Student Loan Debt: Real Crisis or Really Whiny Kids?

Rising student loan debt has some people wringing their hands with concern. Is a crisis looming or is the issue overblown? You decide.

I’m at a point in my life where student loans aren’t a particular concern of mine. My own loans have long since been paid off, and I’m still a few years away from my oldest child entering college.

However, a few months back, this photo popped up on my Facebook newsfeed.

Student Loan Debt

My first thought was that the numbers are obviously made up. I have a hard time imagining a student loan in which you pay for 23 years and still owe more than the principal. I also wonder how this person could possibly have a loan with a term longer than 30 years, which would seem to be the case if she still owes more than $45,000.

However, my Internet sleuthing failed to find the original source of the photo to put the figures into context.

So assuming the numbers are real, my next thought was, “How dumb can you be?” It’s hard to feel sympathy when someone fails to notice for 23 years that their loan has a glaring flaw, whether that be an outrageously long repayment term, or minimum payments low enough to guarantee they’ll be in debt forever.

Maybe I’m being too harsh. Maybe the student loan system does need an overhaul. Let’s take a closer look at the issue together.

The size of the student debt problem

First things first: Exactly how big of a problem is student loan debt? That question may be more difficult to answer definitively than you might guess. Official government statistics are a bit behind the times, while more current data from other organizations varies.

When it comes to official data, the National Center for Education Statistics is who you want to call. However, the most recent data included in its 2013 report on the subject comes from 2009. During that year, the center says average student loan debt for new graduates was $24,700.

Organizations with 2012 data peg the number higher:

While the individual numbers are different, it appears clear that a lot of students are graduating with a lot of debt. The NCES data from 2009 indicates that 66 percent of graduates in that year left college with student loan debt. For 2012, the Project on Student Debt says that number is 71 percent. Meanwhile, the College Board puts the 2012 number of indebted students at 57 percent of those from public four-year institutions and 65 percent of those at nonprofit four-year schools.

But is it really a problem?

Those are some big numbers to be sure, but do they represent a crisis? That may depend on how you define a crisis.

The College Board finds that the distribution of outstanding student loan debt skews to smaller balances. The largest percentage of student loan debtors in 2012 had balances below $10,000.

  • Less than $10,000 — 40 percent.
  • $10,000-$24,999 — 30 percent.
  • $25,000-$49,999 — 18 percent.
  • $50,000-$99,999 — 9 percent.
  • $100,000-$149,999 — 2 percent.
  • $150,000-$199,999 — 1 percent.
  • More than $200,000 — 1 percent.

Meanwhile, the Brookings Institution says there are few graduates with outrageously high balances, and that most have manageable monthly payments. According to that public policy think tank, the average monthly payment was $242 in 2010, representing 7 percent of the $71,681 average household income earned by those making monthly payments.

Critics of the report, such as The Guardian, shot back that Brookings used poor methodology and missed the larger issue of loan defaults. The U.S. Department of Education says up to 21 percent of student loan borrowers default on their loans within three years of entering repayment. Defaults were highest among students who attended for-profit schools and lowest for those from private nonprofit institutions.

In addition, those who contend student loan debt is a problem say it leads to a whole host of other problems, delayed marriage and homeownership among them, which can have a negative economic impact on the entire country.

Personal responsibility as a piece of the puzzle

For those who say student debt is a problem, the proposed solutions often involve governmental intervention. Student Debt Crisis, an organization that grew out of the website referenced in the photo above, says student loans should be treated the same as other debt.

The petitions on its website call for these reforms, among others:

  • Allow for the discharge of student loan debt in bankruptcy court.
  • Enact a statute of limitations for the collection of student loan debt.
  • Allow students to refinance and consolidate their loans.
  • Expand income tax deductions for student loan interest.
  • Make all loan repayments income-driven and limited to 10 percent of an individual’s income.
  • Forgive all loans after 20 years of repayment.

All may be effective ways to reduce the number of graduates bogged down by monthly student loan payments. However, they seem to ignore the role of students in racking up student loan debt.

Rather than trying to find ways to get students out of their loans (bankruptcy and consolidation are already available in some cases), maybe the answer is to help students make smarter borrowing choices upfront.

Recent high school graduates in particular may have limited money management experience and need extra guidance to ensure they aren’t overdoing it on student loans.

Practical solutions to reduce student debt

If you or your child is getting ready to head to college, try these practical solutions to keep your debt to a minimum and pay off your loans quickly after graduation.

