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Saturday, March 21, 2015

Keys to Avoiding Student Loan Debt

by Katherine O'Brien, MA CCPS

Is heavy student loan debt inevitable?  The average now is over $29,000 per indebted student and, in 2012, 71% of all students graduating from 4 year colleges and universities had student loan debt  Not only is the average amount of debt increasing, the default rate, the rate of those who are over 90 days behind on their payments, has been steadily increasing since 2003.  Additionally, student loan debt has the highest delinquency rate of all forms of debt – an astounding 11.5%!  Unlike other forms of debt, student loan debt cannot be forgiven.  Nor can it be eliminated by bankruptcy.  It’s not hard to see the devastating impact of this loan burden, and the personal habits have on these students.  What can be done now, while our kids are in high school, in order to avoid this outcome?
From 2005-2012, the average student loan debt jumped from $17,000 to $27,000, a 58% increase in seven short years.  The impact on their adult lives is significant.  For example, people with student loan debt have a 36% lower home ownership rate.
It’s not surprising that many people are starting to question the value of a college education.

Key #1 Time to Degree

Overall, the six year graduation rate at American four year colleges is 59%.  At public universities, the average is 57% while 66% of students in private non-profit colleges graduate within six years.  At private for profit institutions, the rate drops to 32%.  This means that, nationally, 59% of the students who started college in 2006 were finished six years later in 2012.  But, these are four year degrees!
At most public universities, only 19% of entering students graduate within 4 years.  Even the flagship publics with excellent research, etc. only graduate 36% of their students within 4 years.  The overall 4 year graduation rate for all colleges and universities is 39%!  The Department of Education reports that graduates who started at a 2-year public institution and subsequently obtained a bachelor’s degree had a median time to degree of 63 months.  That means the community college/transfer route is taking over 5 years for half the students (longer for the other half). Bachelor’s degree recipients who didn't start college right after high school had a median time of 80 months. (almost 7 years)  44% of 07/08 first time collegians graduated in 4 years.  The other 56% didn’t; 24% still didn’t have a degree after six years! The 4 year graduation rates for non-profit private college students are much higher, 53%.  Even that leaves nearly half of the collegians at private colleges and universities still on campus for a fifth year!

Key #2: Budgeting

The Department of Education also reports that students who received Pell grants (whose families generally had incomes less that $40,000/year) graduated with nearly $5,000 more student loan debt than their indebted peers who did not receive Pell grants.  While it is certainly understandable that such students’ families would need more assistance since they have less ability to pay, these students are finding themselves very burdened as they get started in their careers.
College is an investment from which a return is expected.  Without information – and the maturity to contextualize and interpret that information – regarding the consequences of taking on significant debt while an undergraduate, students are finding themselves with degrees and too much debt.

Key #3 Getting Guidance

California is ranked last of all US states with a counselor to student ratio of an astounding 1016 students per counselor.  Public students are lucky to be able to meet their counselors; it is rare to be able to have sufficient contact with a counselor in order to get any direction about college, at all.  What a student may receive is targeted toward general college preparation ideas, not tailored to the specific collegiate goals of the students.
The national average is 471 students per counselor, a number still far above the target of 250 set by the American School Counselor Association.  Regardless, high school counselors are responsible for scheduling, disciplinary issues and the myriad special education (IEP, etc.) tasks.  College prep tasks quickly become impossible to regularly incorporate into the workday of high school counselors.
Those families choosing to homeschool may, depending on the way they acquire curriculum, get some guidance regarding course selection but none regarding college admissions and funding.

Working Toward a Better Outcome:

In order to reduce a student’s debt, the student needs to reduce their cost to degree.  This can be done by a combination of reducing time to degree and the costs of college.  Additionally, bringing the family’s true college budget into account in order to make educational decisions in line with that budget is very important.  Lastly, there are numerous choices that are made during the high school years which contribute to each student’s ability to reduce their costs in many, many ways.
First, in order to shorten the time in college, it is critically important for students to have a well formed idea of their goals.  In order for college to make sense, it needs to be leading somewhere in the person’s life.  Before progressing very far on campus, students need to have some idea what direction they want to take their educations and their lives.  Otherwise, they may find themselves educated but not employed or employed in fields they do not enjoy.  Currently, Americans change jobs 11-15 times during their career and shift careers 3-5 times.  Therefore, either having specific career goals in mind or the goals of being able to communicate well, evaluate and organize data, and learn quickly will help students be effectively prepared to join the work force.
Consequently, since I opened my consulting practice in 2004, I have worked diligently with every student on his or her career search.  Through that process, teens learn more about who they are, what they are good at doing, what they love, and what they do not like.  Taking time to explore these areas during the first two years of high school, in particular, prepares students to approach college as the next step in their journey to their future, not simply “the thing you have to do after high school”.  The process of exploring majors and careers in depth creates relevancy for high school courses, college admissions tests (ACT, SAT), and gives direction to course selection for the second half of high school.  It also engenders maturity in the students, who are beginning to seriously consider their own futures in concrete terms and take on responsibility for themselves.
Secondly, it is imperative that expected net college costs be calculated during the college selection process and a serious determination of what can be afforded be made.  Otherwise, the student will identify and apply to phenomenal programs in his or her field, get accepted to some or all, and only then find that the school is simply too expensive.  I believe part of the student loan crisis is a failure on the parts of parents and students to do the research ahead of time.  I have heard of numerous families making drastic decisions because they didn’t want to disappoint their child who had been accepted at a great school which was simply too expensive for the parents and the student to afford.  With proper preparation, however, the outcome can be a great college education for the student and financial stability for the entire family.
Thirdly, when students are invested in their own future, they behave differently.  They understand the value of their grades and test scores and the role they have to play in creating their future.  Sometimes students hear this message in a general way during high school.  Working with students one on one to discern their career goals makes it personal.  After this process, college is no longer generic, a generalized education like high school, one size fits all.  It is also no longer unfocused.  Students also discover the plethora of options available on and off campus, options they can prepare themselves for and attain.  For example, undergraduate concentrations or specializations in numerous majors are offered, as is undergraduate research (starting freshman year at some schools!), internships, co-operative education programs (working in your field while you are still a student), interdisciplinary studies, etc.  The list goes on and on and, for the informed student with a focus, it is no longer bewildering.  Having a career and/or life goal gives college a purpose.  During the course of collegiate study, students will refine their goals and might adjust their majors.  However, because of the foundation laid during high school, extreme changes (like my own switch from engineering to theology) are unlikely.


U.S. Department of Education, National Center for Education Statistics. (2011). 2008–09 Baccalaureate and Beyond Longitudinal Study (B&B:08/09): A First Look at Recent College Graduates (NCES 2011-236), Table 3.
U.S. Department of Education, National Center for Education Statistics. (2014). The Condition of Education 2014 (NCES 2014-083), Institutional Retention and Graduation Rates for Undergraduate Students.
The Institute for College Access & Success, 2014. Quick Facts about Student Debt.

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