The Student Loan Dilemma

Last night my wife and I attended an event held by a local high school where the guest speaker was Dr. Larry Arnn, the president of Hillsdale College.  He gave a great speech on the benefits of a liberal arts education and by the end of the evening I was totally sold on the great things a school the caliber of Hillsdale would do for my children.

He mentioned that too often students attend college simply to get “job training” rather than to truly educate themselves – that too often the only desire for attending college is so that we can gain wealth; that we need to focus on building the person, building character, and providing a depth to our studies.

I agree with him.

Afterwords I was motivated enough to head on over to the website for Hillsdale College to see what the admissions process is like.  While there I happened to notice what the estimated cost of attendance would be.

Annual cost – $31,890.

This means that to send my son or daughter to Hillsdale I can expect a 4 year degree to cost about $127,560.  And herein lies the dilemma.

I want all of what Dr. Arnn spoke about and more for my children. Shoot, I would like to go back to school myself and have the benefit of that type of education. However, when I advise my children about the type of school they go to and their choice of major in college I feel that making sure they receive some type of “job training” is going to be vital to their future happiness.

Otherwise I am condemning them to a life of student loan debt with no possible way of repaying it.  Can you imagine graduating with your undergraduate degree and having nearly $130,000 in student loans weighing you down from day one of your entry into the job market?

I am not meaning to disparage Hillsdale or any other university but when I run the numbers it can be very discouraging.  In 2011 the median income for a single person with a 4 year degree was $44,970 per year.  If you have $130,000 in student loans here is what the monthly payment would look like on a ten year standard repayment or a thirty year extended repayment:

• 10 Year Standard Repayment = $1,496 per month.
• 30 Year Extend Fixed Repayment = $902 per month

$44,970 per year breaks down to $3,747.50 before taxes.  Essentially what we have is a situation where the typical person with a 4 year degree is paying a third to half of their monthly take home pay to a student loan payment.

Granted, there are income based repayment programs that can help reduce the monthly payment, but the burden is still significant.

I don’t know what the answer is.  I want my children to have a great education and a great experience at whatever school they would like to attend.  But the reality is the cost of an education often far exceeds the earning power that education provides.  Leaving students with tens of thousands (and even hundreds of thousands) of dollars in debt – and here is the real kicker – many times there is no real option for making them go away other then death (I’m not kidding).

There are programs for teachers, government workers, and those who choose to work for non-profits, but in general many times the best that can be hoped for is a reduction in the monthly payment.

I don’t believe there is any quick solution to this problem.  And unfortunately I believe the consequences of a country whose population currently has more than $1 trillion in student loan debt but can’t repay it will soon be felt.