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Education

The New Family Legacy: Student Loan Debt

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(AP Photo/Jacquelyn Martin)
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Taking out a student loan was supposed to be a good investment in your future, but now that loan has turned into a long term debt.

Today, more and more Americans over 40 are still paying back their student loans. Their numbers have gone up significantly in the past 10 years.

Student loan debt is not only growing, it’s become a family legacy that spans generations.

To help us understand this situation WSHU's Tom Kuser speaks with author and financial advisor Tim Maurer.

Tim will be a panelist at NPR Presents: Family Matters in New Haven, Conn. on Nov. 19 at the Yale School of Management.  This forum about family financial issues will be moderated by NPR Morning Edition host David Greene and NPR Business Correspondent Yuki Noguchi.

INTERVIEW EXCERPTS:

Why is student loan debt so persistent?

We have this sense in the Untied States that in order to succeed financially you must have a college degree, and, indeed, we've all seen studies that suggest that when someone has a college degree it does pay off in the form of higher salary over time that is higher than someone who does not have a college degree, so that is absolutely correct. But at some point in time, we decided that because education is a good thing any debt taken out in support of education must also be a good thing, and that is where we have erred.

Some people decide to go back to school mid-life and get another degree even though they’re already in debt from their undergraduate studies. Why do they do this?

Because maybe they've also seen the study that also suggests that a graduate degree indeed does over time suggest that you should be making more money. The problem is that they have not considered the financial implications, necessarily, of the debt itself. So when I'm trying to give people an idea of how much debt you can take on, I might suggest that it wouldn't be higher than the first year's salary you would anticipate having after you completed your education. That would be a sustainable level of debt that a household should be able to handle, but, of course, what we're seeing is numbers that go well beyond that in some cases, and then it does become a burden for households.

Is it still true that a graduate degree is necessary?

I do believe it's still true. In fact, I believe it's more true than the last time we suggested as much. One of the reasons is that people do now anticipate that your undergraduate degree is the equivalent of the 13th grade. In other words, it's mandatory if you expect to have any financial success in your adult lifetime. So now what we have seen is growing parity in undergraduate educations, and what I mean by that is that the top level public university is not providing substantially less education than the truly top-flight private universities, even Ivy League. The result of that parity is that people should keep the cost of that undergraduate degree down as low as possible, and then you might still consider making that additional investment for the higher level graduate degree which would have more likelihood of paying you back in the long run.

Has the value of a college Education changed in the past 40 years?

I do believe it has but I think the other thing that has changed is the consideration of college as a value proposition. I'm a Generation X'er. When I talk to my dad about how he was the first of his lineal descendants to put himself through school, it was simple. He worked while he was doing his school work and ended up completing his college degree, with no help from his parents, with no debt whatsoever. It seems, we decided somewhere along the way, we decided that's just not an option. As if the only way to go forward is to be a full time student taking on the the full debt load.