Student Debt

Fall 2012 will see another wave of students entering another college semester. For some it will be their first. Incoming freshmen should ask themselves two questions: How will students and their parents pay for it? And is the four-year college track really the right one for them?

According to the Project on Student Debt at the nonprofit Institute for College Access and Success, student debt has surpassed auto loan and credit card debt combined.

Total student debt in the United States is estimated at over $1 trillion dollars, with the average Michigan college undergraduate leaving school with around $26,000 owed back to the government or private lenders. Some economists believe this is the next big bubble that will pop.

As the cost of attending college continues to outpace inflation, students have to take on larger and larger loans to make up the difference. But students should beware of some of those private or unsubsidized student loans.

Remember, subsidized Stafford loans are ones in which the government pays the interest while you attend school, whereas unsubsidized loans accrue interest. In other words, the interest on the unsubsidized loans is waiting for you upon graduation, and it’s had four to five years to build up.

According to TICAS President Lauren Asher, students should consult an advisor before making a decision to accept the private or unsubsidized loans.

“Millions of students end up with risky and expensive private loans when they actually have safer options, and the financial consequences can be devastating and last a lifetime,” Asher said. “We found that counseling and information at critical decision points can really help borrowers make smarter choices.”

Loans are a necessary albeit sometimes evil element in acquiring a college degree. But before students commit to taking on such debt, they should also ask if a four-year degree is the right path.

I recently had a conversation with a Baby Boomer-aged plumber who said he had trouble keeping younger apprentices around, because many thought of it simply as a summer job until school started again. Then he proceeded to tell me that he makes upward of $200,000 a year and could make more, but can’t keep up with all the work.

The U.S. has created a culture that says adults are failures unless they complete a bachelor’s degree.

However, trades skills such as plumbing and electrical work cannot be shipped overseas. So if you’ve thought about entering a trade, don’t be discouraged. And if you’ve decided that college is the right path, it would behoove you to be informed about which loans you accept.

For more information about student loans, Eastern Michigan University’s Financial Aid office can be contacted at www.emich.edu/finaid/contacts.php or 734-487-0455.


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