The Dangerous Web of Student Loan Debt
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Over recent decades, student loan debt has become a disease spreading across the country. Do you have a college degree? Then you are likely similar to the millions of grads who come out of college with the burden of student loan debt.
“Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year” (Student Loan Hero)
How I ended up with $40,500 in Student Loans
2011 is the year I borrowed my first student loan. I took out $9,500 between federal aid and private loans for my Freshman year of college. Personal finance, budgeting, and debt were not a part of the curriculum of my high school education. Borrowing money year after year, I attended my classes (and the occasional weekend kegger). Four years, a paper diploma, and $40,500 later, I had a college degree and no guarantee of a way to repay that debt.
According to CNN, my $40,500 is above average. Student loan debt was never a category I wanted to be above average in! The table below outlines the details of my student loans including the date the money was distributed, the principal amount, and the current amount owed. You can see it all.
Shackles of Debt
College was never a question. Dreaming about college was a favorite pastime for me since I was 9-years-old. That dream included all the greats: Stanford, Harvard, Notre Dame (I was an ambitious 9 year old). Instead of playing princess and scrap-booking my dream wedding, I dreamed about being an astronaut and played prosecutor. Graduating from college was the proudest day of my life. It was the accomplishment I had worked very hard to achieve. I graduated thinking “this is my shot; this is my time to make money and have freedom”.
It’s been two years since I graduated college, and I am still not free. I have a net worth of negative $31,701.39. What they don’t tell me in High School is that student loans are debt. It is money that I borrowed and now am paying back with interest. My loans range from 3.5 to 7.25% interest, which means that out of my $420/month minimum payment, about $150 goes straight into the banks’ pockets in the form of interest. We’re definitely looking to pay these down at a ridiculous rate in the next step of our debt-free journey!
Note: Many students end up with loans from several banks and have to deal with the challenge of keeping track of all the login pages. It is possible to save time and money by consolidating all of your separate loans into one loan, and possibly even get a lower interest rate (currently as low as 2.43%)! Consider all your options by using a comparison site like LendEdu. It’s a free service that will show you all your options when it comes to student loan refinancing.
I am not advocating against going to college. College was a great stepping stone that opened doors for me to have better job opportunities and a higher income potential. Fortunately, I have been able to make my student loan payments every month without having to worry about where that money will come from. However, the reality of the situation is that no job is completely secure and no paycheck is truly guaranteed. The debt I have accrued is there until I pay it off or die. With the exception of limited deferral periods, I am required to pay it on a monthly basis whether I have a paycheck or not.
Alternative Options to Student Loans
There are many alternative paths for prospective students that can help you to avoid the burden of student loan debt.
1. Take a Gap Year
Waiting a year after high school to start college can be a great way to figure out what you like and what you don’t. Starting college unsure is a very expensive way to figure that out. It can also give you a taste of the responsibilities of managing money and being an adult so you are ready for the commitment you are making by going to college. Working a full-time job during a gap year can give you the financial means to attend college without having to go into any debt and is a great experience.
2. Take Your Generals at a Community College
All colleges and universities require students to take core curriculum “general” classes their freshman and sophomore year. These classes usually include: math, science, public speaking, etc. Figure out what the core curriculum classes are at the college or university you want to attend, and research their credit transfer programs. Additionally, talk to a guidance counselor about their partnerships with local community colleges and what credits will and will not transfer. Community colleges are typically much cheaper than attending 4-year colleges and universities. You will also save on tuition and housing by living at home or sharing an apartment with friends.
3. Work Hard in High School
Advanced Placement and college credit classes are offered at most high schools. Take as many AP or college classes as you can throughout your 4 years of high school. All of those credits can potentially save you thousands of dollars. Most AP credits are part of the core curriculum classes all colleges require, and this may allow you to graduate in less than 4 years. Take advantage of the opportunities at your high school. Talk to guidance counselors and figure out the best plan for you or your child.
4. Not in high school anymore? Determine whether your company has a higher education program
Many companies have education assistance programs that provide aid for graduate degrees. Talk to your HR representative to see if your company offers any sort of reimbursement package for college credits. This approach usually takes longer to complete the degree but can cut down on costs, sometimes by 50% or more!
In conclusion, I wish I would have known my options before accepting my attendance to the University of Minnesota as a naive 18-year-old. College provides many valuable life lessons, but can also be very expensive. It is a social norm that is leading many new grads to default on their loans and families to go through financial hardship.
Was your student loan debt more or less than your first-year salary after college? What do you propose we need to change about the current system to make it work for students?