Paying back student loans is tough. Well, tougher than tough. For some after college, it can be next to impossible.
We’ve written a lot about tips and tricks to repay your student loans, along with ways to keep your student loan debt under control. But if you’re a high school student or parent of a high school student looking for the best solutions to avoiding student loan debt — or a grandparent taking out student loans for your grandchild, which has become increasingly popular — how do your choices on schools come into play?
Obviously, the type of college you go to — public or private — can have a big effect on student loans based on cost alone. In California, the average student debt is over $21,000. And if you choose to go to a certain school based on your parents’ income, you may have a greater risk of defaulting on your student loans down the road.
Below, we’ll uncover some reasons behind how a particular school may help you repay your student loans, the best schools to attend in California, what to expect to pay in cost of living after college, and ways to get out of student loan debt.
Why should I care about what college I attend?
According to a working paper by the National Bureau of Economic Research (NBER), the school you choose could affect not only your future job outlook, but how you’ll be able to repay your student loans. Treasury Department staffers who authored the paper found that low- and middle-income college borrowers had a tough time paying back their student loans after college — most hadn’t started repaying any of the original balance while borrowers from high-income families had repaid about 19% of their balance.
Some additional facts from NBER:
- 1 in 4 borrowers from low-income families default on student loans within five years of entering repayment.
- More than 10% of students from families earning fewer than $30,000 per year are unemployed five years after leaving college, while another 36% are working but earning fewer than $25,000 per year. By comparison, 8% of students from families earning $75,000 to $100,000 per year are unemployed five years after leaving college, while just 27% are working but earning fewer than $25,000 per year.
These facts are largely because of two things:
- High-income borrowers rely less on student debt to finance college; and
- Employment outcomes for low-income borrowers, despite attending college, aren’t as good as those for high-income borrowers.
There are, however, some colleges that can help with economic mobility for low- and middle-income college borrowers.
What are the best colleges to attend in California?
According to the Equality of Opportunity Project, several California colleges are ranked well for economic mobility. Based on the percent of graduates who come from families in the bottom fifth and reach the top fifth of income distribution, the college with the highest upward mobility rate is Cal State-Los Angeles at 9.9%. The average college in the U.S., meanwhile, has an upward mobility rate of 1.9%.
Curious to see which college might make you the most money? Of course, that depends on what field you study and how well you do in school, among other things, but the statistics are interesting.
The top five colleges based on the median income of graduates age 32-34 in the Los Angeles metro region are:
- California Institute of Technology: The median graduate here makes $83,000 per year compared to their parents’ $124,500
- Harvey Mudd College
- Claremont McKenna College
- University of California, Los Angeles
- University of Southern California
It’s important to note that none of these colleges reported a median parent income under $100,000 per year. At Cal State-Los Angeles, which has the highest upward mobility rate in the country, graduates make $43,000 per year compared to their parents’ $36,600.
Finally, here are the bottom five colleges in L.A. metro that recorded the lowest graduate median income:
- Paul Mitchell the School, Costa Mesa: The median graduate here makes just $10,300 per year compared to their parents’ $85,200
- Marinello School of Beauty, Xenon International Academy
- Musicians Institute
- International Career Development Center (which closed in May 2016)
- Glendale Career College
What will be my costs after college if I live in Los Angeles?
You might have noticed the NBER research paper used $25,000-per-year as a salary baseline for its college students five years after graduation. That’s a tough amount for any young adult to live on, and particularly in Los Angeles. According to the U.S. Census Bureau, the per capita income for the past 12 months (2011-15) in California was $30,318, while the median household income in 2015 dollars was $61,818. More than 15% of the state’s population is in poverty.
In the city of Los Angeles, it’s worse. The per capita income is $28,761 and the median income is $50,205. More than 22% of the city’s population is in poverty.
According to the MIT Living Wage Calculator, the minimum an adult living in Los Angeles County with no children must earn while working full time is $13.08 per hour for a living wage. That’s a little over $27,000 per year. Annual expenses for a single person without children include the following:
- Housing — $11,364
- Transportation — $3,768
- Annual taxes — $3,717
- Food — $3,560
- Medical care — $1,998
- Other — $2,799
Note that “other” includes no description, but may include student loan payments (most people are going to want a little leftover spending money for fun, too). An annual student loan payment just shy of $3,000 might not cut it, depending on your loan debt, the type, and its repayment schedule.
Unsure what you might make based on the profession you’re going into in Los Angeles County? The Living Wage Calculator also lists some typical salaries. Here’s the ones that don’t make — or barely make — the grade for living wage:
- Healthcare support — $32,350
- Production — $29,960
- Transportation and material moving — $29,540
- Sales and related — $28,410
- Building and grounds cleaning/maintenance — $26,410
- Personal care and service — $23,300
- Food preparation and serving related — $21,820
- Farming, fishing, and forestry — $19,790
How can I get help with my student loan debt?
If you’re struggling with student loan debt, you’re not alone. You can put in a lot of work learning personal finance at a young age and making sure to keep your budget on track, but unexpected things happen in life that can put us behind on student loan payments. Unfortunately, student loan debt isn’t dischargeable in bankruptcy in California, but if you’re not able to pay your student loans, there’s a good chance you’re having a tough time with other bills, too.
Bankruptcy can help with medical bills, credit card bills, and those annoying creditor calls. Speak with an experienced bankruptcy attorney today to discover your options. Borowitz & Clark offers a free, no-obligation consultation to determine if bankruptcy is right for you.
Other posts on our blog you might be interested in:
- How Can I Repay My California Student Loans?
- Errors on Student Loan Accounts: Were You Overcharged?
- New Guidance on Private Student Loans in Bankruptcy
- Can Student Loans Land You in Jail?
M. Erik Clark is the Managing Partner of Borowitz & Clark, LLP, a leading consumer bankruptcy law firm with offices located throughout Southern California. Mr. Clark is Board Certified in Consumer Bankruptcy by the American Board of Certification and a member of the State Bar in California, New York, and Connecticut. View his full profile here.