Nervous about student loans? You’re not the only one

The student loan crisis is on everyone's mind, and it's making many students anxious. Find out why.

By Team XQ

Student loan debt isn’t just a school problem, it’s a national economic crisis that affects more than 44 million students and their families, and is keeping a generation of young people from achieving financial freedom. It also affects the economy; combined student loan debt in the U.S. exceeds $1.5 trillion, higher than the nation’s credit card or auto debt, with a default rate topping 11 percent. 

Student loan debt weighs heavily on the minds to XQ readers, as well. More than 500 people responded to our social media query about how student loan debt is affecting them personally, and asked us questions about the issue.

So many readers responded, in fact, we’re dividing the answers into three posts. Here’s the first round of questions and answers, which focus on the risks of student loans and options for avoiding them. The next post will answer parents’ questions about paying for college. The final post will focus on innovative proposals and legislation that would give students more flexibility in paying for college.   

What’s the best way to avoid student debt?

The best way to earn a four-year college degree with minimal or no debt is to live at home, earn an associate’s degree from a local community college, and transfer to a nearby state college or university. Community college tuition is relatively inexpensive, and in some cases is even free. Attending an in-state public university can also save students thousands of dollars. Living at home is the biggest money-saver of all, especially in areas with high housing costs. In many cases, the price of on-campus housing and meals exceeds the cost of tuition. 

Here’s a quick breakdown on the average costs of earning a bachelor’s degree, using recent data from the College Board:

Attending local community college for two years, then transferring to a local public college or university while living at home:


Attending four-year in-state university and living on campus:


Attending four-year private college or university and living on campus:


What options are available to pay for college?

Frugal students can find ways to offset college costs before starting college, while in college, and after graduating. Here are a few options from Bruce McClary, spokesman for the National Foundation for Credit Counseling, a nonprofit that helps consumers navigate credit and loans:

  • Open a 529 account, a Uniform Transfer to Minors Act account, or other savings account designed to help young people pay for college. Many of these accounts offer tax benefits. 
  • Apply for grants, scholarships, financial aid, work-study programs, and “any other funding source that doesn’t require repayment,” McClary said. Check with your college or high school counseling office for more information.
  • After graduating, work for a company that helps repay employees’ student loans. In competitive fields, some companies offer such a benefit to attract and retain workers.
  • Enroll in a public service program that offers deferment, repayment, or forgiveness of student loans. The Peace CorpsAmeriCorps, and Teach for America are a few popular programs. 
  • Become a teacher. Under the Teacher Loan Forgiveness Program, the federal government will cancel loans up to $17,500 for borrowers who teach for five years at a low-income school.
  • Consider a trade school. If you know what career you want to pursue and the courses are offered at a local trade school, you could save thousands by skipping four-year college entirely. 
Students tossing cap in the air

What happens if I default on my loan?

For starters, you wouldn’t be alone. More than 1 million people default on student loans every year. According to a 2018 report by the Brookings Institution, an astonishing 40 percent of borrowers are expected to default on their student loans by 2023.

The ramifications are severe. On a broad scale, a wave of defaults nationwide would be devastating for the economy and possibly trigger a recession, much as the housing crisis did in the mid-2000s. For individuals, defaulting on a student loan lowers your credit score, could lead to higher insurance rates, and greatly harms your chances of borrowing money for a home, car, or other purchase. 

Worse, student loans can’t be absolved by declaring bankruptcy.

“The debt follows you around for the rest of your life,” McClary said. “Your future wages could be docked. Unlike other debt, it follows you until it’s repaid or you die.”

I owe $50,000 and am having trouble making the payments. What can I do?

The U.S. Department of Education offers several options for those seeking debt relief, including refinancing, consolidation, and changing payment plans. Check with the Federal Student Aid office for more information.

And beware of scams. Anyone who’s borrowed money for college has probably received robocalls promising instant solutions to debt.

“There are a lot of organizations offering student loan services that are impossible to deliver,” McClary said. “By and large, these offers aren’t true, and they’re preying on people who are already vulnerable. So many people get ripped off.” 

But most importantly, do not despair! Even the direst financial hole has a solution, he said.

“I encourage people to realize help is available,” he said. “There may not be a magic solution, but there’s almost always a way to find an affordable payment plan. Knowing when to ask for help significantly increases your odds of ultimately repaying your loan.”

Read more about student loans from XQ

Student Loans Part 2.

Student Loans Part 3.