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Justin Pope

The other student loan problem: too little debt

Jesse Yeh uses the University of California Berkeley library instead of buying textbooks. He scrounges for free food at campus events and occasionally skips meals. He has stopped exercising and sleeps five to six hours per night so he can take 21 credits - a course load so heavy he had to get special permission from a dean.

The only thing he won’t do: take out a student loan.

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“I see a lot of my friends who took out student loans, then they graduated and because of the economy right now they still couldn’t find a job,’’ said the third-year student.

Even as college prices and average student loan debt rise, educators in some sectors of higher education report they are also seeing plenty of students like Yeh. After watching debt cause widespread damage in their families and communities, they are determined to avoid loans, no matter what.

Educators aren’t sure that’s always a good thing.

Students who take extreme steps to avoid debt, they say, may get stuck with something much more financially damaging than moderate student loan debt. They may not wind up with a college degree.

To pay for college and minimize borrowing, students are working longer hours at jobs and taking fewer credits. They’re less likely to enroll full time. They’re living at home. They’re “trading down’’ to less selective institutions with lower prices, and heading first to cheaper community colleges, with plans to transfer later to four-year schools.

Those may sound like money-savers, but in fact each is a well-documented risk factor that makes students less likely to graduate.

“There’s been such attention on student debt being unmanageable that current students have internalized that,’’ said Deborah Santiago, cofounder and vice president for policy research at the group Excelencia in Education, a nonprofit advocacy group.

Student debt aversion is most pronounced among Hispanics and Asians, who borrow at lower rates than whites, despite having higher financial need.

Fifty-one percent of blacks who had financial need but decided not to borrow had left school within three years without a degree, compared to 39 percent of those who borrowed, a study found. For Hispanics, 41 percent of nonborrowers had left, compared to 32 percent who borrowed.

Eloy Oakley, president of Long Beach City College, says he understands the source of debt aversion. “The predatory lending we’ve had from private lenders, credit card companies, has scared students,’’ Oakley said. “I think they have a conception that all debt is bad.’’

The solution is helping students better understand the complexities of financial aid: the difference between government and private loans, how much debt is manageable, the likely returns on various degrees and majors.

Justin Pope writes for the Associated Press.
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