American Dream

The Weight of College Loans: How Parents and Grads Can Avoid Heavy Debt

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Sisyphus was a mythical Greek king who so offended the gods that he was sentenced to push a gigantic boulder up a hill forever. Today, that myth has taken on real meaning for millions of college graduates and their parents as total borrowing for higher-education passes $1.1 trillion. The huge weight of college loans is often difficult to pay off and, for many, it seems like there is no end in sight.

Falling Behind on Payment

According to research from the Federal Reserve Bank of St. Louis featured by the The Wall Street Journal, 31.5 percent of Americans paying off their student debt are at least one month behind on payments. That figure is much higher than official data from the Department of Education or from the Federal Reserve Bank of New York, which reports 17 percent. Why the difference? The latter figure determines late payments as a share of all U.S. citizens with student debt, but the article notes that 31.5 percent is probably more accurate, taking into account the borrowers who don’t yet need to pay their college loans—those either still in school or who have a grace period after graduation. As payments on college debt fall behind, typical middle-class lifestyle options begin to fade.

Hampering Middle-Class Lifestyle

With the U.S. economy still on the road to recovery after the Great Recession, many college grads are having a hard time finding jobs that compensate them enough to repay their college loans and simultaneously live a middle-class lifestyle.

Some are discovering that even if they never graduated, they’d still owe the money they borrowed. Meanwhile, declaring bankruptcy may not automatically mean loan forgiveness. The good news is that students who borrowed under federal provisions can take advantage of a restructuring plan instituted by President Obama last year.

The current student loan debt is seeping into other aspects of the middle-class lifestyle. For example, the housing market is suffering due to the crippling loan debt. Many new graduates find that their debt burden is eating up much of their income, or that difficulty in repaying is harming their credit scores. As a result, they cannot afford to do something their parents accomplished with relative ease: Buy a house. This has left a vital economic sector lagging behind.

Also at risk are parents, those Baby Boomers who have cosigned loans for their college-bound offspring. These parents may not be fully aware of the potential extent of student debt until their children stop making payments and lenders begin sending bills their way. In an attempt to bail their children out of financial crisis, parents raid their retirement funds to make the payments.

Proactive Debt Prevention

How can students and parents keep their heads above water? Here are some ideas:

  • Get a job to help with expenses, even if that means going to school part-time.
  • Seek out all possible scholarship aid, including from fraternal and affinity groups that often help members’ children.
  • Be realistic about the job possibilities in your chosen field. Don’t let that be a drag on what you want to do with your life, but tailor your borrowing to an honest evaluation of your career goals.
  • Consider alternative ways to get college credits. Community colleges offer the first two years of basic courses at a much lower cost per credit hour than four-year schools. For many schools, these credits will be easily transferred should you change schools before graduation.
  • Remember that public schools are often cheaper than private institutions, although the latter typically have more scholarship aid.

While attending college is often worthwhile, be sure to carefully consider all payment options beforehand so that the boulder of debt you might carry post-college becomes a more manageable pebble.