Editor's Note (The View From Here)

How Much is Too Much?

This is a question being asked by many people about many things. How much student debt is OK? How much is too much? The older you are, the lower the number. In a poll published by Adam Levin, chairman of Credit.com and former director of the New Jersey Division of Consumer Affairs, one in five senior citizens and almost a quarter of adults between the ages of 35 to 49 agree that $20,000 to $50,000 in student loan debt is too much to borrow. College-age students disagree. Many feel they should borrow as much as they need. The flip side of that coin is that 73 percent of young adults who have entered the workforce say they owe more in student debt than they can manage.

The August 2013 Bureau of Labor Statistics report puts the jobless rate for recent grads (20-24) at 13 percent, and that does not take into account the underemployed. A September report by the Department of Education finds the default rate on student loans is “troubling” — to put it mildly. The rate for students who default on their loans within three years now stands at 14.7 percent. For-profit institutions have the highest three-year rate at 21.8 percent, followed by public institutions at 13 percent. Based on the lack of employment or underemployment of today’s college grads we have just scratched the surface of defaults on student loans.

The most disturbing part of this trend is not just the default on student loans, but the fact that we as a society have come to a point where we have no problem borrowing or buying on credit, knowing full well that we are not in a position to repay the debt — and not feeling bad about it. (I am not talking about families who have lost jobs through no fault of their own.) We have lost our ability to separate “want” from “need.”

The attitudes of students who feel the sky is the limit when it comes to borrowing, knowing full well it is unlikely they will be able to repay the loans, usually reflects the attitude of their parents. We are the ones who started the credit ball rolling and must be the ones to stop it. Let’s start with a mandatory course in economics and how to balance a checkbook, along with a mandatory course in personal responsibility — and open it to students and adults alike.

This article originally appeared in the October 2013 issue of College Planning & Management.

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