MONEY Debt

The Hidden Threat to Your Retirement

More older Americans are approaching their golden years with heavy debt loads.

When Wanda Simpson reached retirement a couple of years ago, the Cleveland mom had an unwelcome companion: Around $25,000 in debt.

Despite a longtime job as a municipal administrator, Simpson wrestled with a combination of a second mortgage and credit-card bills that she racked up thanks to health problems and a generous tendency to help out family members.

“I was very worried, and there were a lot of sleepless nights,” remembers Simpson, 68. “I didn’t want to be a burden on my children, or pass away and leave a lot of debt behind.”

New data reveal that Wanda Simpson has company—and plenty of it.

Indeed, the percentage of older Americans carrying debt has increased markedly in the past couple of decades. Among families headed by those 55 or older, 65.4% are still carrying debt loads, according to the Washington, D.C.-based Employee Benefit Research Institute (EBRI). That is up more than 10 percentage points from 1992, when only 53.8% of such families grappled with debt.

“It’s a two-fold story of higher prevalence of debt, and an uptick in those with a very high level of debt,” says Craig Copeland, EBRI’s senior research associate. “Some people are in real trouble.”

To wit, 9.2% of families headed by older Americans are forking over at least 40% of their income to debt payments. That, too, is up, from 8.5% three years earlier.

The only bright spot in the data? The average debt balance of families headed by those over 55 has actually decreased since 2010, according to EBRI, from $80,564 to $73,211 in 2013.

Still sound high? It is especially so for those heading into reduced earning years, or retiring completely.

The primary culprit, according to Copeland: rising home prices and the longer-term mortgages that result, often leaving seniors with a monthly nut well into their golden years.

Seniors are even dealing with lingering student debt: 706,000 senior households grappled with a record $18.2 billion in student loans in 2013, according to the U.S. Government Accountability Office.

It’s not an easy subject to discuss, since older Americans may be ashamed that they are still dealing with debt after so many years in the workforce. They do not want to feel like a burden on their kids or grandkids, and so keep their financial struggles to themselves.

But financial experts stress that not all debt is automatically bad. A reasonable mortgage locked in at current low rates, in a home where you plan to stay for a long period, can be a very intelligent inflation hedge.

“I always suggest clients consolidate it in the form of good debt, like a mortgage on your primary residence,” says Stephen Doucette, a planner with Proctor Financial in Sherborn, Massachusetts. “You are borrowing against an appreciating asset, you don’t have to worry about inflation increasing the payment, and the interest is deductible.

As long as this debt is a small portion of your net worth, it is okay to play a little arbitrage, especially considering stock market risk, where a sudden decline could leave older investors very vulnerable.

“A retiree who has debt and a retirement account with equity exposure may not have the staying power he or she thinks. The debt is a fixed amount; the retirement account is variable,” says David Haraway, a planner with LPL Financial in Colorado Springs, Colo.

It is important not to halt 401(k) contributions, or drain all other sources of funds, just because you desire to be totally debt-free. Planner Scot Hansen of Shoreview, Minn. has witnessed clients do this, and ironically their good intentions end up damaging years of careful planning.

“But this distribution only created more income to be reported, and more taxes to be paid. Plus it depleted their retirement funding source.” he says.

Instead, take a measured approach. That’s what Wanda Simpson did, slowly chipping away at her debt with the help of the firm Consolidated Credit, while living off her Social Security and pension checks.

The result: She just sent off her final payment.

MONEY College

The Most Important Thing to Know Before Applying to Grad School

two diplomas two graduation caps stacked
Wendell and Carolyn—Getty Images/iStockphoto

A record number of college students think they'll need a master's to land a job. They'd be smart to weigh the costs against the benefits before applying.

Four years of college is no longer enough to give you an edge in the job market—at least that’s what most of the nation’s college students seem to believe.

More than three-fourths of freshmen at four-year colleges plan to go to graduate school, according the latest in a 49-year long UCLA survey of the attitudes of college first-years. (More than 150,000 full-time students at 227 universities were polled.)

