Mark Kantrowitz on The Value of College, Student Loans, and More

Mark Kantrowitz is the publisher of Edvisors.com and the co-author of Filing the FAFSA. He was kind enough to answer a few questions for us on the cost and value of college, students loans, and other related issues. Readers may recall that I’ve previously interviewed Anya Kamenetz, David Wilezol, and Robert Archibald. Consider this another installment in the series.

Could you tell us about the work of edvisors.com, and your role?

Edvisors.com is a comprehensive, up-to-date web site about planning and paying for college. It launched in June with coverage of more than 400 topics, including college savings, financial aid application forms, scholarships and grants, student employment, military student aid, student loans and education tax benefits. The web site has the largest glossary of financial aid and college admissions terminology.

I am publisher of Edvisors.com. Together with David Levy, editor of Edvisors.com, I act as a gatekeeper on the quality of the content on the web site. The seven Cs of Edvisors content quality are: clear, concise, correct, complete, current, consistent and context-sensitive.

We wrote a bestselling book entitled Filing the FAFSA. This book is available as a free download (in multiple formats). It is also available on Amazon.com in paperback format. Amazon.com has reduced the list price for the 2015-2016 edition, will be available by January 1, by over 60% to $9.45.

It seems that people are increasingly questioning the value of college. What’s your take?

Government grants are failing to keep pace with increases in college costs, shifting more of the burden of paying for college onto students and their families. Since family income has been flat, this forces families to either borrow more to pay for college or to shift enrollment to lower-cost colleges. They are increasingly concerned about the financial return on their college investment. They are asking not just about college costs and affordability, but also about the value of a college education. We have several articles on Edvisors.com that discuss these issues, including Why College?Is College Worth the Cost? and Reasonable Debt. On average, college is still worth the cost, since Bachelor’s degree recipients earn more than twice as much as high school graduates. But these are averages. Some people graduate with above-average debt with degrees in academic majors that lead to less lucrative occupations. The key is to keep debt in sync with income after graduation. If total student loan debt is less than the borrower’s annual starting salary, the borrower will be able to repay his or her student loans in ten years or less.

Do students have accurate perceptions about the debt loads they’re taking on? If not, why not? 

Students are often unaware of how much their college education is costing. Sometimes this is because their parents shelter them from the details. Sometimes this is because financial aid award letters blur the distinction between grants and loans. Often, students don’t realize that the “refund” they receive to pay for textbooks and other expenses is borrowed money, not free money. Every dollar they spend in student loan money will cost about two dollars by the time they repay the debt. The first step to exercising control over debt is to increase awareness of the debt. Students should participate in real loan counseling every time they borrow to pay for school and should receive annual or more frequent statements showing the total amount borrowed, how much interest is accruing, and personalized projections of debt at graduation if they continue borrowing at the same rate. The next step is to incorporate financial literacy training into the secondary school and college curricula.

How common are some of the huge debt figures we sometimes read about in the media? What are typical debt loads for undergraduate students? What about graduate students? 

News media like to report on extreme student debt figures for the shock value. In reality, only about 0.5% of recent college graduates graduated with $100,000 or more in student loan debt and a Bachelor’s degree. The reality is that the average debt at graduation for Bachelor’s degree recipients is $33,000. Most of the students graduating with six-figure debt are graduate and professional school students, such as doctors and lawyers. About half of law-school graduates and two-thirds of medical school graduates graduate with six-figure student loan debt. But most of these borrowers will also have high incomes, sufficient to repay the debt. See https://www.edvisors.com/ask/student-aid-policy/debt-at-graduation/ for full details.

Despite all the hysteria in the news media and social media about a student loan crisis, there is no student loan bubble or higher education bubble that is about to pop. Most college graduates are able to repay their student loans. We are at least two decades away from a real student loan crisis, if current trends continue. More than a quarter of borrowers in repayment would have to default on their loans each year for there to be a real student loan crisis. We aren’t there yet. Student loans are also less likely to derail the economy, since student loan payments are less than a tenth of mortgage payments (less than 0.4% of GDP) and you can’t flip an education the way you can flip real estate.

Is there any evidence that students are considering their earning prospects when they decide how to pay for college (and how much to pay)? 

Surveys suggest that students and their families are becoming more aware of and sensitive to potential earnings when choosing a college. Some students are adding minors or double-majors to ensure that they have a means to pay the rent after they graduate. Others are enrolling in lower-cost colleges and trying to reduce borrowing or borrow smarter.

Anything else you’d like to add? 

Try to minimize debt. If you must borrow, borrow federal first, as federal student loans are cheaper, more available and have better repayment terms.

Thanks again, Mark. We really appreciate this chance to interact with you. 

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