The real student debt problem

Posted on November 18th, 2014

When most people talk about student debt, they talk about it in terms of undergraduates. Indeed, undergraduate student debt remains a real issue, with the average graduate leaving college with $29,000 in student loans.

But according to Time Magazine, there’s an even bigger problem that’s not frequently talked about in the media: graduate student debt.

Graduate students owe 40% of student debt

In fact, graduate students make up just 14% of university enrollment, but account for nearly 40% of student debt.

Undergraduates entering a tough job market over the past few years have been driven toward graduate school in hopes of improving their career prospects.

In doing so, they’ve built up some serious debt. And many graduates have found that their salaries aren’t enough to help them pay off the loans quickly.

High prices and interest rates lead to graduate debt

Unlike undergraduate federal student loans, all graduate loans are unsubsidized–meaning that interest accrues on the loan while the student is in school. By the time the student graduates, they’re left with a bigger student loan burden than they can handle, particularly if they still have undergraduate student loans.

Since graduate student debt isn’t seen as as big of a problem in the media, it’s given graduate schools license to charge higher prices, according to Joel Best, a professor at the University of Delaware.

They can charge whatever they want and say to themselves that they don’t need to worry about it, the students can get loans.

Meanwhile, graduate student loan interest rates have increased, with Direct Unsubsidized Loans carrying a 6.21% interest rate. Since students can only borrow up to $20,500 per year in these loans, they have to turn to Graduate Plus Loans (7.21%) or private loans to make up the balance if their college costs exceed that amount.

Consider return on investment when going to graduate school

This recent news just highlights the dangers of going to graduate school to avoid looking for a job. It also forces students to consider whether or not their post-graduate school earnings will be enough to make up the difference they take out in loans–or if getting their Masters or Ph.D is even necessary in the field.

While students may assume they’ll make more money by going to graduate school, they need to consider the opportunity cost–the amount of money they would have made by working full-time instead of going to school–as well as the accumulated debt.

Additionally, if you work for a company for a certain length of time, you may find that they’re willing to pay for your graduate degree if it will help improve your relevant skills. It’s worth considering this route if you’re unsure you can afford graduate school on your own.

If you’re one of the many people with graduate student debt, it doesn’t have to be a financial death sentence. We can help you reduce your payments and make repayment more manageable. Give us a call at 1-888-234-3907 or contact us here to find out how we can help.

Category: Student Loans & Repayment

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