That’s up from 51% in 1974, and only slightly below the record sent in the depths of the recent recession, says Kevin Eagan, interim managing director of UCLA’s Higher Education Research Institute.

Usually, interest in grad school spikes during economic downturns. But with the economy healthy, there’s clearly something else going on.

“The percentage of freshmen who think it is important to be well-off financially is at its highest point ever—more than 82%,” explains Eagan, “and during the recession these students were hearing of all of these folks with bachelors’ degrees who were unemployed. So they are recognizing that in order to achieve their objective they need additional credentials.”

Higher Degrees = Higher Pay

Indeed, recent evidence indicates that those with more education have better job prospects. The unemployment rate for those with professional degrees is almost half of the 4% rate for those with just a bachelor’s, for example.

And an analysis by the Georgetown Center on Education and the Workforce found that while the average bachelor’s-degree holder earns about $2.3 million over a lifetime, a master’s degree holder typically earns about $2.7 million and a professional degree earner typically takes home $3.6 million.

Higher Pay ≠ Fast Payoff

But Eagan and other analysts who’ve crunched the numbers say that graduate degrees are also an expensive gamble—and in some cases, have low odds of a financial payoff.

Tuition and fees for a two-year master’s program exceed $20,000 at the average public college, and $45,000 at the average private school. The tuition and fees for a degree from an elite graduate program such as Harvard Business School totals more than $120,000. Living costs can another $12,000 to $24,000 per year, depending on location. All together, you’re looking at a considerable expense on top of the more than $28,000 in undergrad debt new grads who borrow are carrying.

Plus, many graduate programs don’t result in big salaries.

Besides, in some fields, those with advanced degrees aren’t immune to the challenges of finding a job: For example, Eagan says he cautions students pursuing PhDs in humanities about the low odds of finding full-time jobs as professors, as more colleges are replacing tenured instructors with part-time adjuncts.

When a Grad Degree Makes Sense

Wondering if continuing your education pay off for you? There are three situations in which going back to school will put you ahead, according to several recent studies:

  1. You are aiming for a job in a field that either requires a graduate degree or in which employers use graduate degrees as a hiring screen. Besides the traditional graduate-degree-requisite jobs of doctor, lawyer and professor, a growing number of jobs require graduate study, including as librarian, social worker and physical therapist.And, in a study of 19 major employers, Sean Gallagher, an administrator at Northeastern University, found that a growing number of human resources administrators are giving preference to job applicants with masters’ degrees, and that masters’ often helped in competitions for promotions.
  2. You need the degree to get the public service career you want anyway. Students who use the federal direct Stafford and PLUS loan programs to borrow the full cost (including living expenses) of their graduate study and then spend 10 years working for a government agency or a non-profit can have much of their graduate school expenses forgiven under the government’s Public Service Loan Forgiveness program.According to research by Jason Deslisle, director of the federal education budget project at the New America Foundation, a new veterinarian with the typical education debt load of $132,000 who gets a government job and signs up for Income-Based Repayment (which caps payments at 10% of disposable income) will likely pay a total of only $36,000 in debt payments over 10 years. After the 120th on-time payment, the government would forgive a total of $147,000, which is all of the original debt, plus some unpaid interest. But beware: if you don’t end up making 120 on-time payments while working at public service, you will likely either have to pay off your debt in full, or have to keep making on-time income-based payments for at least 20 years, after which you may be eligible to have any remaining debt forgiven.
  3. You are in a field in which graduate degrees tend to lead to higher earnings. The Georgetown study found that graduate degrees typically add about $1 million to the lifetime earnings of, for example, chemists and financial professionals. But graduate degrees appear to have little overall impact on the average earnings of writers, editors, architects and many kinds of health-related therapists, such as audiologists. You can see the affects of advanced degrees on other occupations by viewing the full report.

Related:

MONEY Out of the Red

This Millennial Paid Off $23,375 in Student Loans in Just 10 Months

Jordan Arnold

"If you have a game plan, you can accomplish your goals," says 22-year-old Jordan Arnold.

Like many millennials, Jordan Arnold graduated from college five figures deep in student debt. Unlike most of his peers, he paid off all of his loans less than a year after graduation.

