Rising college debt levels

This article in The New York Times (Lewin, Tamar, “Burden of College Loans on Graduates Grows”, April 12, 2011) speaks about the growing total level of college debt, which is a function of increasing college costs, increasing numbers of students going to college and the increasing numbers of those students who need to borrow to attend school.

The article goes on to state that two-thirds of those who received bachelor degrees graduated with debt in 2008, compared with less than half in 1993. In 2010, the average loan amount for those graduates finishing college with debt was $24,000.

Attending college is great for its own sake, and also leads to substantially higher lifetime earnings and lower unemployment. However, both parents and students should consider the incremental costs and benefits of attending, for example, an expensive out-of-state private university instead of an in-state public university. Both might give the student a fine education, with good prospects for future potential graduate schools and/or jobs.

The private school might have more prestige.  The question is whether this is a sufficient inducement to incur large amounts of debt which could negatively impact the retirement plans of the parents or the future lifestyle of the student. There is no right answer to this, but it is certainly something our clients can discuss with their financial advisors.