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Student Loan Debt: How Much is Too Much?Some call it the Student Loan Bubble — I call it crazy. And what better time to discuss student debt insanity than now, as countless soon-to-be graduates prepare to slip on their caps and gowns? An estimated 1.8 million students are graduating this year, many with degrees that perhaps aren’t worth a damn when it comes to actually getting a job. Nevertheless, many of them will soon be paying back the tens or hundreds of thousands of dollars they borrowed to get those nice degrees, and I wonder how many will regret the decision to spend what they spent as they see their interest compound and principals skyrocket through cycles of deferment and forbearance. The college experience can be an amazing one, but is it really worth the cost? (And I’m not just talking about tuition.)

To get at the heart of this question, I recently commissioned a poll that asked adults of all ages about student loans. We asked how much student debt is okay, and how much is too much. One in five senior citizens and almost a quarter of adults between the ages of 35 to 49 agree that $20,000 to $50,000 in student loan debt is too much to borrow. Maybe that’s because they are in the age range of folks in a position to hire young people. Maybe it’s because college didn’t used to cost so much. At any rate, people of college age, between 18 and 24, disagreed with the old folks; only 16 percent said graduating with that much debt is too much.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

Many respondents believe there should be no limits at all. Among recent graduates, 22 percent agreed that students “should borrow as much as they need,” and “no amount is too much.” Baby boomers and seniors overwhelmingly disagree — only 7.9 percent of people age 65 and up agreed that college students should borrow to the hilt. It seems the marketing of “Don’t Worry, Pay Later” has been a success — at least in younger demographics.

Clearly, many college students and recent grads take a more cavalier approach to student loans than their parents and grandparents. Research shows that many even consider high debt loads to be empowering and give them higher self-esteem. Conversely, young adults—folks who have  labored a few years into the real world — are less enthusiastic about borrowing so much; 73 percent say they owe more in student debt than they can manage.

“It’s not surprising that the generation that has to borrow a lot more for college believes it’s a necessity for others,” says Lauren Asher, president of the Institute for College Access and Success. “There’s been a big structural shift in how Americans pay for college, and the cost that students and families have to pay has increased.”

[Related Article: 5 Things Every Graduation Speaker Should Say]

Young adults back their beliefs with more student debt. Just shy of half the respondents — 46.8 percent — between ages 18 and 24 said they have borrowed money to finance a college education. That’s the highest level of any age group. About 40 percent of adults aged 25 to 34 took on student loans, and under a quarter of all Baby Boomers did.

Loan totals are going up, too. Young adults reported a median debt of $38,100. That blew all other age groups out of the water. Middle-aged adults said they borrowed about $25,000 for college. The average college student has about $26,600 in debt, according to the Project on Student Debt, a 40-percent increase since 2002, and it’s time to find a way to start paying it down.

Today’s bad economic climate makes this pretty scary. The unemployment rate for Americans dipped to 7.1 percent in April. But joblessness among adults ages 20 to 24 remains mired at 12.5 percent, according to the Bureau of Labor Statistics. When you add in all the college grads working as baristas, waiters and other jobs that don’t require a degree, about 1.5 million bachelor’s degree holders — 53.6 percent — under age 25 are unemployed or underemployed, according to a study by the Associated Press.

High college debt mixed with low job opportunities equal economic fallout. And if you are wondering why young people are taking on the debt: high school graduates face a jobless rate twice that of college grads.

Signs of stress are already showing. More than half of all student loans are now delinquent or in deferral. According to the latest report from the U.S. Department of Education, over 13 percent of graduates default on their loans within three years of leaving college.

So, riddle me this: how do you buy a car, a home, or start a family (i.e. put the “consumer” into our “consumer economy”), if you can’t even afford a monthly student loan payment? You already know the answer. And so the economy will continue to stagnate, with demand flagging along with everything else.

As President Obama and the Congress dither over federal Stafford loan rates possibly doubling to 6.8 percent, they have done nothing substantive about the real problem: The Great Recession and a competitive technology job market that colleges and college lenders aren’t catering to. This is the problem that has already killed millions of middle-class jobs that are never coming back.  And until our lawmakers get busy on a solution, it’s only going to get worse.

