Is This Why So Many Have So Much College Debt?

In The Total Money Makeover: A Proven Plan for Financial Fitness, author Dave Ramsey tells this story of a college

A couple of years ago, I met with the dean of the college of business from the university where I graduated. At that time, the average college student graduated with about $15,000 in student-loan debt after spending three of four years in an apartment, not the dorm, and eating off-campus, not on the meal plan. The average student paid $5,000 more per year to live and eat off-campus than to live in the dorm and eat cafeteria food. The student loans that they "had to have" or they wouldn't be able to go to college weren't for college at all. The student loans, on average, paid for an off-campus standard of living, and no debt was needed to get the degree, only to look good while getting the degree.

I've documented the ever-growing college loan situation in several posts including the following:

• College Debt Run Amuck

• A College Debt Nightmare

• An Example of What I've Been Talking About

I used to think that college debt was accumulated simply to pay for tuition and the basics of room and board. But Dave's comments made me wonder -- how much debt is being racked up simply to support a lifestyle at a certain level? If it's true that students are leaving college with thousands in debt simply because they prefer to live and eat off campus, then my sympathy level for them (which was already pretty low to be honest) just dropped through the floor. As you might suspect, I don't have any compassion for someone who generates a lot of debt buying stuff that they really don't need.

I'm not sure whether this is common or not, but now that I think of it, doesn't it seem likely that at least some of the very high levels of debt that some people leave college with (I'm talking $50k+ here) was generated because of lifestyle choices (where they simply preferred to live one way rather than another)? I had these choices as well. But I lived in the dorm even in grad school and ate at the cafeteria as well. Not the greatest food, mind you, but a lot cheaper than alternatives. So, as I said, I do not feel sorry for those who have to have a certain type of place to live, eat certain food (barring a medical condition), need the latest tech devices, etc. and thus leave college with a large amount of debt.

What do you think? Do you think this is common or more the exception than the rule?

Comments

[manoj]

I lived off campus and it actually turned out cheaper. You can cook your own food off campus and not eat pricey cafe or restaurant food and not be subjected to ridiculous phone rates (there were no cell phones then!).

[KH]

Laughing at that dean--yeah, right! Maybe if you're a huge guy rowing crew and eating you weight 3 times a day, but for everyone else, the residence halls are a waste of money.

Like mano, when I was in college it was far cheaper to live off campus than on.

The meal plan (which was sold at a flat rate, but was required for students living on-campus) was incredibly expensive, especially for a woman or someone with an off-campus job that makes you miss lunch and dinner. I also had to skip lunch at the cafeteria most days due to my job off-campus.

The dorms were horrible--all that money for the chance to share a tiny room with a total stranger and shower with 40 other women in the communal bathroom (there were no doors on the shower stalls either, just like some kind of penal institution.). Plus you had to sit outside in the hallway for hours when your roommate had a date over, and you had to endure all the infantile "social" events cooked up by the residence advisor. Oh, and we had a curfew! And "room checks" every night for *gasp* boys!

It was also impossible to study in the dorms with all the social angst and drunks on benders because they were finally outside of parental control. I moved off campus to a much cheaper place for year 3---bliss!

Oh, and I graduated in 4 years with a BS Chem and only $1500 in loans.

[Michael Goode]

In most places I have seen it is usually cheaper to live off-campus and be off the meal plan (as long as you learn to cook cheaply). You could live in a luxury apartment and eat out all the time, but most don't.

[Jonathan Brinley]

When I lived in a dorm, I paid about $1500/month for approximately 50 sq. ft. (half of a room) and the mandatory meal plan. That's about $9000 for the 8 months of the year the dorms were open (you still had to find somewhere else to stay the other 4 months of the year).

Moving off campus, I paid $220/month for about 250 sq. ft. (half of an apartment) that included a private bathroom and kitchen. I spent about $200/month on food (and ate much better food than I did in the dorms). That comes to $5040 for the whole year.

So my savings by moving off campus: nearly $4000/year, while living a significantly improved lifestyle.

[Bobbert]

One more for off campus being cheaper in lots of cases. As you got farther away from campus housing got cheaper, so the limit to how cheap it could get was the distance you were willing to walk, or how close it was to a bus line (or if you had a car, but then you lost out on the price advantage).

