Love, Money + Real Estate #50

An Insider's View on Student Loan Debt and the Burden it Places on the Financial Wellbeing of Young Adults

Over the holiday weekend, I published a newsletter on how financial stress and physical health are intertwined. A new body of research this year has revealed something new: How you perceive your financial decline matters 20 times more than the actual financial change itself.

I received this letter from Joan Hammel, an actor and singer who was a former trustee for Columbia College. She said she stepped down from the Columbia College Board of Trustees just before former Columbia College president Dr. Kwang-Wu Kim’s pay was approved. It’s an incredibly insightful insider’s perspective on how the profit center works for some colleges and universities, even if they have nonprofit status.

Joan approved my sharing her letter with my readers.

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Dear Ilyce,

One of the topics no one talks about is the college's role in student debt. [Though] you and I met each other because of media, I am also a former trustee of Columbia College Chicago. After serving on the Board for over a decade, I had a unique seat at the table regarding how colleges and universities do, or do not, consider the financial impact on students of tuition.

It is my opinion that too many colleges and universities are not considering the financial life of the student in its entirety. Some colleges do not feel any obligation to deliver anything to students aside from a selection of courses once [they are] accepted. Profit is the beginning and end of their concern, leaving the rest on the shoulders of the students and their families.

If you think only from a profit standpoint, there are areas that colleges and universities use to boost the bottom line. Program requirements are sometimes changed to extend a student's time in an institution. More classes mean more time and more profit. I personally would suggest that a student receive a written agreement in their program as a freshman as to exactly what classes are needed to complete their area of study. Changes in programs are not a student's responsibility, and yet it happens all of the time. We were told that the average student is now taking 6 years to graduate. That is a lot more tuition which is good for the school but not the student. Asking what the attrition or graduation rate is one of the most important questions that can be asked of an institution. Sometimes admissions departments don't even know the answer to this, or they don't want to answer it. I recently looked at some colleges in another state for my soon-to-be sophomore son who expressed interest in [his] playing sports for them. They had an abysmal 19 and 21 percent graduation rate after six years. No chance he is going to those schools.

Another profit center is room and board. It is the reason so many schools require that freshman live in the dorms. A low profit center for schools? Those giant classes of a ton of students with one teacher or a ta. Schools will sometimes offer a tuition "discount" as opposed to a straight ahead scholarship because it is not actual money being exchanged. It never hurts to ask for a discount for the large classes as there is so much profit built into them. Sometimes schools use the discount method to recruit students, and families should know this is a very real and tangible negotiating area.

Here is another question: what role does an institution of higher learning have in the job placement for students? Far too many say none. I personally think this is one of the most important questions a student and their family can ask a college. What good does a degree do if there is no job, connections or leads once you graduate? Nursing schools are especially connected in our community, and are almost guaranteed a job upon graduation. It is more than understanding which fields [have employment opportunities], it is vital to know what role the teachers or the college play in the futures of the students.

In my opinion, every student should be offered a comprehensive review of their financial life at the very beginning of their relationship with an institution. There are community resources and not for profits that are free to students to help them see the financial landscape ahead of them, and would require nothing more than the institution to refer them on a piece of paper. And yet, it is not a priority. A student who has an excellent financial plan, a written course plan and a job connection will be a happier alumni who will certainly donate back to the institution upon graduation. This fact seems to be a dilemma to many colleges and institutions as to why calls for money to alumni go unanswered or are met with angry responses.

It pains me to see so many students carrying huge burdens of loans and other debt all in the name of a degree. Far too many kids are never even graduating, which makes it even worse. When I was a young person, I was so focused on being accepted by a college or university, that I did not realize that I was a consumer paying for a product until my junior year. That is when I had a huge internal shift asking more from my teachers and school for the money I was paying for tuition. And don't get me started on what college Presidents are making...

Thanks for letting me vent,

Joan

Dear Joan,

Thanks for writing. Let’s start with the issue you raise at the end of your letter: presidential compensation. According to Salary.com:

As of July 01, 2025, the average annual salary for a University President in the United States is around $306,165, with an hourly rate of $147. The average salary ranges from $183,021 (10th percentile) to $388,712 (90th percentile), with the majority earning between $241,707 (25th percentile) and $349,373 (75th percentile). A University President's salary is shaped by several key factors, including experience level, specific skills, industry differences, company size, and so on. Below, we'll dive deeper into each of these factors to help you understand how they impact compensation.

But, to your point, some college and university presidents earn millions of dollars per year. According to Harvard Magazine, Lawrence S. Bacow (former President), earned $3,080,733 in 2023. Claudine Gay (another former President) earned $1,079,008 in 2023, plus other compensation totaling an additional $283,947, including housing. Alan M. Garber (current Interim President) earned $922,068 in 2023, with a future 25% pay cut starting July 1, 2025.

And, those amounts seem meager compared with what some D1 college football coaches earn. (Hint: $10 million at the upper end.)

But, back to the main issue you raise: student loan debt. According to the Education Data Initiative, at the end of 2024, 42.7 million borrowers collectively owe $1.77 trillion in student loan debt.

• Federal student loan debt represents 92.2% of all student loan debt; 7.79% of student loan debt is private, including $29.3 billion in refinance loans.

• The average federal student loan debt balance is $38,375, while the total average balance (including private loan debt) may be as high as $41,618.

• 4.86% of federal student loans dollars were in default as of Q4 2024; 1.61% of private student loans were in default as of 2024 Q1.

• The average public university student borrows $31,960 to attain a bachelor’s degree.

Over the years, the growth of student loan debt looks more like a hockey stick. When you factor in 7 or 8 percent interest rates, instead of paying off a $32,000 loan, borrowers wind up paying two to three times that amount.

I’d hope that high school students and their parents are aware that they are purchasing a product when they sign up for college. It’s a worthwhile investment in your future, if you know what you’re getting into, limit your partying, and work hard to figure out how you’re going to leverage your education into a lifetime of meaningful work and enough money to live on.

But that outcome isn’t certain. Financial illiteracy is rampant. And, too often colleges collect that last tuition check and say “goodbye” without offering anything more than a piece of paper. Colleges and universities can do better. Parents and their kids should be better shoppers. It’s a lot of cash.

When I wrote my first book for first-time buyers, I said it would be the largest purchase you ever make up to that point. The first edition was published in 1994. Given the price of college, which will soon be more than $100,000 per year, that statement may no longer be true. Worth a hard think, no?

As an aside, one of the reasons I started Best Money Moves was to give people the tools they need to make smarter financial decisions. Despite a raft of financial wellness tools on the market, including ours, I’m not sure the majority of Americans understand how money really works.

Thanks for reading. I’ll type to you again, soon.

Ilyce