The burden of student loan debt
A look at factors that contribute to burdens
High school students are told they should earn a college degree to have a well-paying career. But student debt isn’t good when your degree doesn’t lead to a job that earns enough to repay it.
Students take on college debt with the best of intentions. They’ve been told that a college degree is a ticket to success.
But how do smart students wind up with debt they can’t repay? Here are three reasons, plus ways to avoid these financial traps.
They’re told it’s ‘good debt’
In high school, students hear that they should earn a college degree to have a well-paying, successful career.
“We as a society kind of have this compulsory higher education,” says Daniel T. Kirsch, author of “Sold My Soul for a Student Loan.” “We’re encouraging everyone to take out debt and calling it ‘good debt’.”
But student debt isn’t good when your degree doesn’t lead to a job that earns enough to repay it.
This is the case for Jennifer Atkins, 36, of Jacksonville,
Fla. She believed a university diploma would help her get ahead.
“I had the mentality back then that I was doing what I was supposed to do in life,” said Atkins, who earned three degrees, including a master of nonprofit management in 2014.
Now, Atkins has two kids, more than $100,000 in student loan debt and is unemployed. She quit her job in 2017 due to complications with her second pregnancy and hasn’t found a job lucrative enough to justify paying for child care.
Avoid this trap: Limit borrowing
■ so that future monthly payments don’t consume more than 10 percent of take-home pay.
The loans don’t feel real
Some students are willing to take on large amounts of college debt because they don’t connect with the reality that they’ll eventually have to repay it with interest.
Atkins accepted student loans in small increments throughout 10 years of higher education. She worked throughout school, but the loans were crucial to making ends meet.
Atkins said she wishes she had had a mandatory career counseling session to walk her through the numbers and understand her debt in the context of her future earnings.
Such counseling may have helped. Imagining our future selves can help us overcome present bias, said Jeff Kreisler, co-author of the behavioral economics book, “Dollars and Sense.”
“If you make the future more specific, then you can connect to it,” he said.
Avoid this trap: Do the
■ math as you go. Every dollar you borrow will have to be repaid with interest. But you can choose to borrow less than you’re offered.
They lack information
■
In many cases, students lack the financial education needed to make borrowing decisions.
Susan Dawson, 47, has a PH.D in history and works as a historian for a federal agency. She can afford her student loan payments thanks to a second job teaching online classes and a federal repayment plan that caps her monthly payments. But she said if she had known the earning potential in her field, she would have chosen a different career.
Avoid this trap: Check the
■
Bureau of Labor Statistics’ Occupational Outlook Handbook to research wages and education requirements for various fields. Use a student loan calculator to estimate future payments.