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Education Comes With a Price Tag

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President Obama has made it a goal to add eight million college grads to the American workforce by 2020. To that end, last month Vice President Joe Biden announced an ambitious plan to increase the country's college graduation rates that includes $50 million in competitive grants for states that succeed in growing their number of graduates and $123 million in other incentives. The administration's goal sounds like a no-brainer: It would make the US #1 in the world. Right now, the US is ranked 9th. We can do better. But we also need to be careful what we wish for.

A higher graduation rate won't come free of charge. According to a new study by the Higher Education Policy, in Washington DC, an astounding 41% of recent borrowers face delinquency or default on their federal student loans. That makes the mortgage default and foreclosure rate, even at the height of the housing crisis, look like child's play. In fact, student loan default rates have been rising over the last few years, according to a September 2010 report from the Department of Education. And it's no wonder, since tuition has been rising above the rate of inflation for decades now. The default numbers are even worse for students at for-profit schools, where the graduation rate is a scandalously low 22%.

Clearly, although education may be priceless, it comes with a price tag. Too many young people are being convinced to take on debt burdens they simply can't afford. And who is helping teenagers make those decisions? Ambitious parents want the dream first but they often don't ask the money questions until later. Overworked high school counselors are sometimes the only source of information, especially for students whose parents haven't gone to college. Unfortunately, many students aren't getting the guidance they need. A Public Agenda survey last year sponsored by the Gates Foundation found that 59% of young adults rated their high school counselors as "poor" or "fair" when it came to informing them about paying for college.

So while it's nice for the country to have an ambitious goal, we need to set up systems in order to get students not just the education they deserve, but the financial aid they need. Since 1965, the government has required that all federal student loan borrowers receive exit counseling about their loans, and the consequences of not paying them. For example, even bankruptcy does not discharge student loan debts, unlike credit card debt. But if that message comes after they receive their loans, it's too late.

In the meantime, we can't wait for colleges to clean up their acts. High school counselors need to help students make smart choices to avoid these crippling debts. They should be steering kids to good community colleges, with low tuitions, strong academics and successful transfer rates. They should help students and their parents fill out the Free Application for Federal Student Aid (FAFSA) form to maximize their financial aid. They should inform students of programs like Income-Based Repayment (a relatively new federal option that lets many loan recipients make payments based on their incomes, not their debt loads) and Public Service Loan Forgiveness (which forgives federal student loan debts after 10 years if you work for a non-profit, for the government, or another designated "public service" job). These programs may seem too good to be true, but they're real, and not enough prospective college students know about them.

Counselors should also warn their students about the dangers of for-profit schools: poor graduation rates and high costs. Those schools market themselves as training grounds for practical skills, but in fact they too often just profit from students who drop out after year one. Recently, I met a bright teenager who was making extra money for college by checking children's heads for lice. But then she told me her goal was to attend a for-profit college. I had to wonder: Who was advising this girl and how could we do our jobs better to get her the right information?

A college education is part of the American dream for a reason: College graduates' salaries are higher and their unemployment rate is lower than their peers with only high school degrees. College is truly an attainable goal if students are wise and realistic about the financial realities of enrollment. But for those who carry thousands of dollars in debt -- many with no job in sight-it's instead just another expensive nightmare. We should all be working together to prevent that.

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Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller "Get a Financial Life: Personal Finance in Your Twenties and Thirties," and a member of the President's Advisory Council on Financial Capability. Visit her at, follow her on Twitter, and fan her on Facebook.