Student Loans Are Not a Horror Movie

Yesterday, I saw a short film called “The Red.” In it, a recent college graduate is haunted by the red specter of her student loan debt. And after watching it I thought: “enough already!” Are there students overwhelmed by student loan debt? Yes, but it’s not every student. And we in the profession need to stop perpetuating the myth that student loans are something students should be scared of.

It is generally accepted that the average student loan debt is around $27,000. What is less discussed is the average number is skewed by a small population of borrowers with very high debt. If you were to look at median debt, the numbers tell a very different story. Based on data provided by American Student Assistance (interestingly, “The Red’s” creator), as of 2009 students left 4 year public colleges with a median student loan debt of $7,960 and 4 year private not for profit colleges with a median student loan debt of $17,040. This tells us students at 4 year public and not for profit private colleges leave with a monthly student loan payment closer to $92 to $197 respectively, not the $300 payment implied by the average.

The median debt load numbers make even more sense when you look at the distribution of student loan balances by debt level. As you can see, 40% of students have a debt level of less than $10,000 and 30% of students leave with a debt level between $10,000 and $25,000. What’s more, only 3.7% of students fall into the “horror story” category of $100,000 plus in student loan debt.

The current narrative is that going to college is going to leave you owing so much in student loans that you will never be able to buy a house or car! At what point does this narrative become a disincentive for college attendance? Or become an incentive for bad policy like putting all loans into Income Based Repayment (IBR), which could actually cost graduates more money over the long-term? And why is so much focus placed on student loan debt as opposed to lack of family planning and unchecked increased in cost of college?

The reality is that most students have manageable student loan debt. Further, there are programs in place to help students with unmanageable debt loads such as the IBR or Pay As You Earn program. We need to build awareness about student loans. Tools like the College Scorecard can help, but we need more. We need to be able to show students average debt loads and starting salaries by major (as students tend to overestimate earnings).  Only when students and families fully understand their options and their obligations will the hysteria die down. Until then, turning student loans into a horror movie is just a bad idea.

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