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Student loan debt: Real crisis or really whiny kids?

Rising student loan debt has some people wringing their hands with concern. Is a crisis looming or is the issue overblown? You decide.

By MSN Money Partner Jul 7, 2014 2:26PM

This post comes from Maryalene LaPonsie at partner site Money Talks News.

Money Talks News on MSN MoneyI'm at a point in my life where student loans aren't a particular concern of mine. My own loans have long since been paid off, and I'm still a few years away from my oldest child entering college.

College graduate © Alys Tomlinson/Creatas Images/JupiterimagesHowever, a few months back, a photo with the following message popped up on my Facebook newsfeed.

Student loan paid faithfully for 23 years.
Borrowed: $26,400.
Paid back to date: $32,700.
Still owe: $45,276.63.
No bankruptcy or forgiveness allowed. Only death or total disability frees you. No Social Security or Medicare till paid off.

My first thought was that the numbers are obviously made up. I have a hard time imagining a student loan in which you pay for 23 years and still owe more than the principal. I also wonder how this person could possibly have a loan with a term longer than 30 years, which would seem to be the case if she still owes more than $45,000.

However, my Internet sleuthing failed to find the original source of the photo to put the figures into context.

So assuming the numbers are real, my next thought was, "How dumb can you be?" It's hard to feel sympathy when someone fails to notice for 23 years that their loan has a glaring flaw, whether that be an outrageously long repayment term, or minimum payments low enough to guarantee they'll be in debt forever.

Maybe I'm being too harsh. Maybe the student loan system does need an overhaul. Let's take a closer look at the issue together.

The size of the student debt problem

First things first: Exactly how big of a problem is student loan debt? That question may be more difficult to answer definitively than you might guess. Official government statistics are a bit behind the times, while more current data from other organizations varies.

When it comes to official data, the National Center for Education Statistics is who you want to call. However, the most recent data included in its 2013 report on the subject comes from 2009. During that year, the center says average student loan debt for new graduates was $24,700.

Organizations with 2012 data peg the number higher:

While the individual numbers are different, it appears clear that a lot of students are graduating with a lot of debt. The NCES data from 2009 indicates that 66 percent of graduates in that year left college with student loan debt. For 2012, the Project on Student Debt says that number is 71 percent. Meanwhile, the College Board puts the 2012 number of indebted students at 57 percent of those from public four-year institutions and 65 percent of those at nonprofit four-year schools.

But is it really a problem?

Those are some big numbers to be sure, but do they represent a crisis? That may depend on how you define a crisis.

The College Board finds that the distribution of outstanding student loan debt skews to smaller balances. The largest percentage of student loan debtors in 2012 had balances below $10,000.

  • Less than $10,000 -- 40 percent.
  • $10,000-$24,999 -- 30 percent.
  • $25,000-$49,999 -- 18 percent.
  • $50,000-$99,999 -- 9 percent.
  • $100,000-$149,999 -- 2 percent.
  • $150,000-$199,999 -- 1 percent.
  • More than $200,000 -- 1 percent.

Meanwhile, the Brookings Institution says there are few graduates with outrageously high balances, and that most have manageable monthly payments. According to that public policy think tank, the average monthly payment was $242 in 2010, representing 7 percent of the $71,681 average household income earned by those making monthly payments.

Critics of the report, such as The Guardian, shot back that Brookings used poor methodology and missed the larger issue of loan defaults. The U.S. Department of Education says up to 21 percent of student loan borrowers default on their loans within three years of entering repayment. Defaults were highest among students who attended for-profit schools and lowest for those from private nonprofit institutions.

In addition, those who contend student loan debt is a problem say it leads to a whole host of other problems, delayed marriage and homeownership among them, which can have a negative economic impact on the entire country.

Personal responsibility as a piece of the puzzle

For those who say student debt is a problem, the proposed solutions often involve governmental intervention. Student Debt Crisis, an organization that grew out of the website referenced in the photo above, says student loans should be treated the same as other debt.

The petitions on its website call for these reforms, among others:

  • Allow for the discharge of student loan debt in bankruptcy court.
  • Enact a statute of limitations for the collection of student loan debt.
  • Allow students to refinance and consolidate their loans.
  • Expand income tax deductions for student loan interest.
  • Make all loan repayments income-driven and limited to 10 percent of an individual's income.
  • Forgive all loans after 20 years of repayment.

All may be effective ways to reduce the number of graduates bogged down by monthly student loan payments. However, they seem to ignore the role of students in racking up student loan debt.