  • Skip private loans. Student loans are available through both the federal government and private lenders. If at all possible, skip the private loans. Federal loans may not give you as much money, but the interest rate is often lower and, more importantly, fixed. Plus, if you run into trouble making payments, the feds let you ask for a deferment or forbearance, something typically not offered by private lenders. In fact, according to some reports, private student loans aren’t much better than credit cards.
  • Work and study at the same time. Working full time and going to school part time might not sound like a lot of fun, but it can be a smart way to get a degree debt-free. And you might not have to work so much either if you use some of the tips in this article about how to go to college without borrowing a dime.
  • Choose your degree wisely. Not all degrees are created equal. Pick a field with good income potential and plenty of job opportunities to ensure that you are able to easily afford your student loan payments. We have an article on the 10 college majors with the best starting salaries. Another option would be to pursue a career that doesn’t require a four-year degree. Medical diagnostic sonographers, dental hygienists and nurses are a couple options that come to mind. For more suggestions, read this article on 17 good jobs that don’t require a bachelor’s degree.

Whether you already owe a boatload of money in student loans or haven’t borrowed a dime yet, Money Talks News has plenty of practical tips and advice to help you. Search for “student loans” to find more advice and insight.

As for the original question posed in the title, what do you think? Do we have a student debt crisis on our hands, or is it more a question of entitled kids wanting something for nothing? Tell us your take on the issue in the comments below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

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  • Gars

    Students need to choose majors or technical schools that have a reasonable potential to produce an income that will repay the student loan.

    $24,000 is the cost of a car and I’m sure all of them will be driving a new one soon equipped with Bluetooth linked smart phones. If you want the degree, you have to sacrifice for it.

    If you can’t reasonably expect to repay a loan for education, then you shouldn’t be going into that area.

    We have a local beauty school that is notorious for producing unemployable graduates with high debt. Where’s the lenders stepping in to stop this?

    If you can’t make a living doing what you went to school for, you should not have gone to school for it. It’s a hobby.

    Remember, no loan is forgiven; it’s paid for by higher taxes from you and me.

    I worked 60 hour weeks in the summer to pay for college and took on debt to go to graduate school which provided me a profession for which I struggled in for 10 years before I became established and profitable. Time to pay some dues!

    • gadgetcc

      You have a great point when you speak of trades. My sister took up a trade instead of a degree and makes great money with no student debt. College isn’t for everyone. I also think that some of those degrees are ridiculous. These kids go in without researching what their incomes will be when they get out of school. As a result, the return on their (school) investment in none. Useless Degree + Big Student Loan = Dumb Move.

  • T L

    The woman in the referenced photo—if she exists—probably should have taken a few accounting or finance courses. She always must have paid exactly or near the absolute minimum. Finance courses should be a part of any post-secondary education and they should come at the outset before you get too deep in loans to climb out. Concepts like “interest only payments” and “paying down the principal” are not difficult to comprehend if you actually try to figure them out. Ignoring your finances, making minimum payments, and praying for the government to intervene and bail you out is not a good financial plan.

  • Brinut

    Honestly, that woman can’t be too bright. I have $45,000 of debt, pay the minimum (currently what I can afford unfortunately) and still should be able to pay it off in 10yrs. I work three jobs to pay this, would love to find something full-time but I knew when I graduated, I had to do what I needed to in order to pay them off. It’s not a matter of being “whiny”, yet I must admitt, sone of my friends are ignoring the debt and their unfortunate financial doom, it is a matter of finding a job to pay it back which actually was a hard thing to do.

  • marketfog

    Sometimes, students don’t have any common sense. Last year I ran into an Ohio State student who charged a $500 student season football ticket to his student loan. Ten years from now he will probably be complaining about his student loan. He’s an idiot.

  • Unemployed_Northeastern

    “However, they seem to ignore the role of students in racking up student loan debt.”