This is his story, as told to MONEY reporter Kara Brandeisky.

Jordan Arnold, 22
Bluffton, Ind.
Occupation: credit analyst
Initial debt: $23,150
Amount left: $0
When he started paying it down: May 2013
When he became debt-free: March 2014

How I started building debt

I always knew I was going to go to college, though I figured I’d go to community college for a year or two because it’s cheap. But my parents started talking to me about this private Christian school, Indiana Wesleyan in Marion, Ind. I took a visit, and I really liked it. It’s only like 3,000 students on campus, so it’s a tight-knit community.

Tuition and room and board was about $31,000 a year. And the first year I hadn’t applied for federal student aid, since I didn’t commit to the college until about 10 days before classes started. I got some scholarships and a grant from my church, though. So, ultimately, I owed approximately $9,000 that first year.

Getting to $23,000

I could only borrow up to $5,500 in subsidized loans from the government each year, so I worked to cover the rest so that I didn’t have to take out private loans. I also graduated in three years, which helped.

Still, altogether, I had to take out $15,150 in subsidized federal loans and $2,000 in unsubsidized federal loans. I borrowed another $6,000 from my parents.

My uh-oh moment

In the fall semester of my senior year, I remember being kind of nervous. I knew I had to start paying my debt within six months. It’s stressful, when you don’t have any money. And I heard all these stories about college students who get out of school, they have all this debt, and they can’t find jobs.

Getting my debts paid off was important to me. I didn’t want to get the point where I’d have to be paying student loans for another 10 years. Right now, I’m single. I don’t have any dependents that rely on my income. But I didn’t want to have these loans over my head when I’m trying to feed a family and put a roof over their heads. It’s not just about me, it’s about my future family.

My first step out of the hole

Luckily, I got a job right out of college at an insurance agency (I had majored in finance). I was on salary, and it was pretty good: $36,000 plus bonuses.

I didn’t have to pay my student loans for another four months, but over the summer I decided to go ahead and start making payments before interest began accruing.

I actually moved back in with my parents—which is hard when you have been out on your own. But I didn’t really have a reason to move out. And I was blessed that they actually preferred me to live there because I could help out around the farm they own, baling hay or feeding the horses. Living at my parents’ place for free was a lot better than having to pay $400 or $500 a month for rent.

Kicking it into gear

About four months into my new job, I picked up a second job, delivering for Pizza Hut, to help pay off my debt. I would start work at the insurance agency at 8:30 a.m., change in the bathroom at 4:50 p.m., get to Pizza Hut by 5, deliver pizzas until about 9:30, get home around 10, then shower, eat, and go to bed.

My monthly take-home pay from the insurance company was about $2,200, and I made about $1,000 at Pizza Hut. After gas, car insurance, tithing to my church, entertainment and food, I could put about $2,000 towards my debt every month.

At that rate, I was projected to pay off my debt in May 2014. But I got a $3,000 refund on my taxes, and paid off the rest of my debt with that.

How I celebrated being debt-free

I made my last payment the first of March, then I went to Florida with some friends two weeks later. It was pretty rewarding after a 10-month battle. I had probably worked 65 to 70 hours a week for seven or eight months. It was exhausting, but it was worth it.

What I’d tell someone else in my place

If you have a game plan, you can accomplish your goals. I have an account on Mint.com, that’s where I kept my budget. That’s a big part of it—just seeing your progress and knowing you’re getting closer.

Also, have an emergency fund. While I was paying off that debt, I had a small car accident. I was delivering a pizza, and I hit something in someone’s driveway. It cost me about $760 to fix the car. But I had a $1,000 emergency fund, which was kind of a buffer that I kept because life happens.

Finally, don’t be afraid to move home if you have to. That was a big part of how I got out of debt.

My plan for the future

I quit my Pizza Hut job in April after paying off my debt, and now work at a bank analyzing commercial and agricultural loans, which is more in line with what I wanted to do.

