Student debt starts out as student loans, and if students took out no credit or borrowed less, they would naturally have less debt. Still, we don’t often talk about the loan decision as part of the larger conversation about student debt.
As I’ve written before, I believe student loans are an important investment and usually return excellent value over a lifetime of earning. If you have a choice, take out a loan or not go to college, take the loan.
But loans aren’t always a good idea. For example, if you don’t complete your degree or take out loans to attend a for-profit college, the loans may never pay off. And in general, thinking of college as a financial investment is limiting. College is about so much more than counting dollars spent and dollars received.
However, when costs and debt enter the conversation, discussion and awareness become crucial. These decisions are important.
Erika Moore, Ph.D. and engineering professor at the University of Florida initiates conversations and advises students and their stakeholders about loans and I recently had the opportunity to ask her about student loans and her advice, what she sees and what she recommends.
At the highest level, Professor Moore also sees student loans as an investment. But she says, “I believe that taking out loans to finance college should be seen as a last resort, not a standard,” she said. “I would add that we can be more resilient to credit, we can challenge the ‘financial aid’ packages that involve credit.” She described the process as borrowing against your future, which is pretty accurate.
I asked the professor for her general advice on reducing the loan amount and she said, “I encourage students and trainees to consider which school they attend and to look for alternative methods of funding their education. These alternative methods may include reducing the number of credits they take each semester and working to balance the costs, or transferring to a school that has a lower tuition per credit.”
As for the most important thing she would like to say about student loans to students or future borrowers, Professor Moore said: “I think the most important thing is to know what you owe. By knowing what they owe, students will be better informed about the status of their debt and hopefully can make plans to get their finances under control.”
As a follow-up question, I asked her what was the single, easiest thing someone could do to reduce their debt or credit burden.
She was direct: “Unfortunately, there is no such thing as an ‘easy way’, but there are a few techniques students can consider: Research job opportunities that your degree will offer you. I’m not saying this to discourage students from pursuing a passion, I’m saying this to encourage more students to think about how much a degree costs and how much you can earn with that degree. Once we have an idea of how much a degree costs, we can better plan how much we can afford to get that degree.”
She’s right – students should know these things. But she’s also right that passion counts. Or, as I would say, it is unwise to base your educational decisions solely on financial returns or their projections.
Because student debt is a hot political topic, I also asked Professor Moore for her thoughts on policy changes or rules that could make our student loan and student debt challenges a little less challenging.
“I would like to see more colleges and universities posting where their graduates end up, or their post-graduation employment rate. Earning a college degree should promise higher earning potential and more employment. We need more data on how college degrees are being used and how universities and colleges are preparing their students for careers. This is an idea to hold the promise of higher education to account.”
She continued, “For those who have already graduated and are currently in debt, I would encourage them to create a plan for how they plan to address their debt and find out what programs exist that can support them.
“For those who are currently graduating, I encourage you to get the most out of your degree. Use every single resource to be better positioned after graduation. Finally, apply for every single scholarship you are eligible for.
It’s advice worth repeating over and over again. Don’t borrow money unless you absolutely have to, as a “last resort,” as Moore says. Find ways to cut your costs, even if it means transferring to a cheaper college that will keep you on your course – although you should always check before you make the switch. And of course know what you owe. Know what you owe. Have a design before you sign.