Remember the Student Debt Factor

It's that time of year when high school seniors and graduate school candidates are making their final decisions of where to go to school. There are many factors that come into play in these decisions.

Unfortunately, one of the most important factors—how much debt you will have accumulated when you graduate—is often not on the radar screen. It may be the last thing you want to think about, but factoring the amount of student loan debt you will have into your decision can pay huge dividends after you graduate.

[Follow 10 steps to picking the right college.]

As we noted in last week's post, Avoid Loan Delinquency and Default, a majority of student loan borrowers struggle to repay their loans. And, if that doesn't send a shiver down your spine, consider the fact that the unemployment rate for young college graduates rose from 5.8 percent in 2008 to 8.7 percent in 2009. That's the highest annual rate on record.

The Project on Student Debt recently released its report, "Student Debt and the Class of 2009," examining average debt levels for the 50 states, the District of Columbia, and more than 1,000 U.S. colleges and universities. It's a great resource and even comes with a map if you want to begin assessing the amount of student debt you're about to take on.

The report estimates that college seniors graduating in 2009 had an average of $24,000 in student loan debt. But there are large variations in average debt levels among states and among colleges.

State averages ranged from $13,000 to $30,000. The high-debt states were concentrated in the Northeast and the low-debt states mainly in the West. Students in Utah ($12,860 in average debt) and Georgia ($16,568) had the lowest average debt, and students in the District of Columbia ($30,033) and New Hampshire ($29,443) graduated with the highest average debt levels.

[Take 11 steps to relief from federal student loans.]

Average student debt levels among colleges ranged even more widely, from $3,000 to $61,500. The study does not rank individual colleges because the available data is not reliable enough (it was based on self-reporting), but it does identify colleges that fall into the high or low ranges. The high-debt public colleges have an average debt ranging from $28,000 to $39,000, and the high-debt private nonprofit colleges have an average debt ranging from $39,000 to $52,000 (with an outlier at $61,500). The colleges with low reported debt levels have an average debt ranging between $3,000 and $8,500.

Interestingly, while higher tuition and fees are associated with higher average debt, there are many exceptions because state and institutional resources and financial aid policies also influence student debt levels.

For example, the California Institute of Technology, Claremont McKenna College, Princeton University, and Williams College all charged more than $30,000 for tuition and fees for the 2008-09 academic year. But students graduating with bachelor's degrees from those institutions had, on average, less than $10,000 in student loans thanks to no-loan or reduced-loan financial aid policies. Other factors that influence student debt levels are the demographic makeup of the graduating class and the cost of living in the local area.

We agree that thinking about the student debt you will have to take on is not much fun. But considering the debt you are taking on before and during college can have a huge impact on your quality of life and ability to pursue the career of your choice after you graduate.

Here are three things to think about:

1. When choosing a school, factor in the amount of debt you will have to take on and whether or not it will make sense given your ultimate career goals. If College A will give you an equivalent education, is it worthwhile to pay an extra $25,000 because College B has a better football team?

2. To the greatest extent possible, only take out federal loans so you can take advantage of federal programs such as Income-Based Repayment and Public Service Loan Forgiveness when you begin repayment.

3. Only borrow what you absolutely need. A spring break vacation might feel good at the time, but it can easily end up costing you two or three times the amount you borrowed by the time you repay your loans.

Isaac Bowers is the senior program manager for Educational Debt Relief and Outreach at Equal Justice Works. He was previously an attorney at Shute, Mihaly & Weinberger LLP in San Francisco, where he focused on environmental, land use, and planning issues. A graduate of the New York University School of Law, Bowers also has extensive experience in nonprofit advocacy and outreach.

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