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College Student Debt Grows. Is It Worth It?

Americans now owe more on student loans than they do on credit card debt. Estimates show students graduating this year with about $27,000 in debt. (iStockphoto.com)

Part of a series on young people and financial literacy

The amount of money Americans owe on student loans recently exceeded the nation's credit card debt. That may lead many to ask: Is it smart to borrow a lot of money to go to college? Student financial aid expert Mark Kantrowitz says that college debt is OK — if you're careful.

"It's smart if it's enabling you to invest in your future," Kantrowitz tells NPR's Steve Inskeep. "But if you borrow more than your expected starting salary after you graduate, you're going to struggle to pay your loans."

  • Save before going to college.

  • Apply for scholarships.

  • Apply for federal loans before applying for private loans — they're cheaper.

  • Think hard about your major. If you don't expect your starting salary after graduation to match what you borrowed, consider a less expensive college.

  • Double major in a more lucrative field.

  • Pay interest while you're in school.

As an example, Kantrowitz says if you're going to borrow $10,000 a year for four years, you should hope that the field you've chosen has a starting salary of at least $40,000. If you are going to be borrowing more than that, he suggests looking for a less expensive school.

"I can see someone borrowing perhaps $10,000 a year if they're majoring in science, technology, engineering, mathematics, computer science or nursing," says Kantrowitz, the publisher of the FinAid and Fastweb websites.

"But I can't see borrowing that amount of money for a degree in art, or humanities, or sociology, because the jobs just don't pay as well for those fields of study," he says.

That might make some people wince — especially those who focused on liberal arts in college. Kantrowitz says it's not that those majors are worthless, but that students have to face the reality of how they're going to pay back the money they've borrowed for their education.

So what are the most worthless degrees or, at least, the hardest to monetize later on in life? Kantrowitz says he often hears from religious studies and theater majors who have a hard time paying back their loans.

Ethnomusicology is another example. Kantrowitz describes one student who was thinking of borrowing more than $100,000 to pay for that degree. "There are only two main occupations for a degree in ethnomusicology," he says. "One is being a music librarian, which doesn't pay very well. The other is being [on the] university faculty, teaching other students about ethnomusicology."

Kantrowitz suggests thinking about a double major in a field that will allow you to pay back that debt.

"I'd be the last person to tell a student not to follow their dreams," he says. "You just need to enter into it with a dose of reality, so that rather than trying to figure out how you repay your loans after you graduate, you have that conversation before you incur the debt."

Kantrowitz, who is also the author of Secrets to Winning a Scholarship, says that to a large extent, debt is unavoidable, and two-thirds of students graduate with some amount of it.

Kantrowitz tells students, "Before you spend student loan money on anything, ask yourself if you would still pay for it at twice the price. Because by the time you've paid back that student loan, it's probably going to cost you about $2 for every dollar you've borrowed."

And that money adds up to a tidy sum: For students graduating this year, Kantrowitz estimates that their debt will be about $27,000. And if you throw parents' loans into the mix, he says, the average is going to be more like $34,000.

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Transcript

RENEE MONTAGNE, host:

As we just heard, students face huge challenges in managing debt. In the U.S., student loan debt surpassed credit card debt last year. This year, it's projected to exceed a trillion dollars.

Steve Inskeep spoke with Mark Kantrowitz. As publisher of FinAid.org and FastWeb.com, he writes about the choices students need to make before they enter college.

STEVE INSKEEP, host:

So is all this borrowing for college smart?

Mr. MARK KANTROWITZ (Publisher, FinAid.org, FastWeb.com): Well, it's smart if it's enabling you to invest in your future. It's not smart if you're over-borrowing for the value of that investment. So...

INSKEEP: Over-borrowing?

Mr. KANTROWITZ: If you borrow more than your expected starting salary after you graduate, you're going to struggle to repay your loans. And I can see someone borrowing perhaps $10,000 a year if they're majoring in computer science or nursing, but I can't see borrowing that amount of money for a degree in art or humanities or sociology, because the jobs just don't pay as well for those fields of study.

INSKEEP: What are some of the most, let's say, the hardest degrees to monetize later on?

Mr. KANTROWITZ: Some of the most common majors for students who are having trouble are degrees in religious studies and theater. Ethnomusicology is one that I've written about, where I got a call and an email from a student who was contemplating borrowing six figures of debt to pay for that degree.

INSKEEP: Ethnomusicology - I mean, that's the study of music, but also of the society behind the culture behind the music. Is that right?

Mr. KANTROWITZ: That's right. And there are only two main occupations for a degree in ethnomusicology. One is being a music librarian, which doesn't pay very well. The other is being a university faculty, teaching other students about ethnomusicology.

INSKEEP: If you're having to borrow that $10,000 per year, you've got to multiply that by four years - maybe more. You should hope that the field that you're heading into has a starting salary of at least that much.

Mr. KANTROWITZ: That's right. And if you're going to be borrowing more than that, you should look for a less-expensive college, or maybe you should double major in a field that will enable you to repay that debt.

INSKEEP: So you're not saying don't become an ethnomusicologist. You are saying do it in a smart way so that you don't get in trouble later on.

Mr. KANTROWITZ: That's right. I'd be the last person to tell a student not to follow their dreams. You just need to have that kind of conversation before you incur the debt.

INSKEEP: Mark Kantrowitz is the publisher of FinAid.org and FastWeb.com. He's speaking from member station WQED in Pittsburgh. Thanks very much.

Mr. KANTROWITZ: Thank you for having me.

(Soundbite of music)

MONTAGNE: And our series Money Counts continues all week. We'll hear about a program in Virginia that teaches middle school students the value of a buck. There's more on our series at our website: npr.org.

(Soundbite of music)

MONTAGNE: This is NPR News. Transcript provided by NPR, Copyright NPR.

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