Student loan debt - what are the options?

To cut to the chase and answer my own question, I don’t think there are any appealing options. Either you:

  1. Are fortunate enough that your family has money to give you for college, or
  2. Go deeply into debt with student loans, or
  3. Go into the workforce without a degree, hoping for the best.

Not many have option 1 available to them. That leaves most of us with a terrible choice: Go deeply into debt or remain “uneducated”.

There is perhaps one more option, that is a less expensive two-year degree or trade/vocational school. In some threads I’ve noticed a stigma associated with fast-track educations such as these on the grounds that it’s not a proper, well-rounded education. Too many consider this to be the education path of last resort. I’m not really sure where this thinking comes from. Most tradesmen will always be in demand in all but the absolute worst of economies.

What’s driving the current student debt load? Is it the notion that only those with a 4 year degree can have successful, rewarding careers? It might be time to rethink this. Likewise, some businesses might do well to relax their degree requirements for certain types of work.

Suze Orman on student loan debt and predatory lending practices:

Perhaps if it wasn’t so easy to qualify for student loans, we might not be facing such a huge debt bubble. In a free market society, we always have the option of buying elsewhere - or not at all if the price of goods and services is too high compared to the value we perceive. That doesn’t seem to be the case with education. It seems to be a given that most will spend tens to hundreds of thousands of dollars for that piece of paper, while never being secure about its value forthcoming.

Suze continues:

Do we need higher education reform? I suppose that’s why this thread is here. What form should it take? Federal bachelor degree loans? Government owned (i.e. where the faculty and staff are civil servants and the school is not just partly, but fully funded from taxes) colleges and universities? Universal access to free higher education (see Sweden, Norway, Finland et al.)?

You’ve forgotten some other options.

  1. You are poor or talented enough to get scholarships.
  2. You work and go to school simultaneously.
  3. You go into the workforce for a few years until you can save enough money to go to school.
  4. Any combination of the above (including familial assistance and taking out loans).

I wouldn’t mind seeing free universities/colleges…though I suspect they would appeal mostly to poor and poorly educated students and thus become as stigmitized and underfunded as anything else appealing to the poor and poorly educated.

I don’t really have any solutions, though. I hope someone else does…and that they are practical ones.

I went to a four year state school where a lot of the students did a combination of working while in school (some of these people took one class a semester), student loans, and a lot of them had the GI bill as well. We had lots of weekend warriors.

On #1, HELPING Junior through four years of in state tuition shouldn’t be that big of a challenge for the median income family in a median cost of living situation - I live in that neighborhood. But they have boats. And get new cars. And redo their kitchens. And take vacations. And then college comes along and a family of four making between $60k (median) and $100k (which sounds like a lot of money - but that isn’t that much money if you have two adults working outside the home) says “I can’t believe school is going to cost $15k a year and the government is giving us no financial aid. We don’t have $15k a year!” You are supposed to look at Junior in the bassinet in the hospital and then find $100 a month to set aside for college. And while that won’t send Junior through private school or let him have a dorm life, it will pay for 25% of college.

People need to be wiser. I know too many people who have HUGE debt - from private $40k a year colleges. Its one thing to work to support yourself, take six years to graduate, have Mom and Dad help because they saved, live at home, spend two plus years in community college before transferring to a four year school, and leave college with 20k in debt and a degree in Accounting/Engineering/Education - its something else to graduate from Notre Dame in 4 years with a token grant and $100k in debt and a degree in French Lit.

Whatever the solution is, we really shouldn’t reward the stupidity of kid #2.

  1. Save some money and then shop around for an affordable degree. There are still places where you can graduate debt-free or nearly so, provided you live cheaply (e.g. eating a lot of noodles, sharing a small apartment, working during spring break), and aren’t looking for a “name” school. Being willing to go to community college for a year or two and then transfer would help a lot. And as Dangerosa points out, having a family with healthy priorities goes a long way.

Note: I say affordable schools exist; not that they exist in adequate numbers for everyone.

Among academics, yes. Not so much among employers. If a two-year degree gives a marketable skill, it’s better – at least immediately --than a four-year degree that doesn’t.

This is very likely to be changing in the next decade. Political pressure is building on universities to cut costs, and they are beginning to comply: see Texas’ recently-unveiled sub-$10k degree programs. The biggest driver of cost reduction will be more courses moving online; those courses cost a sliver of traditional delivery.

