College Debt: Is It Worth It?

By Flora Richards Gustafson

Piggy bank and booksLesson Plan Guide

“I’m going to be in a lot of trouble,” jokes Drew Johnston as he reflects upon the college debt he already has and will incur. Johnston (not his real name) is a medical student at Washington University in St. Louis, Mo., who already has his undergraduate degree. With tuition at just over $50,000 per year, Johnston expects to have nearly $300,000 of college debt before he can add the M.D. at the end of his name. “Even though doctors can make good money, budgets are still tight during the first few years—well, it’s more like 10—after graduation,” he said.

Johnson’s projected debt is not typical, however.

Breaking down college debt
Getting an education may be one of the more complicated financial decisions you’ll have to make in your life. The average amount of college debt graduates with four-year degrees face is nearly $27,000. However, this amount varies widely by state, school, living expenses and financial assistance. In reality, debt for undergrads ranges between $17,000 and $32,000. Factors that contribute to the cost:

  • The school: Some universities and colleges cost more than others.
  • Room and board: If you live on campus, you’ll have to pay to live in a dorm and eat in the cafeteria.
  • Your major: Some areas of study require more expensive books and/or buying special supplies.
  • Fees: They vary by school, but can include the cost of parking, transportation services, club memberships, the use of labs or equipment, having an on-campus mailbox, etc.
  • Travel expenses: If you plan to commute to school, you need to consider the cost of gas or public transportation. On the other hand, if you live in a dorm, you’ll need to consider the cost of driving or flying home to see your family during breaks.
  • Your state of residence: Some colleges and universities give discounted rates to students who live in the same state.

How much a college costs
When you visit your high school counseling office, career planning office or library, you’ll find a handful of books and magazines that tell you the average cost to attend the colleges that interest you. To get more detailed information, go to the colleges’ websites and look for the academics or admissions sections. With a little digging, you’ll find information about tuition and fees.

An even better option is a Financial Aid Shopping Sheet. Once a college or university accepts you as a student, it can send you a Shopping Sheet that clearly outlines the estimated cost of attendance (including the costs of tuition, fees, transportation, books, housing, meals and supplies) in a way that’s simple to understand. The sheet also includes information about the grants and scholarships you’ve received, options available to help you pay for school (like work-study programs and educational loans), graduation rates, loan default rates, average student loan amounts and your estimated monthly loan payment. Having a Shopping Sheet for each school of interest can help you and your family make an informed decision about the best fit for your budget.

How much to borrow
In “The Financial Aid Handbook: Getting the Education You Want for the Price You Can Afford,” authors Carol Stack and Ruth Vedvik recommend borrowing $8,000 or less per year. This way, when you graduate with a four-year degree, the amount borrowed is $32,000 or less—the average yearly salary a college grad can expect.

Federal student loans are the best way to go if you need to borrow money for school; they include options such as the Perkins loan, Stafford loan and Parent PLUS loan. Also available are private student loans, but they can be riskier and typically have high interest rates.

The benefits of college debt
In general, debt isn’t a good thing to have. But, if you want to go to college, debt is often a necessity. This irritates college graduate Mari Ellison: “There are so many countries that offer free college tuition because they want people to succeed and don’t want higher education to be a burden. I don’t get why people in the States have to get buried under so much debt in an attempt to get ahead. A lot of the people I went to college with had a hard time finding a job and were screwed when they had to start repaying their student loans; they had no money. A lot of the ones that got jobs worked at, like, supermarkets or department stores for minimum wage. How is this considered ‘getting ahead’?”

While the sour economy and high jobless rates make going to college and getting into debt seem counterintuitive, there are several advantages to going to college and owing money:

  • Get a degree: For many, student loans provide the only financial means to go to college.
  • Motivation: Once you’re in college, the debt will help motivate you to graduate. As the future Dr. Johnston puts it, “You don’t want to owe thousands of dollars for nothing.”
  • A better chance at getting a job: The unemployment rate among those who don’t have college degrees is about 19 percent. On the other hand, only 8 percent of college grads are unemployed.
  • Building up credit: The interest you pay on student loans is tax deductible.
    Plus, as Ellison points out, “College debt can be a ‘good’ debt. It gives you a simple way to get good credit for the future, like when you want to buy a car or a house. …You have to think of the debt as an investment in your future.”

