Repairing The Financial Aid System: A Look At Six-Figure Student Debt
October 2, 2012

Recently, a report examining students who graduate with six-figure student loan debt was released by Mark Kantrowitz, veteran publisher of and Kantrowitz contends that while the number of students in this category has risen dramatically over the past ten years, so far they remain a fairly small percentage of graduating students overall. He does find, however, that looking at students in this group, and how they got there, provides significant insight into existing flaws within the process of obtaining financial aid. With these things in view, Kantrowitz is replete with suggestions as to how the financial aid system can be improved.

There are a number of factors that led to students accruing such massive amounts of debt. Graduate students are far more likely than undergrads to become so deeply indebted. Moreover, among graduate students, medical school students and law school students as a group are more likely have six-figure debt than those in PhD or graduate degree programs. This is predominantly due to the enormous cost of tuition for medical and law schools. In fact, the cost of tuition is the biggest reason for six-figure debt amongst all college students.

Kantrowitz’s recommendations for curbing this trend and for improving the financial aid process in general are myriad. Number one on his list is: “Increasing awareness of student loan debt.” He suggests that students and parents need to be aware of how debt repayment works after college so that people know what they are getting themselves into. He also asks that financial aid offices inform borrowers when they are taking out excessive loans relative to their peer group.

Next on the list: “Financial literacy training must be incorporated into the secondary school curriculum. Colleges should also require new students to participate in a financial literacy mini-course during orientation.” This is a pretty tall order. In a world that moves as quickly as our does, it’s next to impossible to keep up. The U.S. Air Force just released a video called “Welcome To 2035…the Age of Surprise.” The video shows how technology over the past century has progressed increasingly faster, so fast that there’s absolutely no knowing what to expect, no knowing what advances will be thought of next. It would be wonderfully unexpected and revolutionary if the next incarnation of education embraced curriculum with more down to earth applications; personal finance is necessary, though admittedly unglamorous one. As a student, one tends to be funneled though the heady world of academia with no real concept of what it’s for or how it relates to the sensory world outside of it. This separation of mind and body, of the theoretical from the practical, makes it hard to grasp ways of making education work for you and use it to help get you where you want to go. This kind of training, therefore, could be useful on more than one front.

Kantrowitz also advocates better government awareness of stresses in the student loan system and better distribution of information about both student loans and how that system works; he then suggests the government invest more in postsecondary education; and he advocates for the ability to discharge student loans through bankruptcy.

Students are desperately in need of knowledgeable, well-informed advocates like Kantrowitz working toward creating some much needed ventilation for the growing student loan bubble. But he is not alone in this fight; there are a number of organizations working to help people who are overburdened with student debt. Just like the recommendation in Kantrowitz’s report, the number one need is to spread awareness of these excellent resources for indebted students.