These already exist; some economists would argue they are a big part of the problem.

In public universities in the US, the faculty and staff are already all state employees, and much of the budget already does come from the state. States, however, are increasingly deciding they are unable to keep funding the ever-rising costs of universities.

You can have universal access, or you can have free. Doing both is much more difficult. Many of the countries that have fully-funded education also have fairly high admissions standards.

In the US, our priority has long been on universal access, even if it means the subsidies get spread out, and even if it means some people get admitted that end up washing out. Without checking, IIRC the US is first in the world in terms of % of the population that has at least “some college.”

For certain types of jobs as well, but for a lot of those jobs, they are looking for Ivy or Ivy like educations - and those schools tend to have big endowments - and those jobs tend to pay enough to cover student loan debt.

Getting a two year community college degree and then transferring to a four year school looks better to a lot of employers than just having the AA. But more and more state systems are being set up to do just that - in part because of our emphasis on universal education. If you are going to wash out, its cheaper to do it at a two year school, and those that don’t transfer into a four year school fairly seamlessly.

Without knowing what all the pronouns in this sentence mean, I don’t really know how to respond.

The point I was making was that a two year degree can in fact be more valuable, economically, than a four year degree, if the former gives a marketable skill and latter does not. e.g. , an AS in Dental Hygiene or IT or Paralegal training likely gets you a job and sets you on a recognizable career path; a BA in Communications or Psychology or History doesn’t do either.

In the long run, the person with only an AS may hit a ceiling; but if so, they can then go back for the 4 year.

Oh yeah. I thought you were talking about Investment Bankers from High End Schools. But both are good points - you’ll likely do better as a car mechanic with a two year degree than with a History degree - at least out of the gate. And if you want to be an Investment Banker, getting that high end degree is your best bet - but the school will likely be heavily endowed and when you hit Wall Street, you’ll be able to pay back any loans pretty quickly.

Mind you, Ivies don’t offer merit-based aid, only need-based aid.

For me, this turned out to be a dagger in my side, as my parents did not support higher education, never saved up a college fund, but were middle/upper-middle class and spent a lot of money on shit like boats or cars and did not really care about what I did at all.

What this means is that need-based universities (most of the Ivies) can’t just ignore parental finances. If your family is decently well off, they’ll expect more money from your family. And if your family won’t cough it up, the burden falls to the student.

I bit the bullet and went to an Ivy (I went to two, actually, Wharton and Harvard) and took out the loans. I regret it. I suppose I could make good money by going into investment banking, but I like having a life. :confused: That seems to be part of the problem, too. The only way to totally crush your massive debt is to go into something insanely lucrative like ibanking.

You could always join the Army. The Illinois Veterans Grant paid full tuition for my (state) school, and the GI Bill was a paycheck on top of that.

I understand that this won’t work for everybody. But I hated the Army and still think it was worth it. I think a lot more people could choose this option that don’t.

And you don’t need an Ivy if you don’t go into one of those careers…that linguistics undergrad from Harvard isn’t worth significantly more than a linguistics degree from anywhere else. I have a coworker whose son is getting an Engineering degree from Stanford - that one is probably worth what they are shelling out - his summer internships have been impressive starting as a Freshman.

To me, the biggest gap is the folks who end up at a mid-low tier “you only recognize the name if its local” private school getting a liberal arts degree on loans. It MIGHT be worth it to get into Georgetown or Vassar. Its a harder justification if you are going to Gustavus Adolphus here in the lovely state of Minnesota on loans.

I have plenty of very marketable degrees (I am both engineering and business/finance) but it’s still hard to justify the loans, in my opinion, especially if you’re paying for it yourself.

Agreed with the last paragraph.

Yeah; although for I-banking, you’re probably going to get an MBA at some point if you want to climb very far, and at that point your MBA becomes the most important line on your resume. And MBA debt plus undergrad debt can be brutal.

So for example, my nephew is borderline Ivy material, and is applying to Duke and Princeton; but he also has the chance to get a basically free undergrad degree from any public school in his state. Given his interests and temperment, he’s a dead cinch for grad school; and if so, the main value of the undergrad is getting him into a good grad school. Given the cost difference, I’d recommend State Flagship over the Ivy.

