Introduction to the Average Student Loan Debt?
“We to are lending money we don’t have to kids who can’t pay it back to train them for jobs that no longer exist.” Mike Rowe, Dirty Jobs.
The student loan debt has reached over a trillion and a half dollars with the average student owing $28,400 and grad students owing well over $200,000. It is the second highest consumer debt, second only to mortgages and higher than even credit card debt. There are over forty-four million borrowers collectively. Some eleven per cent of these loans are in default or over ninety days delinquent. More than half will end up not being paid back in a timely fashion. Since 1978, this rate has gone up over one thousand per cent. That is way past the rate of inflation.
Because of this debt, only one in eight of college graduates with student loan debt will be able to scrape together enough to put the twenty per cent down to purchase a home within the next five years. Two thirds of these kids will need at least two decades to be able to have this deposit before they can buy their home.
Who’s problem is it? The problem belongs to everyone. It starts with the federal government, moves to the colleges, goes to the families, moves on to the students and then reaches to the future generations that it will affect. It is everyone’s problem and everyone needs to find a way to bring about a solution before it continues to infect the kids who will eventually be responsible for running our country.
We should feel shame as a nation. This is not how we should be representing ourselves or providing for our children. There are kids not being able to attend post secondary schools not because of they’re intelligence level or their qualifications but simply because they don’t have the money. What will losing these future strong, brilliant leaders do to that economy?
Some are advising kids, don’t go to college. There’s a shortage in the trade industry. Go to trade school and build a future with no debt. What kind of income potential are they to look forward to in this scenario? It has always been in past generations that you earn twice as much with a college degree than if you simply have a high school diploma. Is that still true? Is college worth it?
It used to be that kids went off to college for a number of reasons. This was their first time away from home. They would learn about independence, taking care of their basic needs, get a part-time job and basically learn to live on their own. They would join fraternities/sororities, go to parties, and have fun. It was considered a well-rounded, enriching experience, not just all about the educational aspect.
Today, it is strictly about picking the right major so that you spend your education money wisely. This way you are able to find a good job when you graduate and can pay the loans back. It’s also about excelling in your classes so that you can succeed and graduate since you have incurred all of this debt. There is so much stress involved in the college experiences now.
One of the problems is there’s no transparency in the system so that kids can make rational decisions. They need to know is this a good quality school, what is the graduation success rate, does the school have a good job placement program? What is going to be the return on my investment, what am I likely to make in my chosen field, what is the demand for my chosen field and what will it be in the time frame that I graduate? When kids know better, they’ll do better.
The colleges are so busy making profits off of the loans that the federal government is providing to the kids and raising their rates to such ungodly high prices that their not taking the time to help the kids plan and plot and realize goals for a successful future.
The kids are going with passion as their guide in picking fields and ending up underemployed when they graduate. There are forty-three per cent of college graduates that are underemployed which means they are in a field that underutilizes their skills, e.g. we have a Starbuck’s barista with a bachelor’s degree. There are college graduates coming out working two and three part-time, low-income trade-type jobs not having anything whatsoever to do with their degree or anywhere near their field of study.
When the government chose to get involved in the students’ loans, they increased the demand for college education, but they also made the colleges greedy causing them to increase their prices significantly. Now the government gets interest from the students and the colleges get profit from the students and the students are left in the lurch. No one is offering to help them handle their finances properly because the government will give them whatever amount they want. They’re being left to fend for themselves as far as preparing for their careers. They’re left with debt that will never go away because they can’t file bankruptcy on it. It stays with them until they either pay it off or pass away.
WHAT MAJORS SHOULD KIDS FOCUS ON IN COLLEGE
Some majors are simply unemployable or don’t pay kids today enough to keep up with the debt that they’ve accrued. This is why they have the multiple jobs and jobs that aren’t pertinent to their degrees. Anything in social sciences and communications is usually too broad to apply when you graduate. You’ll end up having to go back to fine tune the study or working in a completely different industry.
Majors that should be refined.
- Art History
This field is too broad. The recommendation is Art Education instead as a more employable option.
- Early Childhood Education
- Social Work
This also has lesser income potential. The better recommendation for something similar would be Public Administration.
- Fine Arts
This, again, has a lower income than perhaps Film/Video/Photographic Arts as an alternative.
- Human Services Community Organization
This has lesser income and not as employable as it would be if you sought a managerial position in this service.
Good majors to pursue
Nursing. The starting income for nurses is at $54,100 and unemployment is only at 2.3%.
- Information Systems Management
The starting salary for this is $51,600.
- Civil Engineering
The starting salary is $54,800 and unemployment is at 4%.
- Computer Sciences
Salary begins at $58,400 and unemployment is at 4.7%.
- Pharmacy/Pharmaceutical Science
This is the number one major that kids should look into believe it or not. It starts out at $42,100 and unemployment is 2.5%.
A recommendation that some advisers have is that kids negotiate their tuition. What this means is play one college against another. Let a college know that another college gave you a particular package and ask if they can match it or do better. Ask a million questions of each college about their fields of study, if they offer job placement and their success rate with that.
You need to be realistic about your chosen field. What is it going to pay down the road? Is it going to be enough to finance a good living plus pay down the loans? What kind of availability is there in the market for this particular major? It may be a necessity that you find a similar alternative to what you’re passionate about in order to at least be able to get close to what you want to do and still earn a decent income with the loans attached.
Read every single letter of the loan paperwork, even the teeny tiny fine print. Get a magnifying glass. You need to understand every syllable. If you don’t understand something, get someone to help you to understand what it means. Don’t sign anything that you do not know what you are signing. This is something that is going to follow you until you can pay it off which sometimes means years. Don’t use the money for anything except education. Don’t borrow a dime more than what you have to for the tuition. Do everything you can to pay for as much as you can without the dependence of loan money.
It’s actually very sad that this is probably the best educated generation of any so far, and it is going to be the most underutilized. These kids get a bad rap for a lot of reasons, but if you really look at them, they’re not afraid to work numerous jobs. That says a lot about character. They want to go to school to in order to gain employment in their chosen fields. They want to have an impact in the future. We’re just not giving them the tools or the means to do it. We’ve kind of put up the roadblock to prevent their success. It needs to be taken down. Someone needs to fix this mess.
David is a financial expert who graduated from the University of Fordham (Master in Finance) in 2001. He has 10+ years of experience in private equity and wealth management. With strong expertise in senior-level financial planning, personal financial analysis, and mortgages, David knows his way around personal finance. Before working at CCR he used to be a financial analyst at McKinsey.
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