Big debts awaiting more college grads

Thursday, June 20, 2002

Leonna Essner

"One of the best things college students can do is to establish credit early." - Michael Pobst

SIKESTON -- College students have a lot on their plates these days, especially with tuition on the rise. Many students have no choice but to take out student loans, and when they graduate, they are left with large student loan and credit card debts.

According to the State Public Interest Research Group's (PIRG) Higher Education Project, nearly 40 percent of students are graduating with an unmanageable level of student loan debt. The average debt among student borrowers has almost doubled in the last 10 years to nearly $17,000. The average amount of credit card debt is $3,000.

"One of the best things college students can do is to establish credit early," said Michael Pobst, Sikeston Union Planters president. "If students use their credit card wisely to pay for things and keep the bill paid up, they won't be afraid of a bank running a credit report when they come in wanting a loan."

Most of the graduates already know what things can be done to decrease or prevent debt, it's just a matter of doing it, Pobst said. Things like cutting back expenses or moving back in with parents are the most obvious.

"New graduates should take a deep breath and take it slow," advised Jordan E. Goodman, a personal finance expert and author of "Everyone's Money Book." "That college debt is going to be with you for a while, so it's important to find a balance . . . in spending, saving and repayment."

PIRG recommends recent graduates consolidate loans during their in-school or in-grace periods to lock an even lower interest rate of 3.46 percent over the life of their loans. Given that these will be the lowest interest rates in the history of the program, borrowers should consider consolidating their loans after July 1, 2002, and before the next year's rates are set.

When seeking employment, college students should check out employment packages, Pobst said. Some businesses offer to pay off student loans if the person they hire stays with them for a certain length of time. If a business offers packages, it's definitely something to consider.

Sandy Todt of Sikeston agrees. She and her husband, Mike, have put their first daughter through college debt-free. Their second daughter is attending medical school at the University of Missouri-Kansas City. Like many parents, Todt and her husband would like to be able to pay for their second daughter's education, but it's just not realistic.

"Tuition costs about $40,000 each year, and our daughter takes out approximately $20,000 in partial loans each year," Todt said.

Depending on the student's professional field, Todt said students might want to consider taking out loans in their names instead of their parents' names. Some professions require an intense program. UMKC is a year-round program. Therefore, a higher tuition is required, Todt added.

Todt has talked to four different individuals in the medical field. "They all felt the loans should be taken out in our daughter's name because when she graduates and gets a job in the medical field, her employer might possibly pay off the loans," Todt explained.

Saving is another issue. Since the cost of living is so high, it's difficult to save money, but any amount of money that can be saved should, Pobst said.

Goodman also believes new graduates shouldn't ignore saving.

"People always say: 'I'm going to save later, but I have to pay off my student loans first,'" Goodman said. "Let's face it, you're always going to have debt -- student loans or mortgage loans or car loans. You shouldn't use debt as an excuse."