It seems like a no-brainer to college students that we would want to avoid student loans.
We rent textbooks from the library, load up on coursework, and avoid dining hall fees for brown bag lunches when we can, trying to avoid the heavy burden of debt suffered by our classmates. According to nonprofit statistics the class members of 2010 each graduated with $25,000 in debt, up 5 percent from the year before.
But if you’ve ever considered avoiding a student loan – you might want to reconsider. According to an AP report, some say that students who avoid taking out student loans run the risk of not graduating.
Statistically speaking, students who take extreme steps to avoid debt at all costs may get stuck with something much more financially damaging than moderate student loan debt – that is, dropping out before they can earn their college degree.
To minimize borrowing, students are working part-time jobs and taking fewer credits, some while living at home. They’re “trading down” to less selective institutions for financial aid packages, and heading first to cheaper community colleges with plans to transfer later to four-year schools.
“There’s been such attention on student debt being unmanageable that current students have internalized that,” said Deborah Santiago, co-founder and vice president for policy research at the nonprofit group Excelencia in Education. “If you can take out a little bit of loan you’re more likely to complete. If you can go to a more selective institution that gives you more resources and support, you’re more likely to complete.”
So, what’s the upside to student loans? Federal data analyzed by The Institute for Higher Education Policy (IHEP) in 2008 shows that students who opt into loans are more likely to suceed. An estimated 86 percent of students who borrow for college are able to attend full-time, compared to 70 percent of students who don’t borrow. In addition, roughly 60 percent of full-time students receive a bachelor’s degree within eight years, compared to 25 percent of students who enroll part-time. This trend also applies to transfer students, since 26 percent of students who enroll in a community college hoping eventually to earn a four-year bachelor’s degree succeed within nine years. Compare that to 50 percent starting at non-selective four-year colleges and 73 percent at selective schools.
Isaac Romero, a third-year student at Long Beach City College, is one such student. He works a nearly 40-hour-per-week job. He goes straight from there to class from roughly 4 p.m. until 9:40 p.m. Two bus rides later he gets home often around midnight and on the weekends, he completes homework.
He hopes to transfer next year, earn a bachelor’s degree and go on to graduate school. He figures he’ll eventually have to borrow but wants to keep his debt as low as possible.
“Life would be a little more comfortable if I did take some loans,” admits Romero. “I might have a car. I wouldn’t have to take the bus for two hours.” But, its memories of seeing his father agonize over bills and seeing friends have their cars repossessed that deters him from opting into a loan. “I just don’t want to go through that,” he said.
Eloy Oakley, the president of LBCC, says he understands the source of debt aversion for some students. “The predatory lending we’ve had from private lenders, credit card companies, has scared students,” Oakley said. “I think they have a conception that all debt is bad. They’re concerned about that and rightfully so.”
But it’s important that students move through their enrolled at community colleges in a timely matter, he says, since debt aversion is a more dangerous problem overall than student debt.
“The longer they’re in school, the more opportunity they have to be distracted by life events, jobs, families, situations that change in their own families,” says Oakley. “If we can minimize those exit points and shorten their time to degree, that’s much more advantageous to them.”