[Katharine]

Um. Maybe at this University? But A) not all campuses offer on-campus housing for the entirety of your degree B) In lots of places its cheaper to live off campus and C) most student loan disbursements go straight to your financial aid office - most students never see a dime of that money. I mean, private student loans are a different story, but I never saw a dime of any of my government backed money.

[David C]

I was a commuter to a local state college, so I saved a lot by doing that. Luckily this school was not too far away, so that was feasible. I carpooled with one or two other students whenever possible, to save costs. I drove a twenty year old car and really didn't care too much about impressing anyone. A part time job was a necessity to keep the whole thing going. All of this enabled me to graduate with no college debt whatsoever. Of course this was 25 years ago, so I guess things have changed for the worse it would seem.

[Brian]

I agree with all this stuff. I moved off-campus after one year because of the high cost. The meal-plans are also restricted to certain times of the day as well. I had to keep extra food in my dorm room when I lived there for the times I missed the appointed "lunch" time or on the weekends when they only offered two meals instead of three.

No offense, by when I read this in Ramsey's book, it sounded like a plug for colleges to get you in the dorms ($$$$$). Except in super-high cost living areas like New York or southern CA where universities subsidize housing, it is almost always cheaper to live off-campus.

[Jon]

I saved a TON by living off campus. I rented a house with 3 other guys and payed 215 a month (utilities included). The dorms wanted $670 a month. Mandatory meal plan for freshman cost about $5.50 a meal, outrageous considering how cheaply I was making healthier meals at home for a fraction of that.

[Jenna]

As a recent college grad (less than 5 years ago) and the sister of a current college attendee, I think this dean is full of crap! To live off campus was almost 3K cheaper for 12 months of an apartment/food verse only 8-9 months in a dorm. Not to mention the food was better! There's always the exception, but most colleges charge a premium to live on campus for the convenience.

[katrina]

Residence halls are not the reason. I graduated with 100k in student loan debt and the reason is TUITION. There is not a significant difference in paying rent vs paying for apartment. At least when considering all the tuition you are paying. Maybe saves 10% at the most. I lived in a bad part of downtown in a rented off campus apart along with 90% of my school.

[JM]

At my college, and from what I understand almost all other colleges, it was way more expensive to live on-campus with the meal plan than off buying your own food. Don't know which college dean Dave Ramsey talked to, maybe to one in a city where there's a very high cost of living (New York maybe?) and the dorms really are cheaper? That's the only thing I can think of.

[Eugene Krabs]

I don't disagree that some can and will find cheaper ways to live that is off-campus. I myself went to a local university and lived at my parent's house to save money so....

That said, I do know and have seen people who use student loan, mostly for nothing more than to raise and support their standard of living. They take the maximum amount of subsidized and most if not all unsubsidized.

And... knowing their track record of unpaid back taxes, and the lack of motivation to work a job, I just don't know how they're going to pay it off.

[tom]

I call BS on that.

The meal plans at my school range from $1,750 - $2,250 a semester. I spent way less than that living off campus, and eating out most of the time. A meal at Panera costs $7, and Chinese costs $7. Let's round up and say we are spending $20 a day eating out plus bar tabs half of the time. We'll spend maybe $100 a month on groceries or $5 a day the other half.

Let's look at the math:

On Campus:
School year: Sept - April = 125 school days.
$4,000 per year / 125 days = $32 a day for food on the meal plan (use it or lose it)

Off Campus:
School year: 125 days
$20/day eating out(plus bar) x 125/2 + $5/day groceries x 125/2 = $1,500 per year or $12 a day.

It costs way more to eat on campus than off campus. Even if you were eating out every day, you are only spending about $20-$25. The low end meal plan at $1,750 still comes out to $28 a day, again, use it or lose it.

I also didn't add that it actually costs more to live in the dorms than to actually rent a house/apartment with a bunch of friends!

So, with respect, I call BS on Dave Ramsey.

[tom]

I should also mention I only graduated 4 years ago.

[Doug @ CheapScholar.org]

As a college administrator, I can tell you that the dean is totally off the mark with that statement. Living on campus tends to be more expensive only because it is an all inclusive option. Unlimited meals, unlimited use of utilities, and no responsibility for maintenance or upkeep. In addition, most colleges require students to live in campus housing/residence halls a minimum of 2 years and some require all 4 years. So living off-campus tends to be a cheaper option when it is allowable.

