Archive for Sunday, August 21, 2011

Debt burden

Student loan obligations are making it difficult for many university graduates to financially get their feet on the ground.

August 21, 2011


Student loan obligations are making it difficult for many university graduates to financially get their feet on the ground.

Higher education can be an investment in the future, but sometimes that future doesn’t look so bright for students who have accumulated large debts from student loans.

It’s one more factor in keeping higher education affordable for middle class students who don’t qualify for scholarship aid.

A recent Journal-World story looked at the case of a Kansas University student who graduated with a bachelor’s degree in English and about $60,000 in debt. He’s now working full time at a local bookstore. He likes his job and it includes benefits, but the only way he can make ends meet is for his mother to pay half his $560 monthly loan payment.

Obviously, this student is not alone, especially in the current depressed job market. Too many students borrow money while they’re in school without a clear picture of how much their subsequent loan payments will be or whether they will be able to afford those payments on the salary they can expect to earn.

Student loan decisions are primarily the responsibility of students and their families, but Kansas University and the federal programs that support these loans should have a responsibility not to make it too easy for students to accumulate a debt that will be difficult to pay off. Making sure to alert students to the financial commitment they are making is the first step, but lenders also need to be realistic about the loans they are making.

Because it’s almost impossible for students to get out from under their loan debt by declaring bankruptcy, a key element of risk has been eliminated for the lenders. They know they will get most of their money back one way or another. That makes it a lot easier for them to make the loans without a realistic evaluation of the borrower’s ability to repay the loan. A university degree could be considered collateral for a loan in that it supposedly enhances a person’s earning potential, but some degrees offer more potential than others, especially in this economy.

So what’s the bottom line? For too many students, the debt they incurred make them wonder, as our bookstore employee does, whether they should have gone to college at all. Tales like his serve as a cautionary tale — or even a strong deterrent — for students trying to decide whether to pursue a university degree.

Some of those students may choose to attend less expensive community colleges to earn freshman and sophomore credits or pursue an associate’s degree that has strong job potential. For some of them, that would be a good choice, but for others, it could be a significant loss not only for themselves but also for the state, which needs a work force that includes people with bachelor’s and advanced degrees.

The situation is something that should give state universities — and the legislators considering funding for those schools — food for thought. Growing costs are putting university degrees out of reach for many Kansas students. Increased scholarship money can help, but increased loans are a burden that can drag students down for years after they leave school.


Centerville 6 years, 10 months ago

Not to mention the extra $46K (and counting very quickly) in extra taxes that they'll have to pay.

P Allen Macfarlane 6 years, 10 months ago

It would be much better if our students had at least some idea of how they wanted to use their degree once they went out into the world. As parents, educators, etc., we have promoted college as a panacea overemphasizing the disparity in income between those who complete college and those who do not. This advantage, while real in some instances, is overblown, if for no other reason than the obvious fact that for some occupations there is little correlation between formal education and occupation. For example. some tech jobs that require only an associates degrees are more lucrative than public school teaching. I could cite other examples as well.

Ron Holzwarth 6 years, 10 months ago

Several of my aunts are teachers, and one of them explained to me that yes, the pay is a bit lower than some other jobs, but there are three wonderful benefits of being a teacher:

June, July, and August.

bklonnie 6 years, 10 months ago

I agree, but it also takes one other key player; probably the most important one. I'm talking about employers. I think that's the reason why there is so much value put on a piece of paper from a college these days. When 2 people are applying for a job, employers almost always tend to hire the one with the college degree, even if that degree has nothing to do with the job. Now, I get that college shows commitment and dedication, but some degrees out there do not require a fraction of the work that others do, and are basically just the same as going to high school for another 4 years.

Ron Holzwarth 6 years, 10 months ago

I think you are largely correct, and I believe that because of personal experience.

Quite some time ago I was laid off a job because the company was in financial distress. Then after I was laid off, they needed me to come back as an outside consultant for printed circuit board design because none of their engineers that had a degree was able to do it in any kind of timely fashion, and I could get it done overnight.

And then a few years after that I was laid off another job, because the company's new medical devices were going to be more closely examined by the FDA, and the employee's backgrounds would be more closely examined. Therefore, since I had not quite completed my Electrical Engineering degree, they would need to find an engineer that had graduated.

Then after I had been laid off from that company, it was necessary for them to hire me as an outside consultant do design their printed circuit boards also, because the new engineer they selected did not have the skill to do it at all.