I actually haven’t moved out of my parents’ house yet. Instead I’m saving up for a down payment on a house. I’m putting away 50% of my take-home income for that, and I should have a down payment by mid-summer. I also started investing. I started a Roth IRA, and I plan to max it out this year.

Staying true to myself

Some people have made the argument, ‘Maybe you shouldn’t have paid off the debt so fast because the interest rate is cheaper than what it will be for you to borrow for a home.’

That makes sense in my head, but in my heart, I didn’t want this hanging over me. I want to be responsible with my money and build a strong foundation.

Are you climbing out of debt? Share your story of getting “Out of the Red.”

Check out Money 101 for more resources:

MONEY Debt

Americans Are Taking on More Debt—Again

Is it time to worry?

If the definition of insanity is doing the same thing over and over again and expecting different results, then Americans are starting to look a little batty: The average American’s consumer debt is climbing back to the highest levels since we exited the Great Recession. At the same time, however, mortgage payments are declining thanks to the current low home prices. So should Americans we be worried about the uptrend in consumer debt?

Debt on the rise

According to the Federal Reserve, Americans’ appetite for loans is increasing again. The amount of revolving credit outstanding, which primarily reflects credit card debt, totaled $882.1 billion in November, up from $853.3 a year prior. The amount of student loan debt outstanding has climbed from $1.21 trillion to $1.3 trillion; auto debt outstanding has grown from $866.4 billion to $943.8 billion; and mortgage debt outstanding increased $35 billion between the second and third quarter to $8.13 trillion. As of the third quarter, the Federal Reserve Bank of New York pegs Americans’ total debt at $11.71 trillion.

Those numbers may look great to banks like Wells Fargo WELLS FARGO & COMPANY WFC 1.39% , which rely on rising loan volume to pad earnings, but they should be worrisome to American consumers, because they suggest millions of people are spending more money paying down debt and less money saving for a rainy day or retirement.

Straining balance sheets

In the past year, the amount of revolving debt taken on by consumers has grown by 3.3% — nearly double the rate of growth in the average American’s income. As a result, the percentage of the average American’s disposable income that goes toward paying monthly consumer debt payments — such as credit cards, student loans, and auto loans (but not mortgages) — has increased for seven consecutive quarters to 5.3%.

Although the percentage of disposable income that goes toward consumer debt payments still remains below its prior peaks, the current trend could be worrisome, especially if it ends up mirroring the trend that followed the savings and loan crisis in the early 1990s.

Is this a big deal?

Although Americans are paying a greater share of their disposable income to finance consumer debt than they were a year ago, there’s little evidence to suggest that consumers are anywhere near a tipping point that could cause budgets to buckle, spending to sag, and the U.S. economy to slide. In fact, the bigger picture of household debt is much less worrisome than those consumer debt figures.

The financial obligations ratio — a broad measure that, unlike the debt-service-to-obligations ratio, includes rent payments, home owner’s insurance, and property tax payments — is at its lowest levels since the early 1980s. And the total debt-service ratio, which includes consumer debt andmortgages, stands close to 35-year lows at 9.9%. Thus these more comprehensive measures paint a much prettier picture of the average American’s financial situation than the consumer debt payment ratio alone.

Everything is OK — for now

With lower mortgage payments offsetting higher payments on credit cards, student loans, and auto loans, household debt isn’t likely to sink our economy — at least not yet. However, that could change if home prices inch their way higher and mortgage interest rates start to climb. If that happens, then higher monthly mortgage payments could be cause for concern that the average American’s debt has indeed become a problem again.

MONEY Financial Planning

The Most Important Money Mistakes to Avoid

iStock

Smart people do silly things with money all the time, but some mistakes can be much worse than others.

We asked three of our experts what they consider to be the top money mistake to avoid, and here’s what they had to say.

Dan Caplinger
The most pernicious financial trap that millions of Americans fall into is getting into too much debt. Unfortunately, it’s easy to get exposed to debt at an early age, especially as the rise of student loans has made taking on debt a necessity for many students seeking a college education.

