Thursday, November 01, 2012

How Much College Debt Is Too Much?

As tuition increases make higher education harder and harder for average American families to afford, more and more are now forced to consider "mortgaging the farm" to get kids through college.

The average college grad leaves school with $20,000 debt collar wrapped around his or her diploma, and while this is not a catastrophic sum, the question of where to draw the line concerning college debt is certainly an important one for students and parents to consider, especially during uncertain economic times.

An interesting and informative article by Kim Clark in U.S. News and World Report discusses the details:

One third of all new bachelor's degree recipients in June of 2008 started their working lives without owing a penny in federal or private educational debt. Only 10 percent of last year's graduates owed more than $40,000, according to the lead author of the report, College Board researcher Patricia Steele. (She did not count credit card debt or other noneducational liabilities such as car loans.)

The median borrower graduated last year owing almost $19,999, a $1,026 increase from the typical debt load of 2004 graduates. "Most people would say that is a reasonable amount of debt to take on for a baccalaureate degree," especially if students stick with federal loans, which now allow borrowers to adjust their payments to their income, Steele says.

U.S. Education Secretary Arne Duncan said in a recent Bloomberg interview that unless colleges whose tuition schedules are "out of whack with reality" manage to reign in the cost of education they could soon find themselves pricing themselves into irrelevance as consumers turn increasingly to "no-frill" institutions offering less expensive three-year degree programs and other cost-cutting measures.

With real family incomes in retreat, and textbook prices going through the roof, even budget-conscious students at low-cost community colleges are often finding it difficult to make ends meet without taking on sometimes oppressive levels of educational debt.

For those about to face the prospect of taking out substantial student loans, this short piece by Associated Press outlines important things to keep in mind.


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