The new economic age of big, portable, sharable data is here, yet many American students today are still preparing for the economy of the past. Rather than slashing investment in higher education and scientific research, we should be adding to it. We should also be seeking innovative ways to keep a lid on tuition increases while simultaneously working to help millions of American graduates win the kinds of good-paying jobs they’ll need to pay their loans.

Image: Jetta Productions

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  • http://www.Credit.com/ Gerri Detweiler

    Just sent you an email. Apologies.

  • Lily

    I have about $100k in federal students loans. It feels overwhelming when I think about it, but thank god for Pay as You Earn …. I’ll pay back less than $20k plus the income taxes on the remainder when it’s forgiven in 20 years.

  • http://www.Credit.com/ Gerri Detweiler

    Contact the
    Department of Education and request a review to appeal the offset due to financial hardship. The paperwork you need to fill out should be available at that link.

  • http://www.credit.com/ Credit.com Credit Experts

    David —
    Was the debt-to-income reason given for not allowing you a secured card? (That would be harder to understand, because the lender is not at risk, since the card is secured by your deposit.)
    If you have any credit at all, the best thing you can do to help is to pay on time. Some of the others — particularly debt to income — will be harder to address. Lenders use these scoring models to predict the likelihood of debts being repaid, and they obviously want borrowers who can pay them back.
    You can take a look at your credit profile (here’s how to monitor your credit score for free) to get an idea of what potential lenders see. It is not a good idea to continue to apply for credit unless you have reason to believe you will qualify. Every application (approved or not) can cause a small, temporary drop in your credit score.

    • David

      Monitor your credit score? You are joking right? Credit.com has me with a credit score of 618,Credit Karma has me at 619. When I applied for a new vehicle the loan stores had me between 525-583. There is no way to monitor your credit score because from what I am experiencing is that the websites want to make the users feel better and then the banks, who have all the money, slaps us up side the head and says we are trash.

      To tell me not to apply for new credit is not reasonable because the credit bureaus and all the cards like Capital One tell me I have to to improve my credit score. I am in a catch 22, damned if I do and damned if I don’t.

      Yes I am a very frustrated person, I have had a very bad business fail and trying to climb out of a mess and move forward before I pass from this world.

      From what I am seeing the financial people want to make sure I stay a broke bitter old man.

      I can not be the only person going through this.

      • http://www.Credit.com/ Gerri Detweiler

        Hi David – I get it. The different models can make it feel incredibly frustrating. The auto loan models can be somewhat different than the others – and in your case quite a bit different. I’ll reach out to you by email.

      • http://billcollectorshateme.com/ Bill Collectors Hate Me

        You are not alone. It will get better if you just stay the course.

  • David

    So having $75k in student debt an being 62 years old is a bad thing?

    The credit card companies seem to think it is as it is a reason the they turn me down. The people with money say you need a better job, to get a better job you have to finance the education, then the economy takes a down turn, and the jobs dry up and you can not pay your student loans, then they get transfer from one credit collection agency to another, so that tacks on more fees. The credit collection agency’s get paid whether they collect or not. The wisdom of our government.

    The haves just want to make sure the have nots stay have nots.

    Don’t tell me that after bankruptcy it is easy to rebuild credit either. I have tried financing a Nissan NV200 as that is what would make the most sense for me with no luck. I not have thirteen inquires on my credit reports, not one like you guru’s tell people will happen.

    I have been turned down by Capital One, Credit One, Kohls all for new credit, including secured credit. They all use the same excuse, I filed bankruptcy, I have too many liens, even though they are maker as discharged, I have too much debt for income (student loans).

    A 62 year old white male with out a college degree, does not walk into a $100k year job.

    When ever I share what I have experienced like I am doing now all you experts love ignoring me.