On another note, you have to remember that a financial aid office can NOT certify and process loans that exceed the cost of attendance (COA) at the University (less any aid they receive). These costs include Tuition, Living allowance (or Room & Board), bookstore charges, and some misc. allowance usually around $1000 to cover other incidentals.

Based upon this, student loans can not be used to live a lavish lifestyle while in college. Yes, you can decide to not eat as much in order to go buy a pair of pants or share books with your roommates so that you have some extra cash for movies and entertainment. However, at the end of the day you only have access to funding up to the cost of attendance figure established by your college and what's left after you pay the college the appropriate fees is not going to be a large windfall for the student.

[asdf]

I don't understand how you could not have sympathy for those who moved off campus. In almost every case, moving off campus saved students money from paying a ridiculous amount for a tiny dorm in which saving money is harder since you can't cook.

[weston]

Add me to the chorus. I've been out of college for decades but found living off campus far more frugal than living on campus. Particularly when it came to food costs.

[Damilola]

I'll provide a little input on this because I went to 4 years of undergrad and I am in my 5th year of grad school, so I know a little bit about this.
It is definitely cheaper to live off-campus for the most part. However in some off-campus housing corporations, they have these all-inclusive deals where you get internet, water, electric and cable all covered in a lump sum. Most students think it's a great deal but when you actually do the math, it ends up being a rip-off. Unfortunately, these students don't know better because they don't do their research or get tips from their parents on how to apartment shop.
Case in point, one of these housing corporations brought down one of the guys from "Jersey Shore" so they could attract new tenants for the coming year. You can imagine who is going to bear the brunt of the expenses for that invitation.
Overall, I think at the end of the day when these loans are being applied for, the parents should consider talking to their children and advising them to live within their means. As we all know, getting a college degree isn't worth as much as it used to and doesn't guarantee a job anymore.

[M&M]

I live off campus (I'm a nontraditional student, 26 and married), but I was curious and so I've asked several students about the dorms. I can't quote an exact figure but it was more than renting a moderate apartment or house in our area. Plus the students have to vacate over the winter break or pay an additional amount that I think is ridiculous. Now about the meal plan, we have a faily flexible option where you load how much money you want on your student account and use it as you like, but you food options are faily limited and about as healthy as eating at a fast food resteraunt everyday. Everything is fried or pizza and a soda fountain. I've never seen a salad, or a jug of milk. And this is what the athletes mainly eat since they are often scholoarship students and the meals are included. In my opinion its not only cheaper to live off campus, but probably healthier too.

[Geoff]

I agree with others above. But adding to it, where I went to school, they had a lottery system for university-owned housing and upperclassmen were given priority (which makes no sense since they are closer to the real world and should get some practice finding a place to live on their own). So after freshman year I had no choice but to find off-campus housing.

[blake]

I spent one year on-campus. It was required. I had fun and met most of my good freinds in that first year. After that I moved off campus as did most of my freinds. Cheaper to live off campus and much better quality of life as an adult rather than being treated like a junior high kid at summer basketball camp. I graduated with a BS and MS in engineering in 5 years. I also worked 35-45 hours per week during the school year. Wages were terrible in that town so I still ended up with 15k in student loan debt, but I wouldn't change my experience for anything.

I seriously doubt I would have finished school if I stayed on campus, but that is due to a sense of independence that most 18-22 year olds don't have anymore. College is important but I could not have made it my whole life for 4 years. I continued with hobbies such as hunting, fishing, and motorcycling while working and making college something else I was doing.

[D]

@Geoff

This school you went to, it wasn't in the mountains of Virginia, was it??

[Budgeting in the Fun Stuff]

I saved about $2000 a semester by living off campus. All the cafeteria and convenience foods offered on campus were much more expensive than cooking in a shared apartment.

But, I do agree that a bunch of college debt is because of lifestyle choices.

If you live off campus by yourself and eat out every day with friends, you will rack up the expenses pretty dang quickly. I knew a bunch of people who thought it was weird to have roommates. They were paying $600-$1000 a month while I paid $288. I don't know if they were acumulating debt, but they sure weren't helping themselves...

[Wayne]

I would think that the students who are in debt $30k+ have typically made some life style choices that make school more expensive. I am sure that is the case when a student is $100,000 in debt. I asked my son if he had seen an Ipad and his reply that he was in school with kids who didn't have money for such. I am sure there are exceptions and students who live high, but many struggle financially. Sure they make some mistakes, but that is part of learning.

