The Scourge of Student Debt

Brief: At What Cost? (2013).  As with his earlier brief, Has the 401(k) Been a Failure? (a previous SavvyRecommendation), Robert Hiltonsmith of Demos asks a provocative question. In short, what is the long-term financial cost for a student that incurs debt in the pursuit of higher education?

Eight Reasons Not to Get a Bachelor’s Degree

Mr. Hiltonsmith notes that student debt has skyrocketed over the past decade, quadrupling from just $240 billion in 2003 to more than $1 trillion today. Moreover, if current borrowing patterns continue, student debt levels will reach $2 trillion in 2025.

How Damaging is Debt?

The brief attempts to quantify just how much the soaring debt levels impact college-educated households’ financial stability over a lifetime. It creates a model using data from the Federal Reserve Board’s Survey of Consumer Finances and other datasets to estimate household debt and assets, comparing the projected debts and assets of a college-educated household with average levels of education debt to a similar household without debt. It finds that, over a lifetime of employment and saving, $53,000 in education debt leads to a wealth loss of nearly $208,000. Shocking numbers indeed.

At What Cost

In the brief, Mr. Hiltonsmith opines that student debt is now nearly a prerequisite for a college degree.  While I agree that  is certainly the prevailing view in our society, I don’t believe that is necessarily the case. In a comment to the blog post  Rethinking Higher Education-Part 1: Is A College Degree Really Worth $100,000? at Bright Balance Ministries, I noted three ways – often overlooked or not fully explored – in which debt can be avoided or significantly reduced:

  • Military Service. Individuals can learn a skill/trade while earning decent salary/benefits, use programs like Tuition Assistance (government pays 75% of costs) while on active duty, and the GI Bill once separated from service, all with the added bonus of serving your country. Individuals can earn a college degree (multiple degrees in fact) to pair with their training and real world experience at no expense…other than the service. 
  • College Savings Plan. Forward looking parents should start a college savings plan (e.g. 529) as soon as possible. Unfortunately, too many parents are financially illiterate which negatively impacts their children with regards to matters such as determining how to finance an education. 
  • Community College. There is no requirement, or need, to attend a university all four years. A better option is to spend the first two years at a local community college; staying at home and working at least part-time. Overall it is a great way to spend less money and be more prepared. The first two years are primarily spent just taking core courses (e.g. English) and lower level specialty courses anyway.

Final Thoughts

Correctly I believe, Mr. Hiltonsmith notes that a college education remains the surest path to a middle-class life. However, evidence has begun to mount that student debt may be far more detrimental to financial futures than once thought, particularly for those with the highest levels of debt: students of color and students from low-income families.

The At What Cost Brief? can be viewed – and downloaded (.pdf) – at the Demos website.

A PBS NewsHour segment entitled, Is a College Diploma Worth the Soaring Student Debt, offers a nice round-table discussion on the topic and is worthy of a viewing.


Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. The education system needs an overhaul, and as of now most schools are run as a business, so in order to sustain they need to have a constant flow of students willing to pay. Staying in state, going to community school, getting scholarships, and attempting to graduate as soon as possible will help any student with avoiding loans.

    • “The education system needs an overhaul.” No doubt. You won’t get any argument from me. However, I believe most agree that a college education is still a key component (for most) in finding employment success.

      Thanks for stopping by and sharing your thoughts, my friend.

  2. Thank you for this, James. You know my feelings. A college education is the surest path to a middle-class life, but the college business model sucks the big one. I’m a proponent of unbundling. Separate the trade school aspect of college from the critical thinking and wisdom aspect of college, and just base a college degree on the trade school classes. You would thus need 12-15 classes for a college degree rather than 40. This would cut the cost of a college degree by a least half.

  3. Outstanding post. My son earned his degree debt free in 4 years from Mizzou by saving and working hard. While in school he didn’t understand why I wouldn’t let him take out any student loans but now that he’s graduated, he sees the value of not being burdened with mounds of debt. In addition to the ways to avoid student loan debt noted in your article, students should also consider: 1) Dual credit courses while in high school. My son entered college with 12 hours credit that didn’t cost a dime and 2) Employer tuition reimbursement programs. They are a great way to earn both an education and a career.

    • Thanks for the great addition to the conversation. You brought up two more great ways (i.e. dual credit courses and employer tuition reimbursement programs) that families can mitigate the cost of higher education. Attaining a college degree is still a worthwhile pursuit; there just needs to be more forethought with regards to financing options and minimizing the costs. Thanks for stopping by, Kudzu. I hope you’ll stop by more often and share your insights.

  4. A comment from a reader on Google+

    “We have the same issues with student debt in Canada. Unlike most other forms of debt, government guaranteed student loans cannot be included in any kind of insolvency plan unless/until the student has been out of school for 7 years. Of course by then, it’s too late.”

  5. I too, attended a local 2 year community college, then went to a local university. Although it was hard, I had only 1 full time job and going to school, I paid my way through it. I was SO happy at the end of it (5 years later) that I owed NOTHING! It can be done, you have to do without some things for a while, but it can be done depending upon the type of school that you go to. Is the education really any better at the larger universities? I guess that would depend upon your major.
    A lot of people I know either go to or have gone to the University of Phoenix. The main reason they go there is because they have 5 week courses online. This gets them through school quicker. They pay a nice little premium to go there, but are they really getting the education they need in those classes or are they just going for the paper? I guess it is all in what you are looking for.

    • Great points, Karen. The main thing I would communicate to people is that I believe a college degree still has value; however, you have to be mindful of how it is paid for to maximize its value and not put yourself in a difficult position financially.

  6. Really great post. The cost of higher education in this country is just out of control. I look forward to reading “At What Cost?” You’re completely correct that Military Service,.Community college and a college savings plan are 3 ways to avoid debt if one chooses to attain a degree. I’m actually working on a blog series that explores the creation of a “Graduate Debt Free plan”.
    I look forward to further comments on this post.
    Great job as usual & thanks for mentioning my blog page.

    • Thanks for the great feedback. As a society we have got to do something to get the costs of college degree under control and individually – with assistance/guidance from family members – be more creative in financing advanced education and not simply take out loans at any cost.

  7. Great suggestions James. I attended a local university rather than a more expensive school somewhere else. I worked two jobs and attended school 3/4 time. Took me 5 years to finish a 4 year honours program – but when I was finished, I had zero student debt. Also I bought my first home while attending school so I was depending on my parents either. It’s hard work but I’m happy I didn’t have that millstone dragging behind me afterwards.

    • Exactly. That is the kind of creativity I am referring to. I paid for my education, attaining my Masters degree, through military service. When my wife, who earned her degree later if life, decided to go to school, we committed to paying as she went. That meant cutting back on a few thing during the five years (she was also working full-time) it took to complete school, but she walked away with her degree debt free. Thanks for adding to the conversation, Jack.

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