Tuesday, August 16

The Elephant in the Room: The Real Student Loan Debt Problem No One Wants to Talk About

Anthony Manfre, an Army veteran, was able to cover most of the cost for his associate’s and bachelor degrees using benefits from his GI Bill, though he still took out $4,000 worth of student loans to cover additional expenses. “At the time, I thought that was a lot,” he says. “And now I look back and wish I only owed that much.”

However, Manfre decided to pursue both a master’s and doctorate degree in marriage and family therapy, and needed to take out additional loans to cover his living expenses. Now, he’s riddled with $200,000 of student loan debt. Like many other college graduates, Manfre viewed taking out student loans as a wise investment — one that would allow him to further his career and create a better future.

He assumed he would be able to afford to pay off his loan payments post-graduation after landing a job in his field of study. Manfre — who now works for the Veterans Administration earning an annual income of $61,500 — does not feel he’s getting the return on his investment he thought he would.

“Average student loan debt has now reached over $30,000 per graduate in many states. National student debt is in excess of $1 trillion dollars,” says Ed Sparacio of the Debt Management Group. “My advice is to pay off the most expensive loans first, lower your principal if you are able to, and try to negotiate a more affordable repayment plan.”

Manfre is not alone. In fact, graduate students make up just 14% of total university enrollment, yet account for a whopping 40% of student loan debt, according to the New America Foundation. Most of the concern surrounding ballooning student loan debt has been focused on undergraduate students who are faced with steadily rising college tuition costs. For them, taking out student loans and credit cards has become a necessary evil. However, graduate students are consistently largely overlooked though they are perhaps the main contributor to the student loan crisis.

Like Manfre, many graduate students are less likely to rely on financial support from parents or other sources, and face little to no limits in the amount they are able to borrow. They are often far past the point at which their parents or family can help them cover their college expenses for tuition, room, board, supplies, etc., and as such, are likely to borrow nearly three times more per year than undergraduates.

Joel Best, a professor at the University of Delaware and coauthor of The Student Loan Mess feels the focus often falls on undergraduate students due to their sheer number, and the assumption that they are young and naive. Best feels this indifference towards graduate students allows colleges and universities to get away with continuing to increase their tuition rates.

It has allowed lawmakers to raise interest rates for graduate students, who are charged interest rates that are nearly 50% higher than those paid by undergraduates. Also, in 2012 Congress stopped subsidizing the interest that accumulates on federal student loans taken out by graduate students while they’re in school and six months after they complete their degree program — a decision that saved $1.8 billion.

It’s often assumed that those who pursue advanced college degrees will be able to earn enough to make their monthly payments, but this is becoming a rarity.

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