In the United States, student loans total over $1.2 trillion, according to the Consumer Financial Protection Bureau. Although most media reports mostly focus on undergraduate student debt — which averages nearly $30,000 per student — graduate students also face serious debt issues. According to U.S. News and World Reportopens in new window, across all fields, graduate students owe an average of $57,600, while a quarter of graduate students owe over $100,000. Forty million students have at least one outstanding educational loan, according to a CNN reportopens in new window.
How does debt among psychology graduate students compare with these numbers? According to the latest data from APA's Center for Workforce Studiesopens in new window (PDF, 22KB), in 2009 the median debt among recent psychology doctorates was $70,000. Digging deeper into that data reveals that PsyD graduates owed a median of $120,000, compared with $50,000 for PhD students. Most worrisome is that 25 percent of PsyD graduates owed over $160,000.
But now — five years since APA collected those debt statistics — psychology graduate student debt is probably higher for several reasons. For one, the federally subsidized Stafford loans were discontinued to graduate students in 2012. As a result, graduate students are now responsible for paying interest from the moment they accept their loans (students do not have to pay the interest while in school, but the interest accumulates while students are completing their education). In addition, interest rates on student loans increased to a high of 6.8 percent in 2013 and now hover at 6.21 percent.
What can students do to control their debt? Here are some tips that APAGSopens in new window (PDF, 528KB) has been promoting:
Know what you owe. Many students discard or file away their annual notification of student debt. Face your debt by logging onto the National Student Loan Data Systemopens in new window so you can see how much you owe and make a plan for paying it off.
Borrow less
Rather than taking out the maximum amount of loans allowed, make a budget and try to reduce your expenses so you can borrow less. Ways to save money include getting a roommate to split expenses, eating out less, finding a less expensive cellphone plan or dropping cable TV. Even small changes can add up quickly: Just bringing your lunch to work or school five times a week can save you more than $1,200 a year.
Pay the interest on your loans
A $10,000 unsubsidized Stafford loan obtained your first semester could grow to as high as $14,000 over 60 months. If you can, try to pay the interest on the loans while you are in school so you can reduce the overall amount you will owe when you graduate.
Know your repayment options
There are standard 10-year and 30-year repayment options, but there are also income-based and income-contingent repayment options, which cap the amount you pay each month. The latter options are better deals for graduate students at the beginning of their careers when they likely have lower salaries. Two useful websites for repayment options are APAGS Loan Repayment and Forgiveness Linksopens in new window (PDF, 209KB) for loan forgiveness programs and Repayment Plans | Federal Student Aidopens in new window.
Beware of private loans
Stick to federal loans, since private loans have very limited deferment options and have fewer protections if you encounter financial hardship.
I must give credit for the title of this column to Damani Jasper, who interned for APAGS last summer and wrote a blog post for the gradPSYCH Blog with the same title. He's absolutely right. You should not be burdened with such a high level of debt just as you start your profession. Education should not come with a debt sentence.