Shawna Elsberry completed all her graduate work without a single loan, and she actually regrets it. Elsberry, the director of retention at Central Oregon Community College, said her undergraduate degree was “a blur.”

“It was a horrible education experience,” Elsberry said “… I couldn’t wait to get done so I could get a job, so I could sleep.”

Elsberry often wonders how her college experience would have differed if she had accepted student loans instead of making all the money up front.

Many students come into college with backgrounds that have discouraged them from taking out loans, and therefore are leary of attaching themselves to debt, Elsberry said.

“If you take a student who is especially coming from a family culture that is thrifty,” Elsberry said, “[one with] no credit card, where if you buy a car, you pay up front … any debt is scary.”

Elsberry herself came from this background. But is borrowing money for college really a wise investment, or is it acceding to a burden that will later be unpayable?

Student loans, then and now

The free Pell Grant previously paid 80 percent of all expenses for student recipients, according to Jane Reynolds, director of enrollment services at Oregon State University-Cascades.  Now, it pays 25 percent.

“There has been a shift for education dollars away from education,” Reynolds said. “There has been less state support for colleges and universities, certainly, in the last 10 years. Tuition has to cover those costs.”

And students have to cover the cost of tuition, which is why loans have gone up, according to Kevin Multop, director of financial aid at COCC. Multop started as a loan processor before computers were integral to the process.

“Attitudes toward borrowing have changed,” Multop said. “Loans are also a better deal than they used to be. … Interest rates are significantly lower.”

But there is a psychology to borrowing that many students still cannot get past, according to Elsberry. Borrowing money when a student hasn’t even chosen their degree can be daunting.

“We think of the huge investment – ‘God, that’s a lot of money. Do you know what you’re going to do?’” Elsberry said. “All that background noise of unemployment is demotivating. It doesn’t help.”

Though Elsberry has never taken out a loan, she believes that, within reason, they are “truly, truly worth the money,” because they are not just paying for an education – they are paying for the ability to take full advantage of that education.

Loans can also help students keep up momentum. While many students run out of money in college and decide to “stop and save up,” that’s a seemingly fiscally responsible decision that could end up being a poor academic decision.

“If you stop in that undergrad area, you’re vulnerable,” Elsberry said. “Once you start, you really want to complete.”

The answer

Protections are built into the system to keep students from borrowing too much, according to Reynolds.

“By and large,” Reynolds said, “if you go to school full-time you can’t borrow too much.”

The maximum amount a student can borrow from the government in four years of school is $31,000, according to Reynolds. The average at Oregon State University statewide is $23,000, which makes the average loan payment $261 a month for ten years.

The catch? Taking longer than four or five years to complete your degree could land you in dire straits.

“I think it’s a great way to help you get through school if you can be intentional about how fast you move through your program,” Reynolds said. “Careful borrowing is not a bad thing, but you want to finish, and you want to finish as fast as you can.”

But what is ‘careful’ borrowing? It is borrowing made with your life plan in mind, according to Jacquie Carroll, campus engagement and education consultant for the nationwide student money resource program SALT.

“A good benchmark is don’t borrow more than your first year’s salary in the job of your chosen field,” Carroll said.

And that borrowing should be done in subsidized loans, because those loans don’t accrue interest during college, Carroll said. But if you are forced to borrow unsubsidized loans, you can actually start paying those off right away to avoid giant interest increases after you graduate.

“Even $15 or $20 a month,” Carroll said.

Most students also don’t know that when they begin paying off their student loans, they can change their payment plan to reflect their income.

“Once per year,” Carroll said, “If you’re underemployed or even unemployed, you can go ‘well, now that my income is this, I can only afford to pay this.’”

Is borrowing money worth it?

The Brookings Institute completed a study in February on the best place to put $102,000, which equates to roughly $25,000 over four years, according to Reynolds.

“The return on investment was 15 percent for a bachelor’s and 20 percent for an associate’s,” Reynolds said, “and that’s because of lower cost over less time, moving into the workplace faster.”

Students with degrees also have much more earning power over time. Even in the economic downturn, Reynolds said, someone with a bachelor’s degree was more likely to be employed and earning more money than someone without a degree.
“To me, $250 or $260 a month for a higher quality of life is not a bad investment,” Reynolds said.

Scott Greenstone
The Broadside
[email protected]