College folly: Student debt growing

Student loans: We love and we hate ‘em.

Sure, you get that degree that will stay on your resume for life. But, you’re also driving a beater to work, living in a smaller apartment or with more roommates than you want, and eating peanut butter and saltines every day.

Student loans are something we pass down from 1 generation to another. My father had student loans, I had student loans and my son had student loans. But it’s not the same thing for each generation.

The good old days

Going to college in my father’s generation and probably mine was a guarantee that you’d get a job — maybe a good one, depending on your career path. But is that still realistic?

“Everyone is telling stories that were true 20 or 30 years ago. Go to school, graduate and get a good job,” says Tim Lavelle, who founded ForgetStudentLoanDebt.com. “Kids should be going into this with their eyes open as to what’s out there, and what’s really not possible.”

Loading up on debt can be a disaster if your profession doesn’t pay enough to pay back that loan in a reasonable time, say 10 years. If your parents took out the student loan to help you, it could postpone their retirement for a few years, maybe forever.

RATE SEARCH: Compare student loan offers at Bankrate.com.

Regrets? Grads have a few

The Financial Security Index by Bankrate.com, released Tuesday, showed that 1 in 10 Americans and 1 in 4 millennials say their biggest financial regret is taking out too much in student loan debt.

Still, fewer parents are limiting their student’s college choice based on price, says Jodi Okun, founder of College Aid Advisors, which is affiliated with Discover Student Loans.

“Incomes are trending up, and parents are hopeful they will meet all financial needs,” she says.

Loans play a big role

The average student loan in 2016 is the highest it’s ever been. Almost a third of parents in an April survey by Discover Student Loans said student loans would be the main funding source for their child’s education, the highest in 5 years.

At the same time, 11 percent of students loans are in serious delinquency, or 90 days overdue or more. That’s up from 2 percent in 2005, according to a report by the St. Louis Fed.

To solve the problem, the Obama administration is pushing for wider adoption of income-driven repayment plans, those that tie loan payments to a percentage of earnings.

Payback’s a hitch

For its part, the Consumer Financial Protection Bureau is putting together a “Payback Playbook” to help consumers better understand the ins and outs of student loan payment. Some experts like Mark Kantrowitz, publisher and vice president of financial aid site Cappex.com, aren’t sold on it.

He says the latest iteration of the playbook doesn’t go over the total payments and interest over the life of the loan — 2 major points that shouldn’t be dismissed or ignored.

Still a good deal, though

Even with all the gnashing of teeth, a Fed economist still thinks student debt is a good deal, and manageable in the end. While the average student debt is growing, it tends to be offset by the average financial gain in the long run.

“In 2014, labor force participants aged 20 to 30 who had at least some college earned $2,353 per month on average, $750 more than people the same age with just a high school degree,” says Joel Elvery of the Cleveland Fed.

That’s “average,” though. I still think you need to look at your major when deciding how much in student debt you can take on.

“If you’re getting a bachelor of science degree in nursing, where the salaries are $60,000 to $70,000 a year, you can afford to borrow more than someone in underwater basket weaving, which presumably doesn’t pay very well, or journalism,” Kantrowitz says.

Yep, the Bureau of Labor Statistics doesn’t lie. It puts the average wage of “reporters and correspondents” at $46,560. Registered nurses make, on average, $71,000.

Woodworkers — that’s the closest job I could find to underwater basket weavers — take home $31,300 on average.

Consider how much you likely can make before picking a pricey school and signing on to 4 years’ worth of debt that could take you 10 years to pay back, if then.

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