Drowning in debt: Why students loans are altering the decisions of a generation
Student Debt (RENEE TANNER/PETOSKEY NEWS-REVIEW / April 19, 2013)
The result is a generation of graduates with hefty debts and slim job prospects.
This phenomenon has caught the attention of politicians, sociologists and educators across the nation, who predict a cultural shift as a consequence of high unemployment, high debt and low job security among 18- to 34-year-olds.
How does one make monthly loan payments -- around $200 a month for the nation's average borrower -- and still save for the future when the job market is saturated and competition for any job -- let alone a high-paying job -- is cut throat?
Relief in the form of legislation is unlikely. Gov. Rick Snyder's newly unveiled budget for fiscal year 2014 includes a 2 percent increase in spending for higher education, meager compared to the state's 15 percent cut in 2012 and 3 percent reduction the year before.
It is more often the burden of parents and students themselves to attempt to find a path that fits with a young person's goals, while avoiding excessive debt.
"That's a big concern for parents and students right now. Often their number one concern," said Chelsea Kinjorski, college advisor for Boyne City and East Jordan high schools. "As a general rule, the students are thinking more conservatively."
Sometimes, under-matching occurs where students choose a school that is not a good fit academically because they don't believe they can afford one that better matches their strengths.
"Especially for students that come from low-income families, they're going to the school they can afford, not the school they should be at as far as skill level," explained Kinjorski.
Sometimes paying for a bigger university is possible for those low-income students under the right circumstances and with the right strategies, she said.
"It's a strange balancing act between searching out scholarships, seeking money from schools, seeking money from family and working. All the students looking at bigger universities are looking for jobs for the summer."
Another major way to save money and still get a degree from a bigger university is by going to a community college for a year or two after high school in order to take basic classes at a lower cost before heading to a more expensive college.
"That's one of the biggest decisions I see students making, going to a community college first and then a university," Kinjorski said. "It's how they're justifying (the expense) to themselves and to their parents."
Virginia Panoff, North Central Michigan College's director of financial aid, agrees.
Probably the best way to reduce debt while still getting a university degree is by attending a community college first, she said. Classes such as English, speech, math and history are usually transferable from a community college to a university and are offered at a fraction of the cost. Students should check with an advisor before taking the classes though, she said, to make sure they will in fact transfer to the university of their choice.
Panoff offered a few other tips for students to escape college with a degree and without tens -- or even hundreds -- of thousands of dollars of debt.
Not taking the maximum amount of aid offered and working part-time while in school are two major strategies she offered.
Schools distribute aid to students in the form of grants, federally subsidized loans and loans that are not subsidized. The aid is usually enough to cover tuition, books and room and board for the school year. If a student can work part-time while in school or save enough up over the summer, the additional money offered for non-educational costs such as rent and groceries can be covered by the student up-front instead of by loans.
The goal, said Panoff, would be to significantly reduce or eliminate the need for unsubsidized loans. The interest on these loans accrues while in school and is applied to the loan's principal. Federally subsidized loans don't have that constantly accruing interest and can be easier to pay back.