Rather than trying to find ways to get students out of their loans (bankruptcy and consolidation are already available in some cases), maybe the answer is to help students make smarter borrowing choices upfront.

Recent high school graduates in particular may have limited money management experience and need extra guidance to ensure they aren't overdoing it on student loans.

Practical solutions to reduce student debt

If you or your child is getting ready to head to college, try these practical solutions to keep your debt to a minimum and pay off your loans quickly after graduation.

  • Skip private loans. Student loans are available through both the federal government and private lenders. If at all possible, skip the private loans. Federal loans may not give you as much money, but the interest rate is often lower and, more importantly, fixed. Plus, if you run into trouble making payments, the feds let you ask for a deferment or forbearance, something typically not offered by private lenders. In fact, according to some reports, private student loans aren't much better than credit cards
  • Work and study at the same time. Working full time and going to school part time might not sound like a lot of fun, but it can be a smart way to get a degree debt-free. And you might not have to work so much either if you use some of the tips in this article about how to go to college without borrowing a dime
  • Choose your degree wisely. Not all degrees are created equal. Pick a field with good income potential and plenty of job opportunities to ensure that you are able to easily afford your student loan payments. We have an article on the 10 college majors with the best starting salaries. Another option would be to pursue a career that doesn't require a four-year degree. Medical diagnostic sonographers, dental hygienists and nurses are a couple options that come to mind. For more suggestions, read this article on 17 good jobs that don't require a bachelor's degree

Whether you already owe a boatload of money in student loans or haven't borrowed a dime yet, Money Talks News has plenty of practical tips and advice to help you. Search for "student loans" to find more advice and insight.

As for the original question posed in the title, what do you think? Do we have a student debt crisis on our hands, or is it more a question of entitled kids wanting something for nothing?

More from Money Talks News

Jul 7, 2014 3:37PM
I've been paying on mine for 10 years now, still owe $35K, it sure would be nice if I didn't have to pay the rest of it. But, no one else took the loan, and no one else gets the benefits from the education I received like I will. Therefore I will not accept a "bail out," and will continue to take pride in paying off the money that I promised to pay. Thank you for loaning me the money so that I could pursue my education and land the job I want.
Jul 7, 2014 3:32PM
I paid off my loans for trade school a long time ago.  I carry no debt but my wife brought about 50k worth of loans into the marriage.  I refinanced my car and house and for the last 4 years have put every penny of my raises into the loans and now we are paying 930 extra on the remaining loans every month.  The loans should be paid off in less than two years.  Suck it up and find a way to pay off your loans.  It may not be fun but it can be done.  If student loans were allowed to be absolved in bankruptcy EVERY college kid would file for it after school.  You signed up for them, you pay for them!
Jul 7, 2014 3:23PM
This is a contract. It is no different than signing a car loan or a home loan. They entered the contract of their own volition. If they do not understand the terms or conditions of the contract then they should not sign. Student loan/mortgage loan, neither should be forgiven. You and you alone are responsible for all contracts entered. The rest of society should not have to pay for the irresponsibility of a few. Be accountable for your actions. Do not expect the rest of society to bail you out when you screw up. We are not your mother and father.
Jul 7, 2014 3:46PM
Here's another suggestion. Cut out student loans altogether. Nothing has contributed more towards university coffers as the student loan program making slaves of all who choose to earn a degree. And, not only does the loan program drive up the price of tuition (because schools know they can get it) it devalues the education. We have a host of educated idiots in this country. Want proof? Read the article.
Jul 7, 2014 3:27PM
The article simply points out the obvious fact of American society in the progressive era: no responsibility is to be taken seriously for any promise made or obligation incurred. We are now well beyond the era of personal responsibility. And it will destroy the nation.
Jul 7, 2014 3:20PM
Whiny kids. Most of the complainers will put out more than the average school loan just for a car, and do it many times over their life.
Jul 7, 2014 3:47PM
You chose where to go to college; you chose not to save money for school or work while going; you chose to take out loans - you can pay them off!

I'll go for consolidation, lower interest, and income-driven, but if we allow bankruptcy, statute of limitations and write offs after x years, students will go to a private college and not pay anything for twenty years and expect them to be written off.

It took me eight years to get my Bachelor's degree because, even though I was working full time, I couldn't always pay tuition and had to skip a semester and save for the next. Because of my job, I couldn't get loans, but I got through - with zero debt. Today's kids can do it, too, they just have to want to do it and work for it.

