Student Debt and the Importance of College

Charlie O'Connor* is finishing the spring quarter of his junior year at Santa Clara University. He dabbled in his academic requirements his freshman and sophomore years. By the time Charlie switched from philosophy, which he loved, to economics, it was the end of junior year and time to buckle down. He knew that completing his economics degree would require a full year of tuition. But given the miserable state of the economy, he thought that an economics degree would afford him many more job prospects in the long run. In any case, he was starting to think of going to law school – in part because he was drawn to a career in public service and in part because he had heard that lawyers can start their first job with a salary well over $100,000. But, before he could pursue that dream, he faced a major obstacle: how to pay for his final year at SCU.

Charlie's financial situation when he was applying to SCU freshman year had been much better than it was now. Charlie had been awarded the Provost Scholarship by SCU for his extracurricular involvement and enviable high school GPA. But, by the end of junior year, the pressures and distractions of college life had overwhelmed him and ruined his eligibility for the scholarship. His mother, an engineer and the main breadwinner of the family, had been working when he started college. But, due to the recession, she had been laid off from her firm during the fall of Charlie's junior year. His father was a teacher but had to reduce his hours to half time due to ongoing bouts of cancer; now the medical bills from chemotherapy were piling up fast and even the co-pays were beginning to strain the family finances. His parents also had a mortgage. Charlie had considered taking a year off from school to work at the yoga studio and to save money for his three younger siblings' educational funds. He was also worried about his father and thought that he could stay at home and help take care of the family.

Charlie knew he was going to pay for his final year of college tuition – more than $37,000 plus living expenses – by himself. He knew that if he continued his job working as a yoga instructor he'd be able to earn just enough money for groceries, rent and his spring break trip to Cabo. In addition to tuition, Charlie needed to take into account the costs of his course load per unit, textbooks needed, LSAT classes and the LSAT exam. Charlie did not qualify for the need-based grants SCU offers for students in emergency financial situations since his mother was now working for a temp agency and his parents' joint income remained too high. He considered applying for the work-study program but learned that such a job would generate at most $2,000 a quarter – nowhere near enough to pay for tuition. Of Charlie's close group of friends, only one had left SCU due to financial troubles—she transferred to a community college since she was not eligible for the Cal Grant Program and did not win an award for an SCU needs-based grant. While he was not ready to say goodbye to the life he had built at SCU, Charlie began to wonder whether his longterm financial health would be better if he chose a less expensive alternative to SCU. The public universities in his home state of Washington were excellent and offered a promising business network for future employment. Charlie knew a state school wouldn't have as much one-on-one attention as he could get at SCU, but, with only one year left, he didn't know if such attention was essential for long-term success.

Finally, Charlie began to consider a student loan and went to SCU's financial aid office. He filled out a FAFSA form, cringed at the thought of asking his strapped parents to co-sign for the loan, and pondered a loan amount that made his head spin—$40,000. Sure, Charlie wanted to be a lawyer and figured his salary as a lawyer could pay down such debt quickly. But he had been reading of the enormous debt – around $150,000 – that people were taking on to go to law school. It seemed like debt piling on debt with no end in sight. He was aware also of the consequences of being delinquent or of defaulting on a loan. He had heard that today only about a third of student borrowers were fully paying back their loans on time. And he had also heard that default rates were creeping up to around 7% of all student borrowers. At the same time, he knew that student loans could not be cancelled out by a bankruptcy, so he would be saddled with this debt until he paid it off. Besides, a bad credit history could make it more difficult for him to find employment after law school. Charlie needed the loan badly but had real doubts about whether he could repay it on time—or even at all. He worried about his family. But he also wanted to finish his final year at Santa Clara. And he knew that having a college diploma offered much better long-term economic prospects than not having one.

What should Charlie do?

Should he have switched his major from philosophy to economics?

Should he take time off from school in order to save money for his siblings' education and to help with his sick father at home?

Should he switch to a public university?

Should he take out the loan? Is it responsible for him to do so?

*This case is fictional.

SCU Senior Meghan Skarzynski is a Hackworth Fellow at the Markkula Center for Applied ethics.