Report: Student debt is a burden

(FOX Providence) - Every month, there seems to be a new report about how students are taking on more debt than ever before to get through college. It is a serious problem which consumer advocates and higher education officials are struggling to deal with. But a new study from Social Science Research suggests all that debt is not necessarily a bad thing.

Peter Kerwin from the Rhode Island Higher Education Assistance Authority, joined The Rhode Show to talk more about it.

So now we don’t have to worry about rising debt levels?

I would say we need to be afraid, very afraid, about the rising debt young people are taking on to get through college. I read about this study in a story in the New York Times last week and it reminded me of a famous research study put out by the University of Maine years ago where they suggested lobsters don’t really mind being boiled to death and eaten by us. I mean, I love lobster as much as the next guy, but I don’t believe for a minute that the trip to my table has been a pleasant one for the lobster.

Now, I will be honest with you. I haven’t read the study. I went to the Social Science Research website and wasn’t going to plonk down $31.50 to get the whole report when reading the one paragraph abstract pretty much told me the whole thing was a joke. Here’s the money quote: “We find that both education and credit-card debt increase mastery and self-esteem, supporting the hypothesis that young people experience debt as an investment in the future, and contradicting the expectation that debt used to finance current spending will lower mastery and self-esteem.”

It’s as if they are saying, “Sure, racking up a lot of debt is a real self-esteem builder. It’s the living in mom and dad’s basement when your 40 that’s a bit of a buzzkill”...without recognizing the cause-and-effect relationship. The way they frame this is to portray debt as some golden ticket which gets you into the middle class. But it’s not…it’s the college education which did that, but when that education forces young people to take on tens of thousands in debt, it really limits their options after graduation.

So what would you say to students thinking about how much debt they can take on for college?

Find your mastery and self-esteem in other ways. Taking on a mountain of debt isn’t going to do anything but create problems for you after graduation. If you are in a field where you know that degree is going to pretty much guarantee you a solid, high-income job, which will allow you to pay back a lot of loans, that’s one thing. For most students, there are no such guarantees in this economy and being left with too much student loan debt can force you to pass on certain career opportunities and delay life opportunities, like getting married, having a house and a family.

One other thing about this survey. The abstract actually stated: “We find, however, that the positive effects of debt appear to wane among the oldest young adults, suggesting the stresses of debt may mount with age.” In other words, when you wise up and have to deal with the reality of debt, you’re not going to like it. So the bottom line is don’t fall for dubious studies which try to tell you that taking on debt is a good thing. It may be good for the banks you’re in hock too…it won’t be good for you.