News Column

Record Student Debt Looks Like a Trend

May 17, 2011

Tim Barker

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Recent graduating classes have been accumulating a record level of debt. This year's crop will probably do the same.

It has become a fact of life in the world of college finance, where costs are rising and student aid is falling. Every year, students are forced to rely more heavily on loans -- both subsidized and unsubsidized -- to pay the bills. At most of the large schools in the bistate region, more than half of the students borrow.

According to the Project on Student Debt, the nation's 2009 graduating class carried an average of $24,000 in debt, up from $21,000 three years earlier.

Of course, not all debt is created equal. And financial aid advisers are quick to point out that borrowing can be one of the best decisions a student makes.

"If that's what you need to do to earn your degree, it's a good investment," said Jim Brooks, Mizzou's financial aid director.

It's only a problem when they borrow too much. But determining the point at which "just enough" turns into "too much" can be a tough task, with so much depending on the job and salary prospects for each student.

Mark Kantrowitz, a financial aid adviser and publisher of FinAid, offers this as a rule of thumb: "Your debt at graduation should not exceed your starting salary."

Of course, many students have only a vague idea of what to expect when they graduate. Many aren't even sure what jobs they'll be chasing.

So there's another way to look at it, said Matthew Reed, program director with the Institute for College Access and Success.

There is a substantial advantage in those federally subsidized loans (lower interest rates, for example) versus the unsubsidized loans that act more like credit card debt.

If it takes more than those subsidized loans to pay the bills at your chosen school, that may be telling you something: "You may want to reconsider whether that's the right school for you," Reed said.



Source: Copyright (c) 2011, St. Louis Post-Dispatch


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