Are Complaints About Student Loan Debt Overhyped?

With total student loan debt approaching $1 trillion and two-thirds of 2010 graduates owing back loans that average $25,250—a 5 percent increase since 2009—plenty of people are condemning the amount of money students must borrow to earn college degrees. But one education expert is bucking that trend, saying that the furor over loans has been blown way out of proportion.

In a recent story in The New York Times, Judith Scott-Clayton, a professor at Columbia University's Teachers College, says the media has sensationalized the student debt conversation by spotlighting extreme examples of college graduates with $100,000 or more in loans. She cites data from a 2009 U.S. Department of Education survey that indicates "only one-10th of 1 percent of college entrants, and only three-10ths of 1 percent of bachelor’s degree recipients, accumulate more than $100,000 in undergraduate student debt." More than 50 percent of student loan recipients graduate with less than $10,000 in debt, the data shows. Clayton makes a pointed jab at the Occupy Wall Street movement, saying, "If you have more than $75,000 in undergraduate debt, you are the 1 percent—just not the 1 percent you might have been hoping for."

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So are the organizers of the OWS-inspired Occupy Student Debt and other activists working to reform lending just whiners? Not exactly. Even students with $25,000 in debt have to take into account that their loans accrue interest—a student’s going to pay back a lot more than she borrowed, which means she’s not saving for a house, investing, or putting away money for retirement. Students are also borrowing from inflexible private lenders that charge exorbitant interest rates, adding significantly to the amount actually paid back.

College graduates do earn more over their lifetimes than their peers with only a high school diploma, but that doesn’t mean finding a job in this economy is a cakewalk. Meanwhile, costs of housing, food, transportation, and health care are skyrocketing.

Furthermore, Clayton finds that most debt is accrued in graduate school, which is troubling considering that job listings requiring master’s degrees are increasingly common. If employers won’t offer jobs to applicants with only a bachelor's degree, people in certain fields have little choice but to rack up the tens of thousands of dollars for a graduate degree just to stay economically viable. But often, the salary bump isn’t always significant enough to pay for the degree.

It seems almost unfathomable that in 1975, students at the University of California at Berkeley paid just $637 a year. Back then, graduates had little to no debt and thus were able to build a solid middle-class existence. Thirty-five years later, even in-state students are charged more than 10 times that amount. The bottom line is that whether it’s $10,000 or $100,000, student loans are putting today's graduates at a significant financial disadvantage compared to their predecessors a generation ago.

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