Yet it’s important to distinguish between different types of debt. Used responsibly, lower-interest debt like mortgages and subsidized student loans can actually be a good way to get financing, helping you build up a credit history and allowing you to achieve goals that would otherwise be out of reach. Yet even with this “good” debt, it’s important to match up your financing costs with your current or expected income, rather than simply assuming you’ll be able to pay it off when the time comes.

At the other end of the spectrum, high-cost financing like payday loans should be a method of last resort for borrowers, given their high fees. Even credit cards carry double-digit interest rates, making them a gold mine for issuing banks while making them difficult for cardholders to pay off once they start carrying a balance. The best solution is to be mindful of using debt and to save it for when you really need it.

Jason Hall
It may seem like no big deal, but cashing out your 401(k) early has major repercussions and leads you to have less money when you’ll need it most: in retirement.

According to a Fidelity Investments study, more than one-third of workers under 50 have cashed out a 401(k) at some point. Given an average balance of more than $14,000 for those in their 20s through 40s, we’re talking about a lot of retirement money that people are taking out far too early. Even $14,000 may seem like a relatively easy amount of money to “replace” in a retirement account, but the real cost is the lost opportunity to grow the money.

Think about it this way. If you cash out at 40 years old, you aren’t just taking out $14,000 — you’re taking away decades of potential compound growth:

Returns based on 7% annualized rate of return, which is below the 30-year stock market average.

As you can see, the early cash-out costs you dearly in future returns; the earlier you do it, the more ground you’ll have to make up to replace those lost returns. Don’t cash out when you change jobs. Instead, roll those funds over into your new employer’s 401(k) or an IRA to avoid any tax penalties, and let time do the hard work for you. You’ll need that $100,000 in retirement a lot more than you need $14,000 today.

Dan Dzombak
One of the biggest money mistakes you can make is going without health insurance.

While the monthly premiums can seem like a lot, you’re taking a massive risk with your health and finances by forgoing health insurance. Medical bills quickly add up, and if you have a serious injury, it may also mean you have to miss work, lowering your income when you most need it. These two factors, as well as the continuing rise in healthcare costs, are why a 2009 study from Harvard estimated that 62% of all personal bankruptcies stem from medical expenses.

Since then, we’ve seen the rollout of Obamacare, which signed up 10.3 million Americans through the health insurance marketplaces. Gallup estimated last year that Obamacare lowered the percentage of the adult population that’s uninsured to 13.4%. That’s the lowest level in years, yet it still represents a large number of people forgoing health insurance.

Lastly, as of 2014, not having health insurance is a big money mistake. For tax year 2014, if you didn’t have health insurance, there’s a fine of the higher of $95 or 1% of your income. For tax year 2015, the penalty jumps to the higher of $325 or 2% of your income. While there are some exemptions, if you are in a position to do so, get health insurance. Keep in mind that for low-income taxpayers, Obamacare includes subsidies to lower the monthly payments to help afford health insurance.

MONEY Ask the Expert

Why You Might Want to Take Student Loans Before Using Up College Savings

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “My daughter will be starting college this fall. I’m estimating the tuition will be about $25,000 each year. I’ve got about $45,000 put aside in a 529 for her. When should I tap that money?” —Henry Winkler, Colorado

A: The first thing you and your daughter should do is fill out a FAFSA, the federal financial aid application. Even if you think your household income will be too great to qualify for aid, it’s worth applying just to be certain, says Mark Kantrowitz, publisher of Edvisors.com, a website that helps people plan and pay for college. “I have seen many cases where families assume they won’t receive any aid, but actually do qualify based on the number of children they have currently attending college or because the high costs of the tuition resulted in a lower than expected family contribution amount.”

Don’t worry that the savings you currently have in your 529 will hurt her chances for aid either. Federal aid will be reduced by no more than 5.64% of the value of the account and account distributions are not considered income, Kantrowitz says.

Next, she should apply for the most available in federal direct student loans. In her first year, she can borrow $5,500. In her second year, $6,500, and any of the years following up to $7,500. Because you only get to borrow a certain amount in these direct federal student loans—which have much lower interest rates than Parent PLUS loans or private loans—it’s worth borrowing the max each year and accruing that interest rather than waiting and trying to borrow the full cost of college her third or fourth year, says Kantrowitz.

