Brittany Clausman, University of Michigan ’15

This year, a record number of college graduates will leave their school with astronomical levels of student loan debt. Current reports show that student loan debt has now reached the level of 1.1 trillion dollars in America, second only to mortgage debt, leading some to question what will happen to our next generation. On an individual level, the numbers are pretty disheartening. It’s speculated that the average loan debt for students this year will reach $35,000, an increase of about 325% since 2004. Of the students who graduate, approximately 70% will have debt upon graduation, and 15% will default within a year. Unfortunately, for many who graduate with debt, this doesn’t just mean an average monthly payment that you must begrudgingly pay. The effects of student loan debt could lead to some hard times for many graduates down the road.

Part of Parros College Planning’s offering is to make sure that debt is not an inevitable ending for attending college. Our ultimate goal is gaining acceptance for our clients at an acceptable price. With a breadth of knowledge in the admissions process, we have cultivated an in-depth list of colleges that offered the best merit based aid for students. We know what to expect and can give a comparative list of colleges to better situate students for a less expensive yet still highly coveted education. With our assistance, we have helped numerous student get their cost of attendance significantly decreased, lessening both stress on parents and the need for exorbitant loans to pay for the cost.

If you were to brave the process alone and you are expecting to take out some loans in order to pay for the cost of attendance, here are a few things to consider regarding what exactly student debt may mean.

  • Students who graduate with high levels of debt will undoubtedly have less freedom when it comes to taking risks for employment. Having an average monthly payment that is generally expected to cost 10-15% of your income means less in terms of resources necessary to move to other locations for more lucrative job prospects. Some research suggests those with high levels of debt can utilize it as an incentive to seek out these high-risk, high-reward jobs, but for most students, the money to support this is simply not there due to repayment and interest accruement. Of those in the latter group, they most likely will have to decide on a career in a much more limited and competitive location or field.
  • Student loan debt is affecting the housing market. Consider this: Those who must make monthly payment in order to free themselves from debt will have less income which they can put into savings or investments. When buying a home, those who are still paying off their loans will typically have a smaller down payment and higher interest rates on their mortgages. Due to the high cost of repayment, many are putting off starting families and buying homes until they are much older than previous generations, leading some experts in the field to believe student debt may soon start causing a slowness in the housing market.
  • The problems this debt can cause are often long-lasting and discouraging. It’s speculated that the loss of income between those who graduate with debt can accumulate to $200,000 worth of loss compare to their debt free counterparts. That’s money that could be used for their retirement, or even future generation’s college bill. This loss of income is damaging, and for many students, translates to seeing college as investment not worth making. Some reports even suggest that those who do graduate with high levels of debt in fields with poor job growth can expect to see the value of their education diminish to the same levels as those with only a high school diploma.
  • For most students, it is expected that their parents with contribute in some way to the cost of their education. Footing this bill is seen as an investment in their son or daughter’s future, but for a lot of parents, the returns on this investment are poor. Students are entering school with higher rates of tuition, and leaving with bleak looking employment options. Report show that 8% of students are unemployed upon graduation, and of those who are lucky to find a job, 44% are underemployed. This creates the need for some parents to work later in life to make-up for that loss of income they need for retirement option. Unexpectedly, this typically means that jobs become less lucrative because less employees are retiring.

We at Parros College Planning cannot stress enough how important education is, and we think that everyone should have access to a college education. We also know that a degree is a daunting, seemingly impossible cost for many families; that’s why we work so hard to make student focus on merit based aid and starting college planning early. We consider the factors of both access and affordability when guiding our students to choosing a college, knowing that the importance of paying for school is just as important as a myriad of other deciding factors.  For us, student loan debt does not have to be a necessary evil when planning for your future.