Editor’s note: This opinion-editorial was written by J. French Hill,  founder, Chairman & CEO of Arkansas-based Delta Trust & Banking Corp. He can be reached by email at frenchhill@delta-trust.com.

One trillion dollars – that is a very large number.  It is the size of the anxiety causing annual federal budget deficit each of the past three years.  Sadly, it is also the recently announced aggregate of the student loan debt in the United States.  Amazingly, it exceeds total credit card debt outstanding.  Indeed, it is a big number.

The Pew Research Center reports that tuition at public and private institutions is up “roughly triple since 1980 in inflation adjusted dollars”. As tuition at America’s public and private colleges and universities has grown, so, too, has the financial jujitsu that the average student and their family have to endure in order to earn a sheepskin.  The average student loan debt for borrowers under 30 years old is $28,835. And, many students have five or over ten times that amount.  According to Mark Kantrowitz, publisher of FastWeb.com, “36.2% of law school graduates and 49% of medical school graduates have debts in the six figures.”

This expense has caused some to question the value of a college degree.  Rasmussen Reports noted recently that only 57% of Americans in recent polls “thought a college degree a good idea,” down from 81% in 2008.  But, in fact, for a good many of young people, college and beyond remains a superb idea.  Just look at the difference in the unemployment number: college graduates have an unemployment rate of 4.1% versus the overall national unemployment rate of 8.2%.  College graduates continue to have better lifetime earnings and employment prospects.

Regularly, I meet students and recent graduates and discuss the immense implications of the challenge of student loan debt.  First, one should note that students are able to obtain multiple loans for tuition, fees, books and even living expenses (rent, food, etc.) and that these loans (while incurring interest and thus growing at a compound growth rate) are deferred, that is, there are no payments due until after they graduate.  This is the cruel reality.  It is hard to imagine, but many students (and their families) do not consider all the intended and unintended consequences of this temporarily “invisible” and growing burden.

Upon graduation, the chickens come home to roost and debt amortization starts.  Here the process is tedious and frustrating.  Students may have several loans with multiple lenders (Sallie Mae, banks, and U. S. Government loans).  Immediately, one is faced with which ones to prioritize and, with a poor job market, how to pay the piper.  Student loans may not be discharged in bankruptcy.  The size of the student loan proportionally to the student’s current earnings – – or, frighteningly, the next twenty years of prospective earnings – – may be a deterrent to desired marriage, family and that first home purchase.

There is a lot of criticism on the supply side of this equation – – that is, should the government make direct loans or instead only make a secondary market in loans that meet certain strict underwriting standards.  That is certainly worthy of debate.

But, in my view, the real issue remains on the demand side – – the student.  And, it is incumbent on the universities, colleges and community colleges to get their costs in line and provide true value in their degree programs.  In this vein, University of Arkansas System President Donald Bobbitt should be commended for recently calling for ways to maintain quality, but lowering the overall cost of a degree via greater use of online technology.

Some food for thought for family, high school guidance counselors and financial aid officials on our campuses:

  • Treat college funding like a first home purchase.  Understand how much you can afford using student job income, family resources and grants and scholarships.  Debt should be your last resort.
  • Determine an appropriate amount of debt related to your post graduating career plans.  Determine what a reasonable amount of debt is that will be outstanding at the end of your secondary education experience.  That is, if your goal is to be a secondary school math teacher, do not generate $100,000 in student debt.  For a future orthopedic surgeon, that amount might be readily affordable.
  • Consider the impact of your student loan on your debt-to-income ratio once you are working.  Bankers and mortgage bankers do not want your total debt-to-income ratio to exceed 45%.  This includes credit cards, home mortgage, car loan and student loan obligations.
  • High school guidance offices and college finance officials must do more to avoid this current calamity from growing.  I urge them to reassess their financial counseling plan in order to fully prepare students for the full benefits and risks of student loans.

Used properly – – like all leverage – – the student loan is a great tool.  But, make sure the amount and terms are right for you.  Students, parents, counselors – do not bury your head in the sand on this one.

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