities or degrees more worth going into debt for than others? Is there a way to calculate this?
A. Statistically, the earning potential and lifetime earnings for someone with a college degree is much higher than one without a two-year, four-year or master’s degree. The question of whether a degree is worth going into debt for is one the consumer must ask him- or herself. A certain profession may require a college degree, and if a student has made the choice to be part of a specific career they may have to make the choice of borrowing a student loan to obtain the degree.
We advocate that a student should consider think about his/her return on investment. What does the student plan to do with their degree upon graduation? What are the average starting salaries? What are the potential lifetime earnings? Students should compare these answers to the potential debt from obtaining a degree. SU’s Career Services Office has a salary research section on its website that can assist students with comparing earning potential and average earnings in various fields.
Q. What are signs that you might be taking on too much student debt?
A. Again, we would advocate that the student consider potential return on investment prior to borrowing. This would help the student know, within reason, where the line for him/her may be. If the projected monthly payment is out of line with the projected monthly salary, then the student should make a conscious decision.
As part of SU’s “I Otto Know This!” financial literacy program, we offer, at no charge, online tutorials that can provide guidance on student loan debt versus potential income. The USA Funds Life Skills modules provide the students with a proactive way to identify salary levels in comparison to an affordable student loan payment. The modules, which are very helpful, are “Where does my paycheck go?” and “What do I need to know before I select a program of study?” Students can view these lessons and more by going to our website at www.syr.edu/financialaid/financialliteracy.
If, after the student has decided to borrow and is now in repayment, he/she is having difficulty making their payments, then immediate discussion with their loan servicer or provider should occur. Options do exist.
Q. What are ways to minimize your student debt?
A. There are many ways to minimize student debt. First, only borrow what you need. I’ve seen students accept the loan amount offered on the financial aid award or apply for maximum private education loan without first checking their budget and actual cost. Often, when you truly break down the numbers, the student can reduce their loans and with diligent budgeting throughout the year can make it through with minimum student loans. Student loans should not be borrowed or used as savings plans; rather, savings should be used before funds are borrowed.
Students should always look for ways to supplement their cost of education with their own resources. Summer work, work study, holiday work or monetary gifts for holidays or special occasions are ways to pay for college costs instead of using student loans. Searching for scholarships is another way to supplement the cost of college.
Syracuse University students received over $4 million in outside scholarships last year alone. The Scholarship Office can assist students in their search for scholarships by visiting us in person or online at www.syr.edu/financialaid/scholarships. Lastly, students should adopt and actively stick to a budget to stay within their means.
Rose emphasizes that SU’s Financial Aid Office offers in-person student loan counseling sessions, group presentations, knowledgeable financial aid counselors and “I Otto Know This!”, a financial literacy program to provide as much information as possible to keep students on track with their student loan borrowing.
