Think student loans will lead you to a better job, better income, and therefore (based on what our society makes you believe) a better life? Think again.
Student loan debt has for the last couple decades risen higher than inflation. It is an area that is little mentioned in the media, but is surely one of the next big bubbles in our economy.
The problems with having large student loan debt are:
1. There are fewer jobs
2. Most people don’t work in the same field as their major (atleast this was the case in the past)
3. School’s lag the real world and by the time 4 years goes by…the world is totally different.
4. The biggest problem of all: the only asset to pay off that debt is YOU. They lent money to you, expecting you to work your tail off for the rest of your life to pay off your loans. How’s that plan sound to you? Hence why buying assets is so important.
I read an article in the LA Times about student loans. The last story sums up the problem that many college students and grads face…and shows how many of us will see a standard of living below what we grew up with.
Marja Lopees of Burbank, CA went to college to become a lawyer and makes about $70,000. Her total cost for college: $196,253. Yikes! Her payments are 40% of her earnings.
She was having trouble paying for school with just federal loans (no surprise) and so had to turn to private loans. The $88,303 of private debt is currently at an interest rate of 8.84%. Ms. Lopees has been quoted as saying: "I’m making interest-only payments on one of the loans, and still the payments keep going up. It’s just overwhelming."
After paying for rent and student loans, she has just 40% of her after-tax income left for food, clothes, utilities, gas, maintenance, insurance, etc. There won’t be any vacations, home buying, or anything else for a long time with that amount of debt.
Her last statement rings so true because this was the mentality of most people as they went to college. As quoted in the LA Times :
"No one tells you to be careful of taking on too much debt when you’re in school. It’s just the opposite. They just keep giving you loans and saying, ‘Don’t worry about it. You’re going to be a lawyer. It’s no big deal.’ "
Re-think how much debt you take on, and what interest rate you’re paying. Compound interest scared Einstein…does it scare you?
{ 6 comments… read them below or add one }
Student loan debt is a consequence of pursuing higher education for a lot of people who simply don’t have the ability to pay for school out of their pockets. Your advice to not accumulate student debt is based on a single example…probably not even a real one. Most people I know pay a lot less for school and earn a lot more when they graduate with an *undergraduate* degree. In reality, universities are usually a pretty good investment, as long as they’re part of a greater career strategy.
Your Einstein reference is only slightly short of retarded. Nobody gives non-compound interest rates. It simply does not make sense from an economic point of view. But who cares about that…god forbid someone goes into compound (oh no!) debt in order to become a more educated and more productive member of our society. Don’t wanna pay compound rates? Then you won’t be doing much borrowing. Go to Cuba if you don’t want to buy into the borrowing/lending economy. See how the standard of living is there.
A lower standard of living than we had growing up Are you serious? Please examine the general trend in the standard of living in our world ever since people started thinking about economic theory. Sure, some people won’t make the right career decisions and end up worse off than their parents, but the general trend is we are all getting richer in a real sense as the products we purchase become cheaper as humans get better and better at producing stuff and trading.
Please refrain from writing stupid articles in the future. You’re doing a disservice to the Internet.
Mr. Senior Tomato is very keen on his knowledge about economy, banking, lending and the whole theoretical and practical marvel behind it. Good for him. Maybe he should go back to when he was 15 and start dissecting Economic Theory again and MAYBE he will understand that it is all based on a illusion called debt which is the magic that makes the practice of lending so surprisingly “natural” in our minds. Standard of living is going up?! Wake the hell up!!! General standard of living?! What are you talking about “expert”?! How about you examine banking, currency, inflation and its origins for starters and compare that to the past standards and maybe you will realize that it did to our standard since the dollar can buy much less then it could before! Why do you think that is the case? Oh I don’t know, maybe it could be because of the accumulated debt which is the foundation of the whole “I give you money, you pay me back with an ascending interest” economy? Could be… But you would not know that since you know all theories banker and “experts” have presented to US “tribes of ONE worthless example” right? Well how many examples of you being kicked in the ass do you need before you can “rationally” conclude you ARE being kicked in the ass?
Leave people fight the thieving bankers as ever they can, don’t protect the lending scam. Perhaps you can be that much of a human? Anyway, I am sure they can not be “much worse” liars than one standard student loan offer…
My apologies for bad language.
Thank you.
I’m graduating in this May and I have about 60,000 in undergrad loans. I even make payments but the interest is killing me. I was one of those students who didn’t have a cosigner because my parents didn’t make enough. I came to school with the prospects of getting a job and now I’m unemployed and my loan payments are going to be 800 a month. If i find a job it will probably pay min wage which is still less then 800 a month. I’m an advocate for education but something needs to be done to allow poor kids to get an education with out loan company’s and schools taking advantage of them. My school personally pulled 4000 a year funding from me after my first year because of funding. That’s 12,000 dollars I had to get loans for and now with interest I’m sure it is around 14,000.
I have a cousin with a degree in Economics. He now makes 13 dollars an hour designing graphics for the local news.Over the summer he lost his apartment because he was unable to pay rent due to his loan payments.He now lives with his parents at the age of 31. He adviced me to go into business myself rather than go to college like he did.
Columbus,
I’m sorry to hear about your cousin’s situation. Hopefully he is able to get his finances in order with this new job and do his best to get out of the debt.
Unfortunately, this story isn’t rare: it’s happening to many people today.
His advise of starting your own business is definitely good advice. Keep reading the rest of this site for more information and tools on how to do that.
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