If you have other savings accounts you can draw from, Kantrowitz recommends setting aside $4,000 a year from such an account for your daughter’s college education so that you can take advantage of the American Opportunity Tax Credit.

With this credit, you get 100% of the first $2,000 you spend on tuition, fees and course materials paid during the year, plus 25% of the next $2,000. The credit is worth $2,500 off your tax bill. Also, 40% of the credit (up to $1,000) is refundable, which means you can get it even if you owe no tax.

The caveat: You will need to have a modified adjusted gross income of $80,000 or less, or $160,000 or less for married couples, a year to get the full benefit. If you earn more than $90,000 or $180,000 for joint filers, you cannot claim the credit.

You cannot use any of the funds from your 529 to qualify for the tax credit since that plan is already a form of tax-free educational assistance. If you do not have an additional $4,000 a year to put toward her education, you can also qualify for the credit by using the student loan amount she received—but just know that you may not be also able to claim the student loan deduction on that amount since you’ve already received a tax break on it, says Kantrowitz. (Right now you can claim both, but Kantrowitz says that could change in the future.)

After deducting any grant aid, her student loan sum, and the $4,000 from another savings account, pay the remaining education expenses with funds from the 529 plan.

“Under this plan it is likely your 529 will be exhausted after her third year of college, or sooner if you don’t put aside that additional $4,000 for the tax credit each year,” says Kantrowitz.

To make up the difference you’ll need to secure another loan. If you own a home, consider home equity financing before PLUS loans, since the latter currently carry a 7.21% interest rate and come with an “origination” fee of about 4.3% of the principal amount you borrow.

If you must take the PLUS, you might be tempted to try to lock in current interest rates by borrowing to cover the first two years’ worth of expenses. But you’d end up having to borrow more since she’ll be getting less federal loan money those first two years, and you’d have to pay two more year’s worth of interest. Even with possible rate increases, you’re still better off taking the PLUS loans in her last two years.

RELATED:

MONEY Millennials

How to Set Financial Priorities When You’re Young and Squeezed

man counting coins
MichaelDeLeon—Getty Images

You have a lot of demands on your money—and not a lot of it. Here's what to do first.

The most financially challenging state of life is not retirement, it is early career.

That’s the time when your salary is still probably low, but you have the longest list of expenses: career clothes, cell phone bills, your first home furnishings, cars, weddings, rent—need I go on? You probably don’t have enough money to pay for all of that at once, unless your parents have set you up very well or you are a junior investment banker.

The rest of us have to make choices with our limited “discretionary” income. Here is a rough priorities list for newbies who have shopping lists that are bigger than their bank accounts.

First, feed the 401(k) to the match, not the max. If your employer matches your contributions, make sure that your paycheck withdrawals are high enough to capture the entire company match. That is free money. If you have enough money to contribute more to your 401(k), that is a good thing to do, but only if you’re able to cover other key expenses.

Invest in items that will improve your lifetime earning power. A good interview suit. An advanced degree. The right electronic devices and services for the serious job hunt.

Pay off credit card balances. Chasing those “balance due” notices every month will kill just about any other financial goal you have. If you’re carrying significant credit card balances, abandon all other extra savings and spending until you’ve paid them off, in chunks as large as possible.

Put money into a Roth individual retirement account. The younger you are and the lower your tax bracket, the better this works out for you. Money goes in on an after-tax basis and comes out tax-free in retirement. You can withdraw your own contributions tax-free whenever you want. Once the account has been in existence for five years, you can pull an additional $10,000 out, tax-free, to buy a home. It’s nice to have a Roth, and the younger you start it the better.

Save for a home down payment. Homeownership is still a smart way to build equity over a lifetime. New guidelines will once again make mortgages available to people who make downpayments as low as 3%. Even though interest rates are still at unrewarding lows, it’s good to amass these earmarked funds in a savings or money market account.

Pay down high-interest student loans. If you had private loans with interest rates over 8%, find out whether you can refinance them at a lower rate. If not, consider paying extra principal to burn that costly debt more quickly. Don’t race to pay off lower-interest student loans; the interest on them may be tax deductible, and there are better places to put extra cash.

