Wednesday, June 25, 2014

Worried About Student Debt? Ask a Counselor

By: Patrick O'Connor Ph.D

It happens every year.  No sooner does school let out, and counselors complete their extra couple of days/weeks/months of work, and the headlines fill with a story that directly impacts our work.

This year’s topic is student debt.  Many articles are posted each May about the high price of college, but this year brought more of them than ever.  Many of them went to great lengths to include examples of students who took out $80-100,000 in loans to complete Bachelors’ degrees that held small value in the job market.  This has led to a number of articles countering that, all things equal, statistics show student debt isn’t all that much worse than it was ten or twenty years ago.  Now, in late June, the articles are challenging the data used in these articles, with the “sky is falling” team and the “things have always been this way” team trying to outmaneuver each other with discussions of mean, average, and outliers.

It’s important to read these articles, but it’s even more important to do so with a wary eye.  Yes, there are students who take out $80,000 loans to get degrees in things like Medieval Art History, but there aren’t that many, or the average debt load of graduates would be $80,000, when it’s currently $33,000.  That’s still a lot of money, unless of course your degree is in Engineering, when you will likely get a job before college is over, and that job will pay at least $55,000 a year.  That means $30,000 in debt isn’t a risky loan; it’s a wise investment. 

On the other hand, it really probably is a very bad idea to take $33,000 in loans to attend a local “college” that promises you a great-paying job in six months, when you have never heard of that college before they called you at home.  If their results were really that good, there’s a great chance someone—your parents, a friend, your counselor—would have told you about this at some point in your high school career. 

Beyond offering bad advice for students and parents, these articles hold a higher likelihood for compelling mischief when they recommend policy changes based on their limited use of statistics.  The “do nothing” crowd is totally oblivious to the number of debt-endowed students who are living with their parents—but that is where we find the largest increase in indebted students. 

At the same time, a remarkable number of high borrowers choose to attend higher-priced private colleges, rather than the lower-priced universities that, as a rule, are considered less prestigious.   Many people would rather drive an Accura than a Camry, but should we really alter college loan policies just because those who can well afford the Camry take loans to support a poorly-informed choice to go for the flashier ride?

The challenge in letting economists, politicians, and the media determine education policy is that none of them are educators, making it too easy to wander from reality when they try and find a “cause” and a “solution.” This year’s discussion of college costs is lengthier than prior years, but the quality of the debate has now devolved into arguing about one another’s figures.  Students and parents should let the argument continue without them; if you need help in deciding what’s best for you, talk to a counselor before you sign off of any loan, or decide to spend your life savings on a college just because it has a higher ranking.  Your decision shouldn’t be about prestige, or bimodal distributions—it should be about you.

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