    • http://www.credit.com/ Credit.com Credit Experts

      David —
      When you were turned down for a secured card, do you know why? (You should have been told.) It is by no means easy to rebuild credit, and doing it without an adequate income is even harder. You are also in a situation in which your student loan burden is especially onerous. If you have federal student loans for at least part of that amount, you may have some repayment options. You may also want to contact The Student Loan Lawyer Joshua Cohen to discuss possible options.

  • Melissa C.

    Its better than how things are going now at least erase the interest and raise our life time limit.

  • http://www.Credit.com/ Gerri Detweiler

    Does he have private or federal student loan debt? If he is not sure, tell him to go to the National Student Loan Data System and check.

  • Hello

    I’ve been telling my daughter only grants or scholarships and go community college FIRST, to get basic out of the way, then a University of her choice to go for what she choses, besides what is the difference with community college or a University on a resume, really?!

  • Cheryl Nunn

    I started college at 40 to become a teacher. My loans total 140,000 for a degree to teach school. I clear 2,800 a month my loans are 1,100. interest rate is 8.25%. I am basically living on 1,000 a month plus credit cards. I know there is a teacher loan forgiveness program but thats only after making 120 payments, which is still 10 years away and I still have to live from month to month. I tried getting on as a part time professor with an online college, and three years later I am still trying to get on, it is just a circle I can’t get out of. all because I consolidated the privet loans through sallie mae.

  • zeromein

    I have a decent education. Money isn’t free. If it is taken out of the economy, then there is less money available to loan out to businesses. I agree, that the system should be configured such that there is no profit made on the student loans, but the money isn’t free. The interest rate should be the Federal Funds rate, which is the same one that banks use with each other.

  • http://batman-news.com Brett520

    I borrowed $50k for my Bachelors and MBA. When the job market tanked, I had a hard time keeping up with the payments, which ultimately lead me to the student loan consolidation program, which really changed the whole ordeal. I went from being in debt of $50k to $132k overnight. I don’t know how they could justify that kind of usurious program. I have tried to work through this with the Dept. of Education, and their call center reps, and was basically told – You should have read the fine print better. I provided them with my monthly income to debt ratio, and was told that I could pay them $1,000 a month. I told them that I did not have that much once I paid my immediate/working class bills. Again, I was basically told – It sucks to be you. That’s the deal. If you don’t like it you can default and we’ll just garnish your wages. I would like nothing more than to be able to pay off my student loan debt in my lifetime. I would have appreciated some real help from the Department of Education with arranging REALISTIC monthly payments. I do feel that I was duped or suckered into the loan consolidation program, and it did teach me a VERY important lesson the hard way – if it sounds too good to be true….it is. I’ve tried every avenue I can think of to get some guidance and assistance with setting up an affordable payment plan in which the loan actually decreases, but I have run into a brick wall at every turn. I’ve even sent letters to Arne Duncan personally, and get nowhere. At this point, I just remind myself that there is student loan forgiveness when I’m dead. The stress of the loan hanging over my head may cause me to have a heart attack and for that to come faster than expected.

  • http://www.credit.com/ Credit.com Credit Experts

    It’s possible you need to see a consumer law attorney for help. Also, do you mean it will be in default as of May 2014? if it is not yet in default, you may be able to keep that from happening, because it sounds as if most of your income would be protected. There’s more information here: Help! My Social Security Income is Being Zapped for Student Loans. Good luck, and please let us know what happens.

  • http://www.credit.com/ Credit.com Credit Experts

    A reminder: Please disagree respectfully on our comment pages. We reserve the right to remove posts that seek to inflame at the expense of the discourse

    • Helping students understand FA

      It seems like that comment should have also been addressed to 08grad.

  • Me

    So I know a woman – single who took out student loans to get a degree in as a chiropractor. Had the money to take 2 out of the 4 tests to get licensed in the state of CA. Never really made money or worked. Now trying to have student loans of 200,000 forgiven on the thought that her health problems keep her from doing chiropractic work. Trying to get disability – even though she has been self employed making next to nothing. She will be entitled To SSI if she is ok’d. She hears Obama at a college graduation this week talking about totally forgiving student loans – now she says if he does that she can get her license and have a chiropractor practice- so you lying about your medical condition to get student loans forgive and disability? But if your student loans are forgiven a miracle will happen and you can practice chiropractic medicine?

