To understand what’s happening with student loans you need to keep two things in mind at once: There is a problem, yes, but there is also a lot of hysteria. And increasingly lost in the hysteria are the students we should worry about most – those making poor choices based on bad information or attending for-profit colleges that are ripping them off. But the focus on overall debt is obscuring much of what’s really happening – median debt for students who borrow is less than $13K, for instance. That’s what I look at in this week’s TIME column.
Student debt is completely out of control, right? The more than $1 trillion in outstanding college loans is front-page news and is pretty much the only educational issue the presidential candidates are talking about. Yes, ballooning student debt is causing real hardship for some Americans. But as with many educational flare-ups, the public debate is giving us more noise than signal. So before you decide to skip college based on the hysteria, here are a few things to keep in mind.
The interest rate to read the entire column? 0% with no origination costs. You can’t beat that. Just click here.
2 Replies to “This Week’s TIME Student Loan Hysteria”
Not sure I’m convinced. The article Andrew links to states that the median debt is indeed $13,000 but that the average debt is $23,000. But more importantly, the article doesn’t distinguish between current students and graduates. Nor does it group borrowers by income level. There are two reasons why this can distort the data.
First, if current students are included in the data then the loan balance of freshmen in their first semester of school are going to be blended with the loan balances of college graduates and present a distorted picture. A more accurate statistic would be to look at only the loan balances of graduates with bachelor’s degrees and not include current students, drop-outs, and 2-year degree grads.
Second, the statistics should attempt to group statistics by the parent’s income level. I know wealthy parents who pull out stafford loans on behalf of their kids simply to invest the money as an interest free loan for the duration of their kids college career when they could have just paid cash. If your kid does 4-5 year of college then 2-3 years of something like the Peace Corps then another 4 years of grad school that stafford loan taken out her freshman year can amount to a 10-year interest free loan for the parent.
It would be more informative to know the average loan balances for a variety of ordinary first-year professionals such as teachers, nurses, social workers who are entering the job market in 2012. I suspect it is MUCH MUCH higher than $13,000.
I’m thrilled to read a sensible article on this topic. The hysteria over student loan debt is masking the real problem: that students aren’t getting what they pay for, and there is virtually no incentive for colleges to control costs.
It seems to me that keeping interest rates from going back to what they were a few years ago (another tidbit no one likes to bring up – the 3.4% interest rate has not been around for long) is a lousy way to try to fix the higher education bubble we’re in. Perhaps instead we should be focusing on the total amount students are allowed to borrow, the qualifications for receiving student loans (some basic academic prerequisites seem like a must, if we want the students we fund to actually get a degree), mandatory in-person counseling/info sessions to educate students about loans, and incentives for colleges to control cost.