[SS]

Yes, that sounds exactly like what a dean would say.

But the point must be valid that lifestyle changes could keep a lot out of debt. I'm really amazed at how low the average student loan debt amount is (~$20K) when compared to the average cost of school, which is around that amount each and every year. If only a quarter of the costs are borrowed, it seems feasible that lifestyle reduction may be able to cut out the need for that borrowed piece.

[Claire]

I went to university in Southern CA and still found living off campus cheaper. Also, I went to a public university and while we could live on campus for our first two years, it was not required...nor was it guaranteed. I did stay on campus for two years only because the second year I could live in an on-campus apartment with no meal plan and cook my own meals. I think the meal plan worked out to be about 400-500/month. On my own I spent under $200/month.

[tom]

I think it is irresponsible of Ramsey to put this annecdote in one of his best selling books without doing any background research.

This dean obviously has an agenda to get more students to live on-campus, by playing it off as cheaper. In reality, the school makes more money. I'm wondering if his school has a vacancy issue in their dorms.

[Tom Schneider]

No, that is not the reason.

[tom]

And that school is University of Tennessee, Knoxville. R

oom and board looks to cost around $8,000 for the year on-campus. Average dorm rates cost around $2,500 per semester and meal plans at $1,500 per semester.

As I layed out above, a student off-campus can easily get away with spending only $1,500 a year on food and drink, even with eating out a lot.

This dean from UT is completely off base.

[Steve]

I too found the factual error to be glaring.

If we force ourselves to look past that, we can still consider the question being posed. That is, it is (ok/right/immoral/a good idea/a bad idea/etc) to spend money on anything non-essential while you're living off student loans?

I lived on campus for the first half of my college years and off-campus the rest. But my parents lived only 3 miles away and I had a car for the second half anyways. So I did, in fact, take out loans just to have a certain lifestyle (even if it wasn't luxurious.)

Student loan money is some of the cheapest you can get, and the time period is possibly the lowest standard of living you'll have your entire life. So taking out loans to improve your lifestyle, in moderation, may actually be a rational act.

[helio]

I'm a sophomore at a community college in Scottsdale, Arizona. The university here has three campuses. The one where I want to go next fall has one dorm, and the cost is the same as apartments around there. Not only that, but you have to sign a whole YEAR long lease, just like a regular apartment. What if you have a job in the summer or you do an internship somewhere else? You still have to pay rent for the summer whether you're there or not.

So I would disagree that dorms are cheaper than apartments. Food on the campus is awful, so my sister's friends are always ordering out pizza and junk food, or driving to restaurants off the campus. You have to have a car to get to a place to get food, so that adds more expense unless your mom is paying for it.

Most of my sisters friends in college are not living like movies starts. Neither am I because I live at home and my mom is not a movie star either. Tuition keeps going up every semester and ASU charges extra for every credit hour you take in any major that might help you get a job.

[jim]

It depends on the university and the student.

Some schools are in high cost of living cities where living on campus is cheaper than off campus. Some schools are in low cost areas where on campus housing is more expensive. Some meal plans are paid for like restaurant cafeterias where you pay for what you eat at each meal so if you eat a lot you pay more on campus. Some schools have cheap food with meal tickets so you can eat 3 meals a day with an 'all you can eat' buffet style system. Some students are frugal and will do well living off campus sharing rent with roommates and cooking frugal meals from food bought with coupons. Some students will eat out at restaurants most of the time if living off campus and spend more than they would in a dorm cafeteria.

There is certainly no general rule that on campus housing is more affordable than off campus or vice versa.

[[email protected]]

I too saw that story while reading the Total Money Makeover and had to read it 3 times to make sure my eyes weren't playing tricks on me.

I've ALWAYS heard that it's cheaper to live off campus. The meal plan alone is usually outrageous...

[FMF]

asdf -

I said I didn't have sympathy for them when I believed it was a worse deal to be off campus. Apparently that isn't the case.

[Eric]

Yup, FMF, I have echo everyone's comment. Not sure what university this dean is from but school for me cost a lot more if you live on campus.

[Lilly Adams]

I racked up just as much debt in living expenses as I did with my college tuition this past year. I am moving off campus into a local apartment right after the holidays.