So, is college debt worth the trouble? The simple answer is yes, but only if you’re focused and determined to get a degree, and are willing to do the work necessary. “It’s smart if it’s enabling you to invest in your future,” said student financial aid expert Mark Kantrowitz in an interview with National Public Radio.

“There is no question that, on average, a college degree is still a very good investment. The unemployment rate for young adults who have just a high school diploma is more than twice the unemployment rate for those with a (bachelor’s degree),” said Lauren Asher, president of the Institute for College Access & Success, in an interview with

To learn more about student loans and all your options, talk to your high school’s college counselor or a financial counselor at the college of your choice, and your parents.

SIDEBAR 1: Paying it off
After you graduate from college, you have a six-month break (or grace period) before you need to start paying off your student loans. Here are more terms you should know about your debt and loan payments.

  • Grants and scholarships: Financial aid that you don’t have to repay.
  • Work-study: A college work program through which you earn money that helps you pay for the cost of your education-related expenses.
  • Loan calculator: An online tool that estimates your monthly loan payments.
  • Federal loan: A loan from the government.
  • Private loan: A loan from a private institution, like a bank.
  • Loan term: The amount of time it takes to pay off a loan.
  • Interest rate: The amount a lender charges to loan you money.
  • Fixed interest rate: An interest rate that doesn’t change during the term of the loan.
  • Variable interest rate: An interest rate that can increase or decrease during the loan’s term.
  • Default: Nonpayment of a loan or missed payments.
  • Entrance and exit counseling: Financial counseling programs that help you understand the details about your student loan. This type of counseling helps you make wise borrowing decisions and set up a good repayment plan so you don’t default.
  • Income-Based Repayment (IBR): A payment plan for federal loans that bases your monthly payment on your income.
  • Loan forgiveness: If you’re in an IBR program, the debt you owe on a federal student loan is forgiven after 25 years. However, if you work for a nonprofit or public employer, your federal student loan is forgiven after 10 years.

SIDEBAR 2 The future of interest rates: What it means for you
When considering the amount of money to borrow for college, don’t forget about interest rates. If you enroll in college during this time, have a high school diploma or GED, and take out a student loan, you’re in luck. Along with the historically low interest rate, you can also enjoy a six-month grace period without interest accruing after you graduate.

“... I try and limit spending and work as much as possible during breaks to have something to start paying back debt with. ... I’m definitely keeping certain programs like Teach for America in mind not only because they fit with my interests and later career goals, but because they also help with loan debt and repayment. I’m also looking at different options and playing around with schedules so I could potentially graduate anywhere from a semester to a year early.”
Sydney Nolan, Macalester College, St. Paul, Minn.

“... I am avoiding the fearful future of college debt by earning large academic and journalism scholarships, as well as working on-campus jobs and being an RA in order to cover my housing expenses.”
Macaela Bennett
Hillsdale College, Hillsdale, Mich.

“... Going to a CUNY wasn’t part of my plan, but it was a choice I made to avoid taking out a loan and falling into debt. I was surprised—and very fortunate—to receive a full-tuition scholarship for all four years at Hunter. ... Focusing on my studies and maintaining good grades in high school helped me to earn a merit-based scholarship. ... Continue what you are doing now—focusing in school, participating in extracurricular activities and sports, working hard at your job—because it will pay off in the future. Also, apply to as many scholarships and grants as you can; don’t be intimidated by the criteria they set. You will be surprised at how much you can benefit from doing the work now, even if it seems like a small task.”
Anjelica M. Enaje
Hunter College, New York, N.Y.

About the Author

Flora Richards Gustafson