For many young people, earning a college degree is the logical first step on the path to a successful career. But the enticing prospect of campus life can distract applicants from the burden of debt they are likely to be carrying come graduation day.
“Students often aren’t fully prepared for the financial realities of college,” says Dean Florez, president and CEO of Michelson Twenty Million Minds, a foundation started by Dr. Gary Michelson and his wife Alya Michelson, committed to improving student opportunities and outcomes. “They sign off on loans that they don’t understand, and they aren’t really ready for the five or six-figure debt they might be facing.” Students deserve to be educated about debt before they make any commitments, he says.
As college enrollment has increased, so has the size of the average college loan. Statistics from the Project on Student Debt show that between 2008 and 2012, debt at graduation rose on average 6 percent each year. In 2013, seven in every ten students graduated with debt, owing an average of $29,400 each. And the situation has only worsened this year.
“Full-ride scholarships and other ways of attending college completely debt-free are hard to come by,” says Florez, noting that even the most intelligent and conscientious students often struggle to qualify. Competition is fierce, and students need to consider other methods of managing their budgets: “Partial scholarships, grants, living off campus, and paying down loan interest while attending school are good ways to graduate as close to debt-free as possible.”
But even those tactics are often not enough. Bryan Hill, 26, attended Columbia College in Chicago as an undergraduate, but soon found high tuition fees and living expenses sending him far deeper into debt than he wanted to go. Returning to Southern California after two years, he moved back in with his parents to reduce costs, transferring to Cal State San Bernardino to complete his Bachelor’s degree.
“Debt quickly became a huge factor in my undergraduate experience,” Hill says. “And I’m sure it will be affecting my life for a long time to come.”
So is a college education still the sound investment it once was? Wall Street Journalcontributor Phil Izzo warns that “earnings and debt aren’t moving in the same direction.” Between 2005 and 2012, average student debt rose 35 percent, while the median salary dropped 2.2 percent. So students are taking on more and more debt while standing to earn lower wages down the line.
But it’s more complicated than that. As David Autor, an MIT economist points out, the “college premium” — the relative wage differential between those with college degrees and those without — is today bigger than ever. So while a college education might be costly, missing out could prove even costlier.
Students, then, must strive to keep overhead costs down. Beyond tuition and living costs, expenditure on textbooks deserves close attention. Textbook prices have leapt up sharply over the past decade, and students today are advised to buy used copies whenever possible, or use rental services as well as libraries. Great deals can be found online, too.