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| JESSICA KOLDITZ / Scroll photo illustration |
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As college students find loans more and more accessible, they are ending up in debt more often than not.
In 2004, two-thirds of all four-year college graduates were in debt at the time of graduation, according to a report issued by the State Public Interest Research Group in April 2006. In 1993, one-third graduated with debt.
Not only are students graduating with more student loan debt; many have more debt than they can manage in their chosen career. PIRG studied the effects of student debt on low-paying public service careers and found 23 percent of public college graduates and 38 percent of private college graduates had more debt at graduation than they could manageably repay as starting teachers.
College education is expensive, and many find they need to go into debt to get through school.
“As costs continue to swell, students are taking on more and more debt to pay for their degrees,” according to the State PIRG report.
A college education is worth more than $1 million in future earnings as the job market becomes more global and knowledge-based, according to the U.S. Department of Education. Some think going into a few thousand dollars of debt to acquire that education is worth it.
“As a general rule, I don’t think there’s anything wrong with going into debt for school,” said Ken Stout, store manager of the Wells Fargo bank in Rexburg. “However, running up credit card balances is not a wise choice.”
But some are averse to debt and avoid going to college because they do not want to go into much debt, according to the PIRG report.
Debt is common because it is accessible. Few students have trouble getting a credit card, student loan or even car loan. Loaning agencies are eager to get students’ business and the government also tries to help with subsidized student loans.
“One reason debt is prevalent is that it is too available,” said Kenneth Jackson, director of financial aid at BYU-Idaho. “For example, getting a loan is becoming simpler and faster in the Financial Aid Office; what used to take several weeks now takes five days.”
Stout said most BYU-I students who hold an account at Wells Fargo come looking for loans of some type, including credit cards. Most loans the bank gives to students are student loans.
Debra Plomaritis, a personal banker at U.S. Bank in Rexburg, said about 20 percent of students with accounts at U.S. Bank come looking for loans of some type, not counting credit cards. Most of those students are looking for car loans or loans to start their own businesses, Plomaritis said.
When students do need to borrow money, many get into trouble because they don’t know how to go about it.
Some don’t know how to budget and others just don’t know where to go for help and advice.
There is a concern about students’ financial literacy, Jackson said. There is a big concern that students are too far into debt and they don’t understand how interest works, though a lot do just fine.
Many undergraduate students are facing a growing problem in credit card debt. Nationally, 76 percent of undergraduates in 2004 began the school year with credit cards, and the average outstanding balance was $2,169, according to a report done by Nellie Mae, a lending institution.
Rick Hirschi, a professor in the Economics Department, said many students get into financial trouble because they want to have everything their parents have right now, even though it took a whole lifetime for their parents to acquire it.
Jackson agreed, asking, “Does everything in the kitchen have to match?”
“If you can get through school without the debt, you’re that much better off,” Hirschi said. He suggested students have a specific plan to pay off a loan before they incur the debt.
Students need to plan out what their resources are and what their needs are.
“Budget and live on that budget. The first month on that budget may not work, but just keep trying,” Jackson said. “The key is desire and discipline.”
Students can get help and advice about debt from counselors in the Financial Aid Office. Many Web sites also offer advice and information, such as money.cnn.com, myfico.com and bankrate.com.
