How Much is Too Much Debt?
SARATOGA SPRINGS, NY — With the rising cost of higher education, more students are looking for alternatives on how to afford tuition, and this has led to more students taking on debt. The amount students are taking out in loans has also increased in recent years. At the end of 2016, 42.4 million Americans owed 1.3 trillion dollars in federal student loans. Today, students are graduating from college with an average of about 34,000 dollars in student loans. Ten years ago, the average student college debt load was closer to 20,000 dollars.
“At least half the degrees do not provide enough income to repay the debt burden so students have to be very careful about their course of study” said Jim LaVigne, Executive Director of Saratoga Sponsor-A-Scholar (a college access program).
There are also long term impacts of taking out student loans. “Allowing your child to take on excessive college debt can limit his or her flexibility to make job choices and to save for other life goals like buying a home or saving for retirement,” said Ann Dowd, CFP, vice president at Fidelity Investments.
In order to help people pay off student loans Maryland has created a Maryland SmartBuy Program that assists those with education loans in purchasing a house. The program allows people with education loans to purchase a home and wipe out college debt at the same time. There are some specific requirements for the program that include the homeowner must be a first time home buyer, remain in the house for at least five years in order to have their student debt forgiven, and they must buy a house owned by a the state’s housing department. Currently, there is ten million dollars in this program and the program is estimated to help 50 homebuyers.
Although there are programs like Maryland SmartBuy that help those with student loans, students should still be careful when taking out loans and should instead look into grants. As Ray Franke, Assistant Professor of Higher Education at the University of Massachusetts Boston, has found, unsubsidized loans lower a student’s chances of obtaining a degree while need-based grants increase a students chances of graduating within six years.
Parents need to help their children carefully decide how much in student loans they should take out because “it is hard for an 18 year old to comprehend the impact having student loans will have on their adult life” said Beth Payer, Owner and College Admissions Consultant at College & Company.