The Burden of a Student Loan
Before you decide to depend on student loans for your education - make sure you know how much you will be required to pay each month to cover your student loan.
Welcome to New York City, Katy Sullivan. And welcome to poverty!
That's how it felt when the 25-year-old New Hampshirite moved to the Big Apple for her first job after college. True, her $35,000 salary as an assistant account executive for a public relations firm is decent. But the cost of living is indecent. So she moved into an unfashionable neighborhood, took a roomie, and started cooking at home. There's one expense she can't finesse, however, which gobbles nearly $450 a month, or about one quarter of her take-home pay. It's her beastly post-college burden: $45,000 in student loans.
So it would seem Sullivan is one of the multitude of students drowning in debt. Yet Sullivan, who graduated in 2004 from Boston's Suffolk University with a bachelor's degree in communications, is not gulping for debt-free air. "I thought if I'm going to get an education, I might as well get the best one I can," she says. "The loans will eventually go away." Many educators and counselors endorse Sullivan's attitude. "People need to think of education as an investment," says Sandy Baum, an economics professor at Skidmore College and a senior policy analyst at the College Board. "You're investing in yourself," she says, "and you're going to get a return on it for your whole life."
If you do take out loans, you'll have plenty of company. In the 2003 academic year, 73 percent of students graduating from private, nonprofit colleges had taken out at least one federal education loan. Their median amount of debt: $19,400. Meanwhile, 62 percent of students graduating from public schools carried a median $15,500 in debt. (The typical total debt load is most likely higher, since these numbers do not include private or alternative loans, which make up an estimated 22 percent of all educational debts.) In recent years, student loans have grown as a share of total funding for college and now represent 46 percent, right on a par with grants.
How much is too much? But how much debt is reasonable to take on--$20,000, $60,000, $100,000? If your resources are limited, should you bother applying to pricey private colleges, where the average cost for a year's tuition, fees, and room and board is nearly $30,000? Or is it smarter to stick with a well-regarded and less expensive public school, with an average $12,750-a-year price tag?
The answer, of course, will be different for everyone.
Your decision should depend at least in part on the paycheck you expect upon graduation. An aspiring musician might want to borrow less than a future computer scientist, says Jacqueline King, director of policy analysis for the American Council on Education. A good rule of thumb: For the average college grad, it's reasonable to expect to put about 10 to 12 percent of your income a month toward paying back college loans, says Baum.
But it's tough for even the brainiest math whizzes to figure out whether borrowing more to attend a pricier school pays off in higher earnings down the road. Princeton economist Alan Krueger has shown that students who entered selective schools in 1976 did no better after college than similar students who were accepted but chose to go to less selective schools. In other words, smart and motivated kids tend to do well, careerwise.
Excerpt from USA News and World Report
Welcome to New York City, Katy Sullivan. And welcome to poverty!
That's how it felt when the 25-year-old New Hampshirite moved to the Big Apple for her first job after college. True, her $35,000 salary as an assistant account executive for a public relations firm is decent. But the cost of living is indecent. So she moved into an unfashionable neighborhood, took a roomie, and started cooking at home. There's one expense she can't finesse, however, which gobbles nearly $450 a month, or about one quarter of her take-home pay. It's her beastly post-college burden: $45,000 in student loans.
So it would seem Sullivan is one of the multitude of students drowning in debt. Yet Sullivan, who graduated in 2004 from Boston's Suffolk University with a bachelor's degree in communications, is not gulping for debt-free air. "I thought if I'm going to get an education, I might as well get the best one I can," she says. "The loans will eventually go away." Many educators and counselors endorse Sullivan's attitude. "People need to think of education as an investment," says Sandy Baum, an economics professor at Skidmore College and a senior policy analyst at the College Board. "You're investing in yourself," she says, "and you're going to get a return on it for your whole life."
If you do take out loans, you'll have plenty of company. In the 2003 academic year, 73 percent of students graduating from private, nonprofit colleges had taken out at least one federal education loan. Their median amount of debt: $19,400. Meanwhile, 62 percent of students graduating from public schools carried a median $15,500 in debt. (The typical total debt load is most likely higher, since these numbers do not include private or alternative loans, which make up an estimated 22 percent of all educational debts.) In recent years, student loans have grown as a share of total funding for college and now represent 46 percent, right on a par with grants.
How much is too much? But how much debt is reasonable to take on--$20,000, $60,000, $100,000? If your resources are limited, should you bother applying to pricey private colleges, where the average cost for a year's tuition, fees, and room and board is nearly $30,000? Or is it smarter to stick with a well-regarded and less expensive public school, with an average $12,750-a-year price tag?
The answer, of course, will be different for everyone.
Your decision should depend at least in part on the paycheck you expect upon graduation. An aspiring musician might want to borrow less than a future computer scientist, says Jacqueline King, director of policy analysis for the American Council on Education. A good rule of thumb: For the average college grad, it's reasonable to expect to put about 10 to 12 percent of your income a month toward paying back college loans, says Baum.
But it's tough for even the brainiest math whizzes to figure out whether borrowing more to attend a pricier school pays off in higher earnings down the road. Princeton economist Alan Krueger has shown that students who entered selective schools in 1976 did no better after college than similar students who were accepted but chose to go to less selective schools. In other words, smart and motivated kids tend to do well, careerwise.
Excerpt from USA News and World Report
posted by Educator Fran @ 1:44 PM
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