The Debt We Owe Our Children, and The One They Shouldn’t Owe Anyone

By Patrick O'Connor

This is one of my father’s favorite jokes.

A man walks into a doctor’s office and says “Doc, it hurts when I do this”, and stretches his right arm way over his head.  “What do you think?”

The doctor says “I think you shouldn’t do that anymore.”

I thought of this joke when I read the piece in the Atlantic Wire, indicating Americans now owe over $1 trillion dollars in student loans (you can see it at http://www.theatlanticwire.com/national/2011/10/americas-students-now-own-1-trillion-loans/43860/)

The good news is that this is the first time this has happened; the bad news is that it happened a first time; the ugly part is yet to come.  Since this debt has doubled in the last five years, student debt is likely to break the $2 trillion mark by 2018 if we keep the same borrowing rate.

What exactly should be done?  Some steps are already in place to follow the doctor’s orders:


*  For-profit colleges have been closely scrutinized, and students from these colleges have the highest default rates.  It may not be cause-effect, but enrollment at many for-profits is down, so it’s likely more students are watching their wallets more closely when they enter the hallowed halls of any college.
*  The Net Price Calculator debuts on college Web sites right around Halloween.  This Federally-mandated device is designed to give parents and students better information on what they can expect to pay and borrow if they go to that college.  Since financial aid packages are a combination of art and science, this tool may not be the debt reduction cure-all of college, but it’s likely to take at least some of the trick out of the treat of postsecondary education.
*  Some colleges are simply eliminating loan out of financial aid packages.  Not many colleges can afford to do this, but the example set by the few that can is inspiring other less-heeled institutions to find ways to reduce the amount of loan a student has to pay, further proof that necessity is the mother of invention.

This may be a great start, but clearly there is more for us to do:


*  School counselors need to take a much more active and early role in the college finance education of their students and parents. There isn’t much to be saved in an economy like this, but putting it in the right place—and in the name of the right person—can make a huge difference over time, and it’s time parents used these important allies in the war on college costs. Elementary school is a great time to begin.
*  Counselors need to show parents how to talk with their children about money for college.  Too many parents encourage applications to colleges they can’t afford, saying they don’t want to crush their child’s college dreams.  Armed with no financial information, students blithely sign off on all kinds of documents, and leave college with four years of great memories and a lifetime of debt.  They deserve to know they have a choice; counselors have to help parents know how to explain it.


*  Counselors need more financial aid training in graduate school.  Effective counseling includes the ability to explain the major forms needed to apply for aid, the major sources to find different kinds of aid, and different college strategies students can pursue while saving money. Professors who run counselor training programs often insist they don’t have time to teach these vital skills, but in light of this finding, it’s way past time for them to understand one simple fact—Docs, it hurts when you don’t do this.