College debt is little understood by the people who should know the most: Students

National student loan debt has reached over $1.3 trillion, with more than 40 million borrowers across the United States. I count myself among that group, having borrowed approximately $28,000 for my bachelor’s degree and another $30,000 for my master’s degree. For me, as for many others, graduating from college with debt was as much a part of the college experience as class registration and pulling all-nighters in the library.

To try to understand how students feel about borrowing for their college education and how they plan to deal with debt, New America’s Education Policy Program commissioned a survey of prospective and recently enrolled college students ages 16 to 40. We analyzed students’ responses to questions about student loan debt and compared these responses to broader national trends. We discovered that borrowing “reasonably” for college, as defined by students themselves, is not a reality for most and that students are unclear on how loan repayment is structured.

Although the majority of prospective and recently enrolled students (87 percent) indicated that borrowing some amount of money is reasonable for their college education, their idea of how much they should borrow varied widely. Of those who thought borrowing was a reasonable expectation, 55 percent said they should keep the total amount borrowed to $10,000 – the median debt that students deemed reasonable over four years of college – or less.

When students intending to borrow were asked how much debt they expected to borrow, however, the median amount jumped to over $15,000 over four years. Some outlying students estimated they would borrow much more, pulling the average expected loan debt much higher to $25,295. In other words, most students accept a certain amount of debt as reasonable, but many expect that they themselves will have to borrow more than that.

Those worrisome expectations students have about how much they’ll have to borrow carry over into their concerns about being able to repay their loans. More than half (55 percent) of prospective and recently enrolled college students who plan on borrowing voiced anxiety that they would have difficulty repaying their loans. That finding is perhaps less surprising when we look at how much students think their monthly payments will be under the standard repayment plan – a 10-year plan that students who borrow federal loans are automatically enrolled in upon leaving school. The prospective and recently enrolled students in our survey estimated their average monthly payment would be $545 per month, more than twice the national average.

And this was an overestimation. According to an analysis of student loan debt by the Brookings Institution, the current average student loan payment is $242 per month. Using the repayment estimator that the U.S. Department of Education’s Federal Student Aid office provides, we found that the monthly payment for the average estimated debt of our prospective and recently-enrolled students ($25,295) at current interest rates would be $260 – not their estimated $545 – on the standard repayment plan.

A gap in understanding

It’s clear from the numbers that these students struggle to understand exactly how much money they should borrow and how their payment will be structured. If it’s less clear how these findings can be translated into substantive policy changes, consider this. Under the current system of processing financial aid, financial aid packages fluctuate from year to year, meaning that students have little or no opportunity to understand their financial landscape in cumulative terms over the course of a four-year degree.

Practical solutions could address some of these problems. For example, if we could move to a system that uses an average of several years of income to produce an aid package that is valid over the course of an entire degree program, students would be better able to understand their total loan amounts and set plans in motion earlier for how to deal with repayment. In addition, all students currently have to undergo entrance counseling to get federal student loans. This counseling could be enhanced by providing detailed information – their cumulative balance, interest rates, and estimated monthly payments – to students each time they take out new loans.

And the structure of repayment plans could be simplified to include no more than three options, instead of the more than seven that are currently offered. These options could include the 10-year standard, an income-based repayment plan where borrowers’ payments are linked to their incomes until the debt is repaid, and a consolidation option that reduces the monthly payment and extends it over more years than under the standard plan.

As more and more students borrow for their college education, they will need to keep their debt in perspective and ensure that they are only borrowing what they find to be reasonable amounts they can afford to pay back. But it will also be essential to remember that supporting students in this process isn’t just about borrowing and debt.

The effort to help students must be two-fold: we must do a better job at helping students understand their debt, but it will also be important to focus on how to make a college education more affordable so that students can keep borrowing to a minimum in the first place. That, too, should be as much a part of the conversation on college as our $1.3 trillion dollar student loan problem and the plight of student borrowers.

Data for this article is from the College Decisions Survey.