Buy experiences, not things. Still have some money left? Fly across the country to attend your college roommate’s wedding. Take road trips with friends. Spend money to join a sports team, theater group, or fantasy football league. Focus your finances on making memories, not acquiring things—academic research holds that you get more happiness for the dollar by doing that, and you’ll probably be moving soon anyway.

Buy a couch. For now, make this the bottom of your list. Sure, everyone needs a place to sit, but there’s nothing wrong with living like a student just a little bit longer. If you defer expensive things for a few years while you put money towards all the higher priorities on this list, you’ll be sitting pretty in the future.

UPDATE: This story has been updated to clarify that Roth IRA holders can withdraw their own contributions at any time and do not have to wait until the account is five years old.

MONEY Student Loans

Don’t Believe the Hype: There’s Still a Student Loan Crisis

piggy bank on stack of books
Fotolia—AP

When it comes to student debt, it's not fair to blame students for being in over their heads.

The Brown Center on Education Policy at the Brookings Institution is on a mission.

Over the past several months, the center’s researchers have been working hard to reset popular perceptions about the existence of a student loan crisis and, perhaps, influence public policy as a result.

In the first of its reports (April 2014), the BCEP concluded that not only is the price tag for governmental student loan relief programs much higher than originally thought, but their existence presents an irresistible temptation for students to “engage in more risky behavior because they don’t have to bear the full cost of their actions.”

As such, the center urges policymakers to eliminate the forgiveness portions of the various relief programs to “reduce the potential for over-borrowing by requiring borrowers to eventually pay off their debt.” Doing so, the center’s researchers argue, would also dissuade low-income borrowers—whom they view as disproportionately benefiting from these programs—from attending high-priced schools.

In a follow-up report (June), the same researchers take this a step further by contending that broad-based policy actions on the part of the federal government are “likely to be unnecessary and are wasteful given the lack of evidence of wide-spread hardship”—a conclusion they base upon creative manipulations of Federal Reserve Bank of New York data and selective interpretations of macroeconomic factors and trends.

Three months later (September), the center published an update, in which the researchers turn up the heat by directly challenging what they characterize as the “often-hysterical public debate about student loan debt.” Selective FRBNY data is once again used, this time to bolster a contention that “households with education debt today are still no worse off than their counterparts were more than 20 years ago,”—a conclusion that’s based, in part, on halving the value of those loans on the dubious presumption that U.S. households are typically made up of two people who would be equally responsible for their repayment.

Most recently (December), the BCEP published what may be the capstone to the previous three reports. Its researchers found that more than half of all first-year college students seriously underestimate the extent of their education-related borrowing, which “may perpetuate popular narratives about crushing student loan burdens.” They also contend that after taking into account inflation and financial aid, “college is more expensive, but not to the extent it appears at first glance.”

As it happens, this latest view reinforces their previously articulated “unnecessary and wasteful” conclusion with regard to loan-relief programs, not least because “without knowledge of their financial circumstances, a student with a large sum of debt might be unprepared to compete for the jobs that would pay generously enough to allow them to repay their debt without having to enter an income-based repayment program.”

So to sum up the narrative the BCEP has evolved on this contentious subject, borrowers today are no worse off than those of the immediately preceding generation; tuition prices aren’t so out of whack as we’ve been led to believe; and not only are the government’s relief programs extravagant and pointless, but they also present a moral hazard.

In other words, to the extent that today’s students find themselves in over their heads, it’s their own fault!

Well, we are all certainly entitled to our own opinions. And from the hundreds of comments that are posted on articles discussing student loans, it appears that many agree with the BCEP’s conclusions—especially those who worked their way through school and repaid all their education debts over time, like me.

But that doesn’t mean that the Brookings’ point of view should go unchallenged, particularly when there is more information to consider.