    • k8vkh

      Sounds like a charlatan and she would make a great chiropractor.

  • SickOfDebt

    I am fed up with all of the “disadvantaged student” labels. I am a working middle class citizen paying full price for my child’s “right” to a higher education. The college takes an additional fee from the tuition that my daughter and I pay to fund addional money for the “disadvantaged” students. She was denied any PELL grants and was not awarded any scholarships (she had qualified in every area except that I have a job so she was denied the scholarships). Every student graduates with a degree and will have the same “advantages” and “opportunity” for employment. Except that my child and I will have huge financial debts that the “disadvantaged” students won’t have. Why not eliminate FAFSA using parent income and allow EVERY student to pay for college or take out student loans at maybe 1% for a loan rate to ALL?

    • k8vkh

      Free Higher Education!

      Norway did it.

    • tony

      Your comment is rather bothersome as you do not address the truth that society is stil sexist, racist, homophobic, transphobic,…. imagine your child being more qualified than anyone else in the applicant field but they weren’t picked because their name was ‘funny.’ There are plenty of studies that show this.

      Furthermore, mt parents are Hard working middle class americans, who work over time, break their backs, and see each other 6 months at a time, just to pay the mortgage, put food in the table and maybe send my sister and i to college.

      I got only a few schilarships, for whichi had to still apply to, and a bulk of my debt is in federal loans of all kinds. Furthermore my parennts took on parentPlus loans.

      In short high institutions are expensive even for public ones, because we have to pay the inflation protected salaries of the top administrators, while all the students who take on debt their grandparents would probably not accept.

      Really we all need help this society is interdependent. We need the gpvernment to support students, schools to provide workers to society, and students who will make a difference to assist the upcoming generations of americans.

      If we see everyone as disadvantaged, then maybe just maybe, we can pull ourselves up.

  • Jim

    I was hoping that the article would have given guidelines such as, do not borrow more than half of what your realistic first year salary would be. When considering the loan burden, I would think that the STEM studends could afford a higher debt level than someone with a degree in gender studies.

    • k8vkh

      Too bad Texas doesn’t want to teach science. And they wonder why the universities and boardrooms are full of foreigners.

  • stressed out

    I truly believe the government should erase interest on student loans.and should also increase grants for students so that they feel less stressed trying to get a higher education.

  • Patch

    My g’daughter is already feeling overwhelmed by students loans–and she is only going into her third year at UVA. You know as well as we do that our children are paying the tuition for those who can’t afford it. My g’daughter is an A student fm Fairfax, VA who is in the Echols Scholar Program. Still, they save the grants, etc for the kids from smaller areas as well as for the foreigners and minorities. It wasn’t her fault she was born a middle class white girl in Fairfax County, VA. At least she already had 24 credits when she entered college and that helped some. She’s already decided to get a job after her Bachelor’s degree, pay off loans, then get her Master’s and later a doctorate.

    • realitycheck

      As someone who has a master’s degree, please tell your granddaughter to consider options wisely before pursuing one. I didn’t realize that teaching adjunct would mean I would have three part time jobs, very little pay and very little time, and no health insurance. I ended up taking an admin. asst. job because it paid better, was stable, and had benefits.

    • k8vkh

      Wow, Patch. Foreigners and minorities can also be ‘A’ students. And foreigners pay even higher tuition. Don’t pretend that she’s a victim of systemic classicism/racism.
      The system that is raping her financially could be fixed if the government put a cap on tuition fees. But that limits the freedom of the universities and banks to rape your granddaughter (financially.)

    • spikester

      I live in VA, I went to school in Fairfax… George Mason University. If she wants to cut her bill in half, live at home like I did, and go to a local school. If you want to spend more money living on campus, well, life is tough. These are decisions she needs to learn to live with and deal with.

      Oh, and I hope she’s interning as much as possible, as most employers don’t seem to care where you got your degree, or what your grades were. They care if you know how to do the job they are hiring you for. Otherwise, on to the next applicant.

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