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DAVID GREENE, HOST:

We've been spending time, on the program, looking at how Americans are paying for college. And yesterday, we heard some scary stuff from a few college graduates talking about their debt.

UNIDENTIFIED WOMAN #1: About $92,000.

UNIDENTIFIED WOMAN #2: My loans are about 35,000.

UNIDENTIFIED WOMAN #3: It was well over $120,000.

GREENE: They expect to spend years, even decades, paying back tens of thousands of dollars in student loans and it's keeping them from making some major life decisions.

AMBER MICHAEL: Like getting married, having kids - those things would be great, but I'd like to be in a better financial position before we take those on.

GREENE: That's Amber Michael. Like many graduates, Amber was a teenager when she went into debt. Today, high school seniors are facing that prospect. They need to let colleges know by May 1st whether they'll attend. And most of them will decide to take on student loans. The graduates we spoke all said that looking back they didn't know enough as teenagers to make such a big financial decision. Here's Jen McGarvey.

JEN MCGARVEY: Had I had a little bit of counseling or somebody to really hone in on the magnitude on the amount of debt that I was tying myself to, I probably would have made some different decisions.

GREENE: As we're about to learn, these graduates we interviewed are not alone. Many people faced with loan payments are feeling the impact today and making different life decisions because of it. And even if you don't have student loan debt, chances are you'll feel the effect of it in the broader U.S. economy. William Elliott directs the Assets and Education Initiative at the University of Kansas, and he believes the current college funding system depends far too much on loans taken out by students.

WILLIAM ELLIOTT: Student loans are different than any kind of debt. While you're in college, you don't have to pay back the loans, right? In that sense, you don't feel them right away, you don't understand their magnitude and what they're going to cause. You don't know what kind of job you're going to have afterwards. All these things can't be understood at the time of taking on the loans. And so it's not that student loans can't play a role, but right now they're making up too much of the financial aid package and they're too big of a part of how we finance college.

GREENE: Several of these students said that they're at least thinking about the possibility of paying off these loans for 30, maybe even 40 years. How typical is that for this generation?

ELLIOTT: It's extremely typical. I mean, that is pretty much the standard nowadays, is at the minimum 10 years, but really most people are looking at 20 to 30 years to pay off their student loan debt. 'Cause most people are facing, you know, 30,000 or more in student debt. So, it takes a while to pay that off.

GREENE: To what extent do these loans haunt former students for many years or for the rest of their lives?

ELLIOTT: Well, I think it's something, as far as research, is we're just starting to look at. And what our research has shown is people with outstanding student debt who've graduated from a four-year college have about 60 percent less net worth. They have about 40 percent less equity in their homes and they have about 52 percent less in retirement savings. They're better off than if they didn't go to college, but they're not doing nearly as well as they could be, and as their peers are doing, if they have no debt.

GREENE: Is that in a way creating almost a new kind of have and have-not for this generation - young people who have student debt and those who don't have the debt to deal with?

ELLIOTT: From my perception, certainly. Robert Hiltonsmith did a study on and he found that while students with college debt and without college debt start off at similar levels of income, by the time they're 40 they have less income if they have student debt. And what we've seen is that really that has to do with the fact that these people aren't investing in the kinds of assets that also produce income in the long run. So, they're not buying real estate, they're not buying stocks, they're not buying bonds. And so you have this large divide now between those who have debt and those who don't have debt.

GREENE: What about the possible effect on the U.S. economy? I mean, I'm imagining a generation of people with more debt not spending money. I mean, and for many decades. And less money being spent in the economy can be a problem.

ELLIOTT: I think it has a huge effect, potentially a huge effect, on the economy. If we know that people aren't accumulating assets and that the wealth gap is growing, partially because of student loans, that's going to have an effect on the overall economy. We need people to invest, we need people to have money, to be saving money. To build their assets so they can partake in the housing market, in other types of markets, to buy stocks, bonds. And so I think yes. I think it can potentially have a long-term effect.

GREENE: Well, the president and many members of Congress have expressed a lot of concern about this. Are there changes in policy, ideas that you think might help sort of, you know, reduce the debt and give people these other options?

ELLIOTT: Well, I think there's a number of options available to us. We can help children open up savings accounts and potentially match those accounts with a one-to-one match or higher - start thinking about savings, and for college, early on. Thinking about things like the Pell Grant. Why not make that an early investment in, say, fifth graders, so putting some percentage of the Pell Grant in their accounts so they can leverage that money? So, I think we need a long-term strategy, and saving would be one way of doing that. I also think that we need short-term strategies. One possibility is, right now when you're in school, it's not counted against your credit when you have student loans - but when you get out, it does. So, we're thinking about housing. Most people buy their housing around the age of 30. So, maybe we extend the range at which student loans aren't penalized against your credit report, and so you can have access to build some of these early assets.

GREENE: Do colleges have a responsibility to get more information to students? I mean, to stress to them that they will have to pay this back at some point?

ELLIOTT: I think colleges do. I think colleges have a responsibility to try to drive down costs as much as states do. And they have the responsibility to providing information. But I just think about my own situation. I still have lots of debt, but it doesn't matter how much information you give me about debt; given the options on the table, I was going to take on that debt because I'm still better off, I think, with the debt than without the debt. The question is about equity. Why should one person go to college, take on all kinds of amounts of debt, and still not be able to earn as much as other people earn? We need to create a system in which people can achieve similar types of outcomes if they have similar types of effort and ability. That's what makes our system work and what motivates people, is that belief that if they work hard and they have the ability - and one of the main paths is through education - they should be able to achieve similar outcomes as even those who are more advantaged.

GREENE: Professor Elliott, it's really been a pleasure talking to you. Thanks for this.

ELLIOTT: Thank you for having me.

GREENE: William Elliott is an associate professor in the School of Social Welfare at the University of Kansas. Now, for students picking a college this month, here's a little more advice. Scott Judith, a financial aid officer at Wellesley College, says don't just look at which aid offer is the biggest. For one thing, financial aid packages can be a mix of loans and also grants, which don't need to be paid back.

SCOTT JUDITH: Some will be heavier in loans. Some will have no loans. And also the price of each institution is different. So, if you're looking at just the grant amount, at the final tally, the grant may not make the difference. It's the actual final cost.

GREENE: Judith was talking to our college Michelle Martin on NPR's TELL ME MORE, which has also been taking a close look at how Americans pay for college.

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