They’re the new 1 percenters.
Keep that figure in mind the next time you read or hear stories about students who graduated from college with six-figure debt. Those borrowers who have loaded up on $100,000 or more in college debt represent extreme situations, according to research from Mark Kantrowitz, editor of the highly popular FastWeb and FinAid college financial aid websites and author of “Secrets to Winning a Scholarship.”
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Kantrowitz’s research shows that less than 1 percent of students graduate from college with debt exceeding $100,000.
The average undergrad actually leaves college with a more affordable amount of debt, about $27,000.
Kantrowitz, a nationally recognized expert on college financial aid, scoured federal higher education records from 1992 through 2008, the latest year available, to come up with a more complete picture of students who tap the loan window the most.
Among his other findings:
• About 6.4 percent of graduate school students come out with a degree and six-figure student loan debt.
• Nearly three-quarters of the undergraduate students with six-figure debt graduated from nonprofit colleges, which confirms data from other studies.
• Students attending more expensive
more selective colleges are more likely to borrow into six figures, presumably because the top-flight education could lead to landing a job with a high income after college.
• More than half the students graduating with six-figure student loan debt also had parents borrowing from the federal parent PLUS program. According to Kantrowitz, the average parent PLUS loan was more than $50,000, although some parents borrowed $100,000 or more.
• Undergraduate students majoring in technology, architecture and history are more likely to graduate with more than $100,000 in debt, while undergraduates who majored in computer science, mathematics and health care are less likely to complete college with such a high level of borrowing.
In other words, Kantrowitz said, the majors that carry the highest debts are also among the ones with the lowest potential starting salaries. Colleges, he said, should warn students about degrees and employment prospects.
“This highlights the need for colleges to disclose data concerning debt at graduation, and unemployment rates and income after graduation” based on degree level and major, he said.
Some public university systems are trying to provide this data to incoming students, and legislation was proposed earlier this year in Congress to encourage reporting requirements.
But more than improved financial disclosure is needed.
Students and parents also need the financial skills to interpret the disclosures to make smarter borrowing decisions. It all comes back to exposing students to financial education — whether in the schools or at home — before they set foot on campus, Kantrowitz said. At the very least, more colleges should include money management as a requirement for freshman orientation.