Student Loan Debt and the Role of Higher Education

Student Loan Debt and the Role of Higher Education

Todd A. Wells

University of South Florida

How much are college students borrowing to attend college and how do they learn about the repayment process? The answers to these questions must be investigated as administrators in higher education help students develop sound principles of financial literacy for a lifetime of success. Data from the U.S. Department of Education’s National Postsecondary Student Aid Study reveal that while many students are accumulating high levels of debt, these students remain the exception (Steele, P. & Baum, S., 2009). “Debt levels are increasing for all students, but more rapidly for students in the for-profit sector and for all of those earning certificates and two-year degrees.” (Steele, P. & Baum, 1, 2009). However, the increase in student loan debt is relatively small for bachelor’s degree recipients in public and private four-year colleges. No matter how small or large the amount of student loan debt, administrators from all types of colleges and universities must work to help students understand the value of student loans and the ability to pay the loans back.

A September 2010 Washington Post article indicated that the amount of student loan debt being amassed by college students and their parents totals more than $848 billion (Singletary, M., 2010). The total amount of $848 billion dollars in student loan debt does not tell the full story of most individual borrowers, and it is important to understand the distribution of debt level among college graduates. The typical debt levels of college graduates can be manageable for those who successfully enter the workforce, but there is growing concern that students who borrow much more than the average and end up with burdensome repayment obligations (Steele, P. & Baum, S., 2009). According to the College Board Policy Brief (2009), among all students who completed a degree or certificate in the 2007-2008 academic year, 41% percent graduated with no debt and over one-third had total loan debt exceeding $20,000.

With all that is known about student loan debt and the amount that students are choosing to acquire to pay for their education, are students facing a lifetime of student-loan debt? Most people are able to borrow a reasonable amount of money, pay it back, and lead better lives for having gone to college (Wilson, R., 2009). For every student that has taken reasonable amounts of student loans there are many students that are facing very real problems with the amount of acquired student loan debt. Almost 8 percent of undergraduates borrow at least double the national average (Wilson, R., 2009). Many students are not paying attention to the debt ceiling and their future ability to pay back those loans.

The amount of loan debt is also being linked to future career choices of undergraduate students. A report on negative student loan debt cited several examples of students opting out of public service career opportunities because of unmanageable student-loan payments (Rainry, A., 2006). Our society needs more students to take on careers in teaching, public service, and social work but students are choosing not to base on their ability to repay student loans. How can administrators, faculty, and staff continue to encourage students to take on public service careers when their student debt ratio becomes more than their future salary can handle?

Recommendations

Higher Education Administrators must stay informed on the level of student loan debt on their campuses. Those that work at for-profit universities and those that work at nonprofit colleges and universities face different challenges in providing financial literacy for college students. Bloomberg Business Week 2009 states that experts continue to debate the usefulness of teaching financial know-how to debt strapped students while some undergraduates are learning to manage debt themselves. American colleges and universities must step up and educate all students that take out student-loans on the concepts of debt control and repayment. A simple online loan exit tutorial is no longer enough to help students learn financial literacy. Financial counseling clinics and volunteer debt management programs are popping up at universities and colleges around the nation and are starting to provide more knowledge to debt filled and scared students.

We are at a critical point for Higher Education where we must help our students to become financially literate. All systems and cultures found in Higher Education must work together to provide students with financial information that is relevant to their current life stage. Providing modules and key educational experiences for students on budgets, account management, credit cards, debt management, and loan management will become key to the success of all students working towards becoming successful and productive citizens.

References

Bloomberg Businessweek (2009, July 23). Financial Literacy: Reaching the College Crowd. Retrieved from: http://businessweek.com/investor/content/jul2009

Rainry, A. (2006). Loan Debt Could Affect Career Choice. The Chronicle of Higher Education, Vol. 52, No. 32. Retrieved from: http://www.lexisnexis.com.ezproxy.lib.usf.edu/hottopics/lnacademic/?sfi=AC00NBGenSrch&csi=171267&shr=t

Singletary, M. (2010, September 3). What’s that sound? Student loan debt tick, tick, ticking up. The Washington Post. Retrieved from: http://washingtonpost.com

Steele, P. & Baum, S. (2009). How Much Are College Students Borrowing? The College Board: Policy Brief.

Wilson, R. (2009). A Lifetime of Student Debt? Not Likely. The Chronicle of Higher Education, Vol. 55, No. 37. Retrieved from: http://www.lexisnexis.com.ezproxy.lib.usf.edu/hottopics/lnacademic/?sfi=AC00NBGenSrch&csi=171267&shr=t