Bill & Melinda Gates Foundation

What's the Average Debt for a College Graduate? The Answer May Surprise You

August 29, 2013

I recently spoke to high school students in Jackson, Miss., about how they could pay for college without going broke. Before I started, I asked two questions to the more than 300 students and parents in attendance:

1. What is America’s total student debt? 

a. $1 million

b. $1 billion

c. $1 trillion

2. What is the average amount of debt a typical student borrower today?

a. $5,000

b. $15,000

c. $26,000

The answers are $1 trillion and $26,000

Less than half the audience answered correctly. When I told them the figures, their shock was palpable.

These students in Jackson were eager to go to college. Unfortunately, they knew little about their financial options and they were largely oblivious to how these decisions would impact the rest of their lives.

The students and parents had numerous questions about the complex and intimidating financial aid process: How is my financial aid package determined? What is the difference between a subsidized and unsubsidized loan? When do I have to pay my loans back? How much will it be? 

Students in Jackson are not that different from students in Atlanta, Los Angeles or Chicago. Without access to the right resources these questions go unanswered too often.

We have some ideas about how to fix the problem. For instance, strengthening the federally mandated student loan counseling requirement could go a long way towards ensuring that students and families have the information they need to make decisions about student loans. Many students say they would love more personal contact with financial aid administrators. But there is much more we can do besides encouraging schools to meet with students.

 Counseling does not solve all the problems associated with rising tuition and low completion rates - but it will help ensure that students better understand their options.

Currently, students can “click through” a series of web pages with general information to complete their counseling requirement.  A better method would be to fully incorporate personal information, already-existing repayment calculators, and interest rate differentials into a truly interactive learning experience so that students leave counseling with a thorough understanding of basic lending concepts and of their loans.

Even if students know how much they will need to repay, they often lack information about how much they will earn after college. By requiring schools to report more data and integrating it with earnings information, we could give students a better career road map.  

 By requiring schools to report more data and integrating it with earnings information, we could give students a better career road map.

When we showed students’ occupations and salaries post-graduation in our presentation, many reevaluated their major choices and how they would pay for college (i.e. more scholarships and grants).  This data makes clear how important a college degree is, but also highlights the wide variance in success and salary between schools and programs. If students are able to calculate these numbers before taking on debt, they are better able to make choices that fit their personal circumstances and aspirations.

Certainly, better information and counseling does not solve all the problems associated with rising tuition and low completion rates. But solutions like these will help ensure that students better understand their options and the impact of their decisions.  

You can see the presentation I gave in Jackson here. Please share this with high school students who can use it.

Editor's Note: The post originally asked "What is the average amount of debt a typical student graduates with today?"

 
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