Are your student loans causing you to graduate with a sense of dread?

Graduating with Debt

by Tom Skorupa

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You've shed your gown and joyfully tossed your cap into the air. It's an exuberant (high-spirited) start to a well-deserved celebration at having completed four or more years of serious study at an institution of higher learning. And why shouldn't you let loose and celebrate with abandon? Why, indeed!

There is great cause for celebration, but in the face of potentially debilitating debt, there may also be a good reason for lamenting, and certainly for some anxiety.

Americans now owe over a trillion dollars in student loans, head and shoulders more than even our credit card debt. What's worse is that in our economy, it's can be hard for recent graduates to find employment that allows them to make payments on their debts without considerable stress, and it's often even harder to land a job in the field for which they were trained.

With the average loan balance at graduation at $37,173, many grads are indefinitely delaying marriage, having children, buying a home, and even starting a career.

A Wall Street Journal article told the story of Jodi, who "took out $74,000 in student loans to help finance her business-management degree." At the time, it seemed like a good investment. Her "$900-a-month loan payments eat up 60% of the paycheck she earns as a bank teller, the best job she could get after graduating. Her fiancé spends 40% of his paycheck on student loans." To make their loan payments on time, they both work more than 60 hours a week, moonlighting on weekends as restaurant servers. Another recent grad, Danielle, "will have paid $211,000 for $79,000 in student loans by the time the debt is paid off in 25 years." One of the greatest challenges for bright graduates these days is to keep from falling into mind-numbing debt.

How can you keep from falling into mind-numbing debt? If you're a high school grad (or a soon-to-be grad), perhaps the place to start is to ask the question, "Is a college degree worth it, especially when tuition costs are so high and the job market is so weak?"

Mark Kantrowitz, publisher of FinAid, says, "Families are becoming more sensitive to what's the cost and what's the return?" It's true that college generally makes possible rewards that more than offset the costs, and most borrowers can make ends meet after they graduate if their starting annual salary is higher than their outstanding debt.

At the same time, it's wise to use the standard Vicki Robin (in Your Money or Your Life) proposes for any money decision: "Will I receive fulfillment, satisfaction, and value in proportion to my life energy spent?"

In that light, you might want to consider an in-state public college or school that consciously tries to keep costs down. (Interestingly, it's not just state schools; grads from many Ivy League or other top-grade colleges leave with debts less that $10,000).

Just as important is fully understanding the terms of a loan before you take one on. See if your college offers counseling in choosing loans and calculating payments.

Related: Things to Know before You Take Out a Student Loan

Make sure you max out government loans before taking out riskier private loans. Private student loans often carry uncapped, variable interest rates and aren't required to include flexible repayment options.

In contrast, government loans offer fixed interest rates and flexible options, such as income-based repayment and deferral for hardship or public service. Both private and government loans, however, lack "the most fundamental protections we take for granted with every other type of loan," says Alan Collinge, founder of

When borrowers default, collection agencies can hound them for life, because unlike other kinds of debt, there is no statute of limitations on collections. And while other kinds of debt can be discharged in bankruptcy, student loans must still be paid barring "undue hardship."

Find out if you can benefit from student loan debt help.

If you are now graduating from college with loans already in place, you have fewer options. But you can look at refinancing or consolidating your loans, which may help lower interest rates or help you find a more manageable repayment schedule.

In either case, be as careful as you would in taking out an initial loan. Have your credit in shape before beginning (you will get better interest rates) and make certain to determine if the rate is fixed or variable.

Student loan calculator iconCalculator: Are you taking on too much student loan debt?

Inquire about whether there are origination fees or prepayment fees, and how the new loan might affect your grace period, deferment, or forbearance, and if any lender incentives are available. Also, it is rarely wise to combine government and private loans when refinancing, which may compromise the more beneficial government terms.

In brief, if you do everything you can to make intelligent choices around your school finances, then when cap and gown time comes around, you'll be able to celebrate with unreserved joy and abandon. If you would like more thorough assistance in sorting through the student loan maze, please contact us at the Life Money Center. Congratulations on your graduation!

Reviewed May 2017

Tom Skorupa is the Life Money Empowerment Program Director for the Life Money Center. The Life Money Center has services not only to help people get out of debt but also then to stay out of debt.

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