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Sun, 10/25/2015 - 6:35am
The cost for most students for college is out of control. Average students don't get the scholarships unless they play sports. For most the answer is start at a community college and then transfer. At ours it is 4 to 5 thousand. For some start out part time to see if you are ready to handle the academic rigors it requires. Take a major that leads to a job when you are done. Get part time work in a related field if possible to you major.. Have a truth in lending bill that you and your parents read and understand, and sign it. Start getting some concessions from your professors and administration. Consider alternatives to four year degrees and maybe the military. Think outside the box. R.L.
Sun, 10/25/2015 - 7:31am
All good ideas, RL. For non-traditional students, find schools that give credit for work experience.
Sun, 10/25/2015 - 7:44am
I have 5 young adult children. All started out going to our local community college. There is great community support in our area with many scholarships available. The most any of my children paid for their community college education was a total of $1050. Two transferred to a 4 year university with all of their community college credits counting toward their degree, 2 obtained an associate degree in their line of work and one transferred to a trade school after one year at the community college. There are smart ways to get post high school education, don't forget your community college. Don't get caught up in the hype of "where" your child goes to school. The ones who got their 4 year degree, got them from "the prestigious" schools, it is just that the first 60 credits were from the community college for almost free.
Sun, 10/25/2015 - 8:40am
Central did a few years ago for their Bachelor degree programs. Need more mentoring and paid internships. Look into Multiple intelligences, and the benefits to education. R.L.
Sun, 10/25/2015 - 8:53am
My last projected payment is 2 months after my 96th birthday. How I am supposed to do that on social security is unfathomable. I have been paying for 20 years and never was I in default. Donald Trump can go bankrupt numerous times, but senior citizens have to keep on paying. Two years ago the debt was 1 trillion. At this rate of increase it will double every 7 years. All of the good options that RL proposes are being followed. I might add that my son is in his third semester of school, having joined the army 14 years ago. It is not on their agenda to allow him the time he needs for school. With the onset of our next recession we need a jubilee and clear the books.
Sun, 10/25/2015 - 10:38am
Well written article...thank you. RL, I applaud the idea of a truth-in-lending (TIL) statement. Allowing students (and their parents, if they're involved) the opportunity to meaningfully and accurately make decisions is an essential part of this dialogue. Geoffrey, had this TIL statement been presented to you, perhaps you might have made a different decision? It can be difficult even when students know the reality, as they are banking (literally) on the concept that this investment will pay off in the end. In this ever-changing workplace market, that has become much more challenging to predict. As well, it's important to recognize that education and employable skills are not something that is "purchased". Rather, the student holds the greatest responsibility toward building their own knowledge and skills, using critical and creative thinking and analysis, and acting responsibly as they achieve the self-efficacy of their own lives. That includes selecting products (the curriculum/program and institution) that are the best investment for their future. Students who willingly choose to go to high-cost institutions for reasons other than the best-bang-for-their-buck (i.e., it's a fun place...their friends are all going there...their parents went there...they had a cool brochure and slick marketing campaign...etc.) need to understand that they have personally made this decision and, therefore, are responsible for it. In other words, buyer beware! No one else should have to pay for our hangover if we chose to drink too much. This doesn't even begin to address the fact that all students do not come in the door with the same set of skills. Students who have not taken their education seriously, have been out for a while, or, unfortunately, lived in districts with sub-standard academic preparation opportunities, need to realize that there will be a cost to catching up. Any TIL statement would have to allow for a caveat that students must be at a college level for the bottom line to apply. Unfortunately, a large percentage of students entering college are not prepared both academically or with the responsibility maturity or skills that are required. This adds to the risk for the loans to not be repaid. Of course institutions need to be held accountable as well. They are charged (and financially supported with tax dollars) to ensure the highest quality education at a cost that makes sense and within a time-frame that is reasonable for college-ready students. The curriculum needs to both align to the workplace skills and content, but also to prepare the students to be able to transfer their knowledge and experience should a career shift be needed. According to the Washington Post, only 27% of college grads work within their field of study. ( That means that institutions are not only asked to align to jobs, but also to foster flexibility and core skills that will allow their graduates to be prepared no matter what comes their way. That is the basis for the U.S. liberal arts model of education. (See As well, price gouging is unacceptable. Institutions that use shiny flyers/promotions/etc. to "sell" their programs versus to help their community of students to make informed decisions should be held accountable. Being mindful to the nation, their state, and their community should be at the forefront of their focus rather than making a profit or paying unreasonable wages, etc. Community colleges can be lauded for their role in this manner, as they have proven to be a low-cost solution to the financial burden, while providing high quality products for students to select. Unfortunately, parents and students may see the community college as "settling" rather than as a good investment. Hence, we go back to the argument of buyer beware. As is evident, it's a complex issue that holds many facets of responsibility across the board. Education is an investment in our future as a nation. Remember, the students who are in college today will (hopefully) be supporting Social Security, paying taxes, and being intelligent citizens for all of our futures for tomorrow. It's easy to put in sound bites or make narrow-minded statements. The policies and decisions we make must foster responsibility by all who are involved.
Thu, 10/29/2015 - 11:22am
Being I have attended & now work at a community college, it is definitely the most financially advantageous way to go. But, the debt increase is very understandable. The rising cost of education is astronomical in this country & way out of control. The other thing that is happening are people coming to school just to get "free" money. There has been a fair amount of abuse with the financial aid system. At one time students were coming to school being eligible for grants & loans. Start their classes on the first day of the semester, maybe complete a couple weeks & then drop out after they received their refund checks from any money left over from their grants & loans. Are these debts going into that total figure? Thankfully, some strict changes have been made to limit that abuse. Things like instructor confirmation, later disbursement dates & splitting the refunds into 2 separate payments 30 days apart. But, once again the cost of education is playing a big factor in this with schools like Davenport University charging over $600 a credit hour. Some of these online schools, like Phoenix University, has been over the $600 mark for awhile. Costs of everything keep rising, but yet nobody's paychecks are, except those at the top!