    It’s funny how the notion of lender responsibility is never brought up; only the 17 and 18 year olds who take out loans after a lifetime of indoctrination that college is the only way to wealth, stability, and enlightenment. Where were the student loan moralizers when Sallie Mae created the Student Loan Asset-Backed Securities market? When Congress repealed bankruptcy protections after hearing absurd, unverified camp fire tales of doctors and lawyers filing on the way home from graduation? When lenders lobbied for an exclusion to the Truth in Lending Act? When the courts excluded student loans from the auspices of the FDCPA? When legislature after legislature defunded their public institutions, knowing full well that student lending would fill in the funding gap? When private college after private college raised tuition well beyond what was needed because they understood that higher education too often operates under the Veblen Good Theory? When venture capitalists decided to supersize the for-profit sector of higher education and have 89% of their revenue come from federal student loans? Is it moral for the Department of Education to have collection rates on some categories of defaulted loans actually be higher than for those same loans in active repayment? It’s true – collection rates can be upwards of 120%; compared to defaulted credit card debt at about 25%. Is morality only for the financially naïve people who are often too young to vote or join the military? If you are against bankruptcy protections for those people, then why oh why do we have bankruptcy protections for shopaholics and degenerate gamblers and brazen house flippers? What’s good for the goose is good for the gander, after all.

    Keep lambasting the kids, by all means. But know this: your retirement, your home’s value, the health of the 70% of the economy that is consumer spending – these are all dependent on those kids being able to participate fully in the economy. If student loans choke their promise, well, your financial health will also be compromised. And that 21% default rate within three years? It’s about double what the national mortgage default rate was in 2009, and look how well that turned out.

    P.S. That Brookings report was terrible – it didn’t count anyone in forbearance, deferral, or default. That’s 50% of all student loans at the moment. In other words, it concluded that the people currently able to pay their student loans can pay their student loans. Shocking news.

    • Patrick Seitz

      Well said. People can blame and ridicule student borrowers all they want, but if they think that isolates them from the repercussions then they are kidding themselves.

      • Unemployed_Northeastern

        Yep, somehow the belief that student loan debt is the fault of kids – that they wanted the price of college to increase at more than double the clip of health care over the last few decades so that they could borrow heavily and then whine about it – has caught on with the general public. That we have an incredibly anemic entry-level job market, that real wages for college graduates are less than they were in 2000 and barely above 1970’s levels, that we now compete against tens of millions of equally talented college graduates around the world for white-collar work, that we vastly overproduce basically every type of graduate and professional degree save for doctors and engineers,* and that we can track the decrease in college grads’ earning power almost in lockstep with the nation’s mandate to increase the number of college graduates – these are all variables that people tend not to know, not to reflect upon, or simply don’t care about. The whole “next generation is going to be the doom of civilization” meme has been a thing since Plato, after all.

        – unemployed Millennial lawyer

        *We honestly have more Americans with graduate degrees today than all college graduates in the 1960’s. The number of graduate degrees given out each year in the US has increased almost 66% since 2000, mostly because only 50% of bachelors degree holders can find college-level jobs. Not that credential inflation could possibly be another factor in this mess…

      • Gars

        I wonder about the agenda of the colleges themselves.

        I currently have a niece attending the college I graduated from. As a junior, she is now starting many of the core courses I had completed as a sophomore: anatomy, physiology, organic chemistry, and physics.

        When I attended, the focus was on work and actually getting through college in 3 years. Today it seems to center on a social life and encouraging the students to stay for an extra year or two thus greatly increasing the debt.

        I know other colleges flaunt this. My friends from Eastern Illinois University used to have T-shirts that said “EIU 5 or 6 of the best years of my life!” I didn’t get it until they told me everyone takes longer than the normal 4 years to get through. :-)

  • Jh

    Maybe students should take a course in work ethic and sacrifices. I, like many of you, have taken on student loan debt and worked two jobs while attending school so I could keep my debt low and eventually eliminate the debt. I am now debt free and feel a sense of pride and accomplishment for being able to put myself through school. To read “marketfrog’s” comment on how a Ohio University student used student loan money to buy football tickets just demonstrates some problems with the student loan process. I may be dating myself a bit but when I applied for a loan it went directly to the university to pay for my education. Heck, back then I couldn’t even get a credit card as a student. In reading the article there is an underlying theme of “the easy way out”. Why should these loans be forgiven as was suggested in the website. So somebody can then go buy a house or a new car? Certainly the economy has made repaying loans more difficult. However, the real crisis isn’t the debt amount (or number of students in debt) but rather the many who view that government should step in and forgive these loans and they truly do not view this as a problem.

