Posted by: mrobayna | April 27, 2012

Student Loans – Is Higher Education Worth the Debt?

With national student loan debt hitting the One Trillion dollar mark this past week and federal student loan interest rates set to double soon, student loans have gotten the attention of many in Washington over the past few weeks. Both President Obama and presumptive Republican nominee Mitt Romney have called for Congress to stop the increase of the federally subsidized student loan rates from jumping to 6.8% APR from the current 3.4%. Rates are set to increase in July as legislation signed during the Bush presidency expires, returning unsubsidized loan rates back to their 2007 levels.

Education costs have been steadily increasing for the past few years. In 2010 alone, public education saw an increase in tuition and fees of about 8.3%. In public education, this trend has been seen nationwide as state schools offset lost funding that previously came from state tax revenues.  The average borrower now graduates with $25,250 in debt. Student loan debt has gotten so high that some, like Rep. Hansen Clarke of Michigan, have called for the forgiveness of student debt if the borrower has repaid 10% of their income over the course of 10 years.

Regardless of where the political debate leads our country over the coming months, it’s evident that prospective and current college students need to adequately plan for the costs of higher education. College is still seen as one of the best investments you can make in yourself, with holders of Bachelor’s degrees earning 84% more over their lifetime than high school graduates. So if college is in your plans, it’s important to figure out your options.

So how is it possible to avoid ending up with thousands in debt to get a good education? Here are a few points for consideration when making choices about your education:

  1. Look at your entire financial aid package

Student Loans should make up just a portion of your total funds for education. Make sure you are looking at scholarship programs offered by your school, your state, or private foundations to cover part (or all!) of your tuition expenses. State and federal grants, like the Pell Grant program, also exist to fund higher education.

  1. Consider cheaper educational alternatives

Thinking about going to a four-year private university? If you plan to pay for the majority of it with loans, maybe you should consider cheaper alternatives. Many state schools offer the same education for a fraction of the cost. Attending a two-year school and then transferring to a four-year school has also been an alternative for students looking to get a degree from their school of choice, but who need to save money in the process.

  1. Understand different loan options

Generally, there are three broad categories of loans: federal loans, parent PLUS loans and private loans, each with their own interest rates and payment flexibility. Private loans tend to have the highest interest rates, which are often variable, and the strictest repayment policies.

  1. Calculate your estimated loan payments

There are many useful tools online, including this calculator, that allow you to figure out what your loans will cost you to pay back once you’ve graduated from college. Many times it’s helpful to see what all your loan debt will translate into once you’re out of school to make an educated decision about higher education.

If you are a student who is planning on going to college and want to know more about your financial options, CONNECT offers one-on-one financial aid counseling through partner Bunker Hill Community College and TERI. For more information, contact us at 617-889-1375, ext. 28.



  1. Op/Ed piece from Secretary of Education Arne Duncan

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