Student Loans and Stress: Initial Learnings from EARN Focus Groups on Educational Debt

As the educational debt bubble increases and available jobs become scarce, students are left stuck wondering whether a college education is actually worth the 4+ years of no income and tens of thousands of dollars of debt. Student loan default rates in the US are nearly 14%, indicating a growing problem demanding greater attention. The average college senior in 2009 carried $24,000 in student loan debt. And with nearly five unemployed people for every open job, recent college graduates are having a difficult time finding employment as they compete with seasoned out-of-work employees for entry-level positions. At graduation, students find themselves with no work, little savings, and a huge amount of educational debt.

EARN, in partnership with Marin Community Foundation (MCF), has held focus groups with Marin County residents to understand both the psychological and financial difficulties students are having with the process of paying back their loans. Here are some of our preliminary findings:

1. Fear of Accumulating Additional Debt: A majority of participants are afraid of accumulating debt and increasing their debt load, which prevents them from pursuing future educational goals. Many participants feel it is necessary to work after their undergraduate education before pursuing a graduate degree, due to the risk of accumulating an inescapable amount of debt.
2. Inflexibility of Loan Agents: The inflexibility of loans agents to work with their student loan customers makes it difficult for those in debt to meet monthly payments. Participants feel frustrated with loan agents’ lack of empathy and stringent payment guidelines. In some cases, customers default on their loans and are stuck with ruined credit scores.
3. Learned Helplessness: Due to past difficulties in working with inflexible loan agents, many individuals with student loans feel overwhelmed by their level of debt. After several failed attempts to create a workable system to pay off their debt, they internalize a sense of helplessness, concluding that any future attempt is destined to fail.
4. Minimal Financial Aid Counseling: Some colleges do not provide substantive financial aid counseling. Students are put in a position where they have to take out large loans to pay for their college tuition with minimal guidance.
5. No End in Sight: Participants express that they cannot hope to pay down their debt because many are only able to make the minimum payment, which merely pays the interest on the loan. Meanwhile, the principle remains as the loan grows.
6. Anxiety and Avoidance: People get flustered when they think about their educational debt, so they tend to put it out of their minds. Day by day, the interest compounds and the problem spins further out of control.

As EARN continues to understand the difficulties that educational debt imposes on individuals, we encourage you to let us know of any difficulties you’ve had with educational debt.

Until next week,

Javier Oliver
Policy Fellow

Photo credit: Zach Klein