Take for example, the fact that over the past 20 years, average higher-education prices have consistently outpaced the rate of inflation, average student borrowing has more than doubled, average aggregate borrowings have more than quadrupled, college-completion rates remain stuck at just north of 50%—and that’s for students who take six years to complete a four-year degree—and less than half of all loan payments are being remitted in accordance with the original terms of the underlying agreements (which means that more than half of all student loans that are currently in repayment are either delinquent or in default, have been granted temporary forbearance or were permanently restructured to facilitate repayment).

If the Brookings Institution is serious about providing “innovative, practical recommendations” that “foster the economic and social welfare, security and opportunity of all Americans,” not only would its researchers objectively incorporate all the available data, but their reports would also critically assess the personal-financial management implications of the higher-education industry’s revenue-based business model, the government’s easy-credit policies and the private sector’s loan-underwriting practices, which value creditworthy cosigners and the virtual impossibility of discharge in bankruptcy court over a borrower’s ability to repay his obligation.

As important, the institution would also vigorously explore the reasons for what is clearly an abject failure of financial-literacy education in secondary education and within college financial-aid offices that helped bring us to this miserable juncture.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

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This article originally appeared on Credit.com.

MONEY best of 2014

The 3 Best New Breaks for College Students in 2014

Some good news for students of all ages this year.

Every year, there are innovators who come up with fresh solutions to nagging problems. Companies roll out new products or services, or improve on old ones. Researchers propose better theories to explain the world. Or stuff that’s been flying under the radar finally captivates a wide audience. For MONEY’s annual Best New Ideas list, our writers searched the world of money for the most compelling products, strategies, and insights of 2014. To make the list, these ideas—which cover the world of investing, retirement, health care, tech, college, and more—have to be more than novel. They have to help you save money, make money, or improve the way you spend it, like these three higher-ed innovations.

Best Help For College Grads

More borrowers can now cap their student loan payments, so that the bills eat up no more than 10% to 15% of income. Although these programs first got going a few years ago, they became a lot easier to access in 2014—enrollment doubled to 1.9 million in the 12 months before June 30.

One reason: The StudentLoans.gov site introduced a handy new calculator to quickly compare repayment options, as well as a one-stop application that allows borrowers to choose the plan with the lowest monthly payments.

Best Fast Path to a Degree

If you know the material in, say, Econ 101, should it matter whether you learned it sitting in a lecture, by taking a free online course, or by reading the books? More well-regarded schools are saying it shouldn’t—and that could help bring down the cost of getting a degree. The University of Wisconsin system now makes it possible to earn a bachelor’s by taking tests or submitting portfolios of your work.

The University of Michigan, the University of Texas system, and Purdue are also launching “competency-based” degrees. In the first year of UW’s program, one ambitious student aced enough tests to earn 33 credits in three months, at a cost of only $2,250.

Best New (and Returning) Free Courses

The number and quality of free online courses kept improving in 2014, offering everything from guitar lessons to “no-pay MBAs.” These are three of the most proven of the “massive open online courses,” or MOOCs.

A popular newbie in 2014: If Interstellar inspired you to learn about the cosmos, check out CalTech’s The Science of the Solar System, which has gotten five-star reviews on Coursetalk.com. As you would expect from a CalTech course, it’s challenging, according to the 2014 students. It’s being offered again through Coursera starting March 30, 2015.

Two favorites of the year: As computers become ever more essential to our jobs, programming has become a crucial career skill. But which language should you learn? And how can you learn it quickly and cheaply? MITx’s “Introduction to Computer Science and Programming using Python” teaches what has become the most popular programming language at colleges. Most MOOCs are plagued by high dropout rates. But among all the free courses offered by EdX, the MOOC platform for Harvard, MIT, and many other elite colleges, this three-year-old class is in the top five for number of students who have completed all assignments. The class is being offered again starting Jan. 7, 2015.

Even if you don’t plan to start a business yourself, odds are that you’re working for someone who is trying to be more entrepreneurial. And one of the most popular entrepreneurial gurus of the moment is Steve Blank, a tech entrepreneur who is one of the founders of the “lean startup” movement. Blank’s learn-at-your-own pace “How to Build a Startup” course has been sampled by about a quarter of a million students already, making it one of Udacity’s most popular.

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