But today none of that matters, because printed circuit boards are now designed on computers instead of inside someone's head, and because of that it's so simple that that many high school graduates could learn to do it.

P.S. Need a printed circuit board designed? Give me a call, I have a very fine computer program now. But, I'm not willing to spend the time required to learn a new program because every one of them is different, and it takes so long to learn a new one.

But you know what's strange? I can't do it any faster on the computer than I could manually.

Centerville 6 years, 10 months ago

Speaking of hyperinflation, did you know that, even though there isn't $2.7 trillion in spare change left in the world to borrow (let alone anyone crazy enough to keep loaning to us), Bernacke 'promised' Congress that he wouldn't just print money to make inflation take care of the $ difference? And, the really sorry part is that some of them believed him.

Abdu Omar 6 years, 10 months ago

I don't agree that student loans are the best idea in the first place. I went to school and WORKED everyday to pay my expenses and my parents paid nothing. I came out of college with a master of science and no debt what-so-ever!!! How, I worked and paid my way. It took me 5 years to get a BA and there were 3 years in the Army, then 2 years of grad school and no debts. I enjoyed a good career and no debts to pay off. I went out of state for both Grad schoool and undergrad.

LloydDobbler 6 years, 10 months ago

I had a similar experience, but the cost of a university education has outpaced the ability to work your way through in a traditional sense. Twenty years ago, the cost was about $58 per credit hour. It's about ten times that now. There are some cost containment issues that have not been addresses in higher education.

bklonnie 6 years, 10 months ago

Was some of your schooling costs paid for by your Army service?

LloydDobbler 6 years, 10 months ago

No, just a good summer job and a steady job in a university laboratory. From what I know about costs today, about the only way to get through school debt free (without being independently wealthy) is to join the military or work your way through over about an eight year timeframe.

voevoda 6 years, 10 months ago

There are ways to contain the cost of a college education: Attend public universities, rather than private. Save for college for years in advance. Earn merit scholarships. Graduate in 4 years. Work part-time, particularly on-campus, during the school year, and full-time in the summer. Live modestly during college--stay at home (or have roommates); don't have a car; cook your own meals; buy everyday clothes second-hand; limit electronic goods to the necessary minimum; choose free entertainments.

parrothead8 6 years, 10 months ago

Another way to contain the cost of a college education: Don't go.

There are lots of jobs one can obtain the skills for without going to college. My former neighbor didn't go to college. Instead, he became a plumber. I asked him how he decided to become a plumber, and he told me he didn't know why he wanted to go to college, so he just started working. After two years as a plumber's apprentice, he was making good enough money that he realized he didn't need to go to college to get what he wanted out of life.

That's not necessarily the path for everyone, but we need to stop telling every single kid that he/she needs to go to college, and start helping them to understand that there's nothing wrong with them if they don't go.

DrewMoss 6 years, 10 months ago

The most important choice for students is picking a major that allows them to work in a field that justifies taking the loan. More students need to come out of school with an actual skill set (i.e., nursing, computer science), not with a generic degree like economics or history. The amount of loans a student takes over their college career should not exceed the average starting salary for their chosen profession.

It's not easy for a 17 or 18 year old to fully understand the debt burden they are taking on. It is the responsibility of the lender and the university to make sure students know what they're getting into. This is especially important for students taking lottery loans ($100,000+).

Because of misguided legislation bankruptcy is a near impossibility. This allows lenders to loan to everyone with almost no risk. If students were able to discharge their loans, lenders would be more strict with their lending requirements which would require students to justify the cost of their education.

Ron Holzwarth 6 years, 10 months ago

Some of them do. My father insisted that I go to college, but I had to go to the college he selected and I didn't like that. He was extremely generous and paid for everything: tuition, books, and dorm costs for a four year degree. And, he bought me a car also because he was sure I would need one. He paid for everything for the car, insurance, repairs, and registration, except that I had to buy my own gasoline. So, I had to earn my own spending money, but that was it.

And, if I completed a four year degree, I'm sure he would have at least considered paying for graduate school also. But, maybe money would have been tight by then because there were three of us that had to be sent to college and he wanted every one of us to go.

And me? I didn't appreciate that at all, and dropped out after two years. How dumb was that?

And my two siblings? Neither one of them graduated either, although he certainly got us all off to a fine start.

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