  • Sarah A Shunk

    I think part of the issue is parents not teaching their children about money. I had responsible parents who taught me about earning money, compound interest, loans, checks, bank accounts, credit cards, and other financial aspects. I went to a 4 year private college which did provide some financial assistance as well my parents helped. After graduating I took two overseas teaching jobs with a year of odd jobs between them. I was able to pay off the rest of my schooling within 5 years of graduating. I learned before graduating that international schools provide basic housing for their staff and a person can bring a certain amount of foreign income without being taxes. I used the life skills that my parents taught me to care for myself on a limited budget. Too many people are used to having everything given to them, the silver platter effect and parents are unfortunately part of the problem for debt.

  • tgbobbi

    Where the hell do these people go to school? I go to a state school in MA and I’ll be $50K plus in debt by the time I get my bachelors and I’ve had scholarships. Private schools are $25K plus per year! Sure, I’ll only have to pay this debt for 5 years if I want to be saddled with $1000 monthly payments or only $800 a month for 12 years. I have a family and I needed to further my education (job shipped overseas). upon graduation I’ll be making $45-$50K a year which means I’ll be paying almost 40% of my net income to school. Now I know, some folks will say, well ‘we did it when we were young’ of which I have to say, ‘No you didn’t’ and I’m not young. I’m middle-aged and have a family. When state schools charged $100 a semester in the mid 70’s, folks were making $2.35 an hour for minimum wage. Now, an average semester will cost you, wait for it, $6,500+. Minimum wage is $7.25. do the math.

  • Nick in Mass

    You’d be better off getting a personal loan from a bank or credit union with a set repayment amount and I’d suggest credit counseling. A car loan can get paid off faster than what you are doing. If it has taken you 30 years and your small $12k loan still hasn’t been paid off, you have serious financial mismanagement. According to my monthly amortization tables , $12k @ 6% for 30 years is only $71.95/month ! That’s not even $18/wk. You really need to sit down and redo your finances and start being serious and stop being in denial. The loan will not go away , but will continue to grow unless you really start throwing some serious money at it. Get some real financial help. Consumer Credit Counselling or a similar agency can steer you in the right direction. A payoff loan of $17.5k over 5 years would be around $330/mo. or about $82/wk. That would be a part time job of 10 to 15 hours per week at minimum wage. Think about it. Good luck.

  • Nick in Mass

    These articles are for the REALLY WHINEY KIDS. You took out the loans , now start paying them back. It’s like buying a(n expensive) car, except it can’t be repossessed. Caution : !! DO NOT PAY THE MINIMUM DUE on your loans. Pay more, much , much more. The sooner you start paying them back , the better. And DO NOT do an extension , because the interest still racks up when you aren’t making payments and you are just prolonging your situation. If that means living with your parents and driving a beat up piece of junk to work and having no social life on the weekends and working extra hours/shifts/holidays and working instead of going on vacation, and working 2 or 3 jobs, then do it. The sooner you pay off those loans, the sooner you’ll be free. And, no, student loans should not be forgiven, they should be PAID IN FULL.PERIOD.

  • gadgetcc

    Here’s a thought. Maybe it isn’t the fault of the kids. Maybe tuition is too high.

    Schools tuition is going up a lot faster than inflation. They continue to give lavish salaries and benefits packages. According to the Huffington Post, Gordon Gee of Ohio State made 6.1 million dollars in 2013 as head of WVU. Renu Khator, University of Houston main campus made 1.26 million dollars and there were many more. Schools know that they can jack up tuition and people have to pay them if they want the degree.

    Even though I worked through college to paid a lot of my tuition via cash (and went to community college for two years), I had over $80,000 in student loans between my husband and I. We both graduated, but had to stay home to take care of a child, so I am not able to use my degree. We had to downsize, buy used cars and live cheaply to pay this thing. Not easy. Lets also remember the kids that don’t finish college for illness or
    whatever reason, yet have a student loan that hangs over them.

    Granted, some kids are whiners and complain that interest continues to accrue on the student loan…and I can’t see the principal go up unless they take some kind of deferment or forbearance. But tuition, thus the loans, should not be so high. Maybe these kids should also be taught how money works in high school.

  • Carine Lewis

    Student loan crisis is awful(

  • Amy Whinston

    I played with the math a bit.

    If she paid $32,700 over 23 years, then that comes to $118.48 per month.

    The numbers work our if the rate is 7% per year. At 7% on $26,400, the interest begins at $137.47 per month. So her payments do not even cover the interest.

    If she had been paying $242, the average payment listed in this article, it would have been paid off 8 years ago.

  • Monique

    Wow. I paid off a 20k loan in 5 years making less than 18k to 23k the whole time. Maybe take a budgeting class?

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