How much college debt is excessive?

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More and more of my clients are concerned about the value of a university education.  They don't wonder if their kids should go to college - they understand that those with college degrees are better off economically than those without.  They also understand that providing our children with an education is still one of the greatest things we can do for them - not just to give them a better economic foundation, but to help them become better thinkers.  But college expenses have soared, causing a squeeze for most families.  The question today is exactly how much to pay for that education.

With the economy not producing enough jobs to absorb all the college grads entering the workforce, it's important to carefully consider how much money should be spent on a college education so parents and students aren't overly burdened with debt.  Debt in any form can be dangerous whether it's a mortgage or college loans, but student loans aren't automatically discharged in bankruptcy.

It's true that going to a top-tier school can economically payoff for many years if you network effectively, but the vast majority of our children aren't getting into these schools.  Stanford University, UC-Berkeley and UCLA are top-tier schools in California but these schools are very difficult to get into.  Stanford accepted just 7% of applicants in the fall 2010 semester. 

College costs have grown at four times the rate of inflation over the past twenty years, outpacing healthcare costs.  Along with that the standard of living for students has increased.  Thirty or forty years ago there was such a thing as a "poor, starving college student."  Nowadays with housing, meal plans, technology, etc, many students can enjoy a comfortable lifestyle that was reserved only for students of wealthy families a few decades ago.

It used to be that going to an out-of-state school for one year established residency, thereby qualifying a student for in-state tuition.  Today, some schools still charge out-of-state tuition if the parents reside out-of-state, thanks to budget pressures.

Students that don't go to a top-tier school must carefully consider whether a UC-San Diego history degree, for example, is really a better value than UC-Davis, or if a UC-Davis business degree is better than Sacramento State.  Your college major will influence the school you choose, but value is an important part of the equation that should be considered.

A recent article in The New Yorker magazine highlights some of the cost issues facing students today.