There's also the option of scholarships; my niece just graduated from Vanderbilt, four years on a full-ride scholarship, zero debt...okay, she's exceptional, but it can be done! I have heard that millions of dollars in grants and scholarships aren't granted each year because no one applies for them. A little effort to get good grades and research options to pay for college while still in high school could make a huge difference later.

Jul 7, 2014 3:12PM
I smell another call for a bailout.  Right around election time, no doubt.
Jul 7, 2014 3:39PM
Sounds like whining, most these young people have had TOO much given to them and they do not understand earning. 
Jul 7, 2014 4:04PM
Students need to be financially responsible for themselves. I paid for college myself with no help from my parents except for $100 here and there when I really needed it (comes with the territory when you're the second oldest of five), finished in 4 years, and am still paying my loans 6 years later. I had a total of $26,000 when I left school, and have significantly less than that now (only 4 more years of payments left).

The issue here is the people like one of my former roommates. She started when I did and didn't finish until three years later. For a bachelor's degree. She never took a semester off, just floated through, dropped out of classes here and there, flunked others, rarely worked, blamed stress and her family for all her problems, etc etc etc. Her last semester, she was renting a room in the house my husband and I had purchased, and was bragging on how flush she was with money, because she had just taken out an additional $13,000 in student loans. For one semester. Where she was only taking two classes. She then proceeded to purchase more clothes than any one person should own and went out to eat all the time. She couldn't even get her rent check to us on time every month.

She's now a part-time secretary for a church. I always think back to that last loan she took out, and I just can't figure out how she ever expects to pay ANY of her loans.
Jul 7, 2014 5:56PM
My daughter now pays $5. a month on about $75,000, she also just went to a music festival for about $300.00. Do I feel sorrow for her? Nope Can she borrow money from me? Nope. Does she understand? Nope. Is she in denial? Yep.
Jul 7, 2014 3:42PM

They are responsible for the debt.  They took out the loan.   The fact that they are deadbeats does not require others to pay for them.   If the democrats want to forgive bad loans, then let them PAY for them.   I am OK if democrats don't want their money repaid.  They can forgive them.   But please stop asking us to bail out the best and brightest.  

I mean really are they that clueless?

Another case where people feel the tax payer should pick up the full tab. With the graduation rate of today about 50% don't even belong in college. If you notice the most popular colleges are the one's that are rated party colleges. As it is the tax payers have to pick up a great share of those loans not paid back and it has to be quite high. If that weren't the case you would have to  fund the loan process once and as people paid back the principal along with interest the fund should not have to be given millions a year to keep it going.
Jul 7, 2014 5:12PM

Here's a concept, perhaps new to some people.

If you take out a loan, you pay it back in full and on time - as per the agreement.

Stupid, foolish, greedy, or lazy are not excuses.

Jul 7, 2014 4:02PM
Loans are to be repaid its what you signed up for.  Suck it up and take care of your debts. You are collage educated. Have the loan looked over by a trusted advisor or attorney so you know what you are getting into from the start. Once you sign the line you own it that's how life works.
Jul 7, 2014 5:03PM
so, my son graduated debt free, working almost full time, and I helped too. Do I get a refund from the government if the kids who took out
big loans are allowed to default??? I  did not get cash for clunkers. I did not get the home buyers credit. I did not get a bailout. Selfishly, when do I get some relief.

Jul 7, 2014 4:02PM

I bet many of you walked on your mortagages when your house went upside down and you didn't make that big profit, didn't you? Expected the Gov. to bail you out didn't you? Whiny adults.

Jul 7, 2014 4:11PM

The petitions on its website call for these reforms, among others:

Allow for the discharge of student loan debt in bankruptcy court.
No.  The only reason that should be allowed is if the bankruptcy is due to some unforseeable medical crisis.
Enact a statute of limitations for the collection of student loan debt.
No.  Then it just becomes a game of outlast your creditors in phone tag.
Allow students to refinance and consolidate their loans.
Sure, if the lender is willing.
Expand income tax deductions for student loan interest.
If the government continues to resist a flat tax, student loan interest is as good a thing as anything else to allow for a deduction.
Make all loan repayments income-driven and limited to 10 percent of an individual's income.
No.  You borrowed the money, you pay it back.
Forgive all loans after 20 years of repayment
Here we go again. If they studied in a field that had potential they wouldn't be whining. But they want to take the easy way out to get THAT degree and then bitch because the market is flooded.
Jul 7, 2014 3:11PM
So is this a call for bailing out those who borrowed money to attend college?
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