Student Loan debt is now at 1.6 trillion dollars, a figure that has tripled since 2005. To understand the magnitude of this number, consider that credit card debt is only 1 trillion dollars. For those with student loans this crisis is all too real, but this predicament may soon impact many without student loan debt.
The impact of student load debt on young adults
2018 survey by Summer and Student debt Crisis.
19% putting off marriage.
26% putting off having children.
56% prevented from buying a house.
42% prevented from buying a car.
80% put off saving for retirement.
50% could not donate to charity.
58% reported a decline in credit score.
13% failed credit check for apartment application.
85% said student loan debt was a major source of stress.
Thoughts on student loan debt
There’s a moral obligation that those who take on debt should repay it.
Cultural Ideology of “I deserve it” … someone else should pay for it.
Taxing “the rich” is forcing someone else to take their money and pay for me.
Cultural values that puts one group against another will cause deep divides and prejudice in our nation.
The right thing to do is to be responsible and take ownership.
There’s no such thing as a free lunch - everything has a cost!
There is no “secret sauce,” no top secret way to go through school without paying anything at all. This goes back to the economic idea that “everything has a cost.” You are going to pay for college in some way.
It may be:
Studying like crazy in high school to get the best grades, giving up nights and weekends out with friends to prepare for the SAT & ACT.
Spending 100’s of hours pouring over scholarship information finding people around the country willing to help with your education from their own generosity.
Working your way through school, studying 30hrs a week, while you work 30hrs a week, living a low cost lifestyle.
Going to a Community College… you’re paying by giving up some of the amenities that big 4yr colleges and private institutions offer, but you’re getting the education at a low dollar cost.
Using debt to pay for school. You don’t pay now, but you’re going to be paying for years and years to come, with the interest and financial pressure being the added cost of not making different choices now.
personal Finance education
A recent article from Market Watch, reveals how the U.S. Treasury Department is finally understanding the importance of educating students on finances. It is recommending initiatives to ensure students get the information they need before they make HUGE life altering debt decisions, such as taking on student loans.
Potential Solutions to Help Student Recognize the True Cost & Pain of Student Loans:
Financial-aid offer letters should have “an itemized and sub-totaled cost of attendance” that discusses the direct costs paid to colleges for things like tuition and other indirect costs.
The costs should also be calculated “after grants and scholarships are applied.” Currently, “award letters are sometimes unclear, leaving students with inadequate information to make financial decisions.”
There should be a “broad adoption” of debt letters in higher education.
The letters tell student borrowers the debts they’ve incurred annually and what their expected future repayment amount will look like. Debt letters are already required in 12 states.
The letters should spell out repayment options, estimate how much interest will pile up if payments are deferred and provide average entry-level salaries for graduates with the same sort of major.