Just wanted to point out real quick that this isn’t necessarily true. Many ibankers have no need to go back for the MBA (it’s more important in, say, management consulting). In many cases, your firm will help subsidize the MBA.

This is a much-overlooked distinction. I wanted to join the military for that very reason (valuable even if you hate it), and will encourage my kids to consider it.

QF the MFing T.

This ties together two of the biggest problems in the higher-ed marketplace:

  1. People think that the price is a meaningful indicator of the value of the degree; very often, it isn’t.

  2. People don’t even factor the cost into the decision, because it’s all borrowed and therefore, to an 18 year old, imaginary.

One might want to invade Denmark someday.

More than you even think. It has always been the case that top companies recruit from the top name schools. In some cases I am aware of they hire almost exclusively from those schools - even getting someone from a school not on the list in the door is difficult.

There is also a rather significant halo effect, which I benefited from and my daughter has also.

I am worried about my niece. She is attending a liberal arts school that is exactly like this, without a solid idea of what she wants to study. Whenever I tell people where she’s going, they have no idea what I’m talking about.

But I was stoked when I thought she was going to Indiana University.

Suze Orman is stupid. If you can’t pay for college with $21,500 in Stafford loans (assuming you receive no grants, no scholarships and no family aid) go to a cheaper fucking college.

I think the biggest problem people have with the school they pick is they don’t think about it as a rational, financial decision. It’s an emotional one, people get defined by where they go to school and thus they start to look at all kinds of things that really have nothing to do with how much bang for your buck you’re going to get from your chosen school.

That’s fine if most people were okay with that, but it looks like a lot of people go to the school they fall ass backwards into, that their High School girlfriend goes to, that their parents went to, or that they fell in love with for some reason–and then later regret it big time if it ends up it wasn’t actually a great financial move for them.

Just about every college in the country makes sense for someone, but none make sense for everyone. High School seniors and their parents really need to do a lot more research on what the student wants their occupation to be, what schools are important for that occupation, and a variety of other similar issues. With many fields (engineering is a good example) some of the best schools are the more respect public schools. They have very good tuition rates, often phenomenal for instate, and often have very good scholarship programs for instate students. They also tend to have a decent working relationship with at least a few community colleges in that same state, where you can go to satisfy a lot of general degree requirements at an even lower cost/credit.

But without going into the nitty gritty of your personal situation it really is impossible to say what school is right for you–and most people don’t do that. Just as an example as to how crazy it can get, for some people it’s actually significantly cheaper to attend an Ivy League school than a respected large state school. This can happen if the student qualifies for a lot of need based awards from the Ivy league school and they are considering going to a prestigious out of state public school (out of state tuition at some of the better public universities is often on par with private tuition.)

And for that matter if you for some reason really need to go to an out of state public school I almost can’t imagine a scenario in which it’s not better to move to that state and work for a year and then start school (thus getting in state tuition your entire time in school.)

This is the crux of the matter, to me. These decisions are essentially not rational. They are driven by family expectations and (often) faulty information. When I was 18, college was not even considered a choice. I HAD to go. Nonetheless, my parents didn’t have cash to help (they were legitimately strapped- no boats or house expansions in our family. We could afford to order Pizza Hut once a week - that was about it.). Thinking I was doing the right thing, I went to cheap in-state college (a good one, too!).

I got lots of loans, because my mom didn’t want me to work. It wasn’t forbidden or anything, but she really really discouraged it. So loans covered my living expenses, dorms, and tuition. I dropped out after two years to volunteer abroad. I figured I’d come back after a bit and finish up, since I had covered my general education requirements at that point anyway.

Took quite a while before I came back, and by that time I had been abroad so long wasn’t a resident of any state. I went to a cheap private school that had the field I was looking for and finished quickly. But this took more loans. Then I discovered that I needed a Masters to really do anything in my field, so I got that online from WGU, again borrowing whatever I was legally allowed to, and working hard to set up a business at the same time.

All of this made some degree of sense at the time, but looking back on it, I was giving way too much credence to the idea of salary increases. They just don’t come in my field, and when they do, it’s not really enough to offset the debt.

As it turns out, though, if you live abroad and use the IBR program, you pay nothing anyway. So that’s an option.