The cover page of the latest Consumer Reports magazine states that 42 million people owe $1.3 trillion in student debt and in large quotations:
“I kind of ruined my life by going to college.” – Jackie Krowen Portland, OR with $152,000 in student debt
If that headline does not get your attention coming through the line at the grocery store then I don’t know what will. The magazine cover page just jumps out at you and draws you into read more about how college can possibly be ruining lives.
While I think the cover idea is pure marketing genius, and also agree that college debt is a problem, I will never agree that college, or higher education for that matter, ruins lives.
It is the students who go to college without a good plan and take on loans at any cost to attend college that is the real problem. I think the more suitable statement should go more like this,
“I kind of ruined my life by borrowing $152,000 for college.”
But of course the marketing geniuses at Consumer Reports know that this headline would not have sold as many copies or drawn the readers like the powerfully painful statement from Jackie Krowen.
The cats been out of the bag on how debt can ruin lives. But to think that college is ruining lives, whoa, now that’s something to read more about. It made me buy a copy.
I will also say that the level of college debt is relative. Some doctors went to undergraduate school and medical school and residency and come out with $152,000 in debt. The big difference is that they will likely be earning at least $150,000 – $300,000 for the rest of their career. The Return On Investment (ROI) may make sense. If you come out of college with $152,000 in debt without a degree or with a degree in art history or teaching – then you may be in a world of hurt.
There is a lot of regret and buyer’s remorse occurring today for those living with the burden of college debt.
An Example Of Getting A College Degree With No Debt
Before heading into the darkness of college debt I want to tell a positive story. It serves as a reminder that there are college students out there paving their way to a degree – responsibly.
I was at dinner two nights ago with my wife and eleven-year-old son. My son reminded me that the waitress had just taken a test the last time we saw her and he was curious how she did. So we asked her. She replied that she did good on the test and received a B in the class, something she was surprised about considering the difficulty level of the class.
She mentioned that she was attending the local community college and would graduate in December to be an RN, or a Registered Nurse. I asked if she was saving money by going to community college. Her reply coupled with the Consumer Reports article are the main reasons I wanted to write on this hot topic.
“I will be 24 when I graduate. My brother and sister are 19 and 20 and in college racking up student loans with NO idea what they are doing. I figured out that I wanted to be a nurse and could get my education while working, so although it is taking me longer, I will have a job when I graduate and have no college debt.”
“So many of my friends have huge debts and still do not know what they want to do.” – Community College student, waitress
I was floored at her youthful wisdom and want more of America to think the same way. The primary concern about students going to college without a plan is that they will waste precious time and tuition money, which may delay or even prevent graduation. One thing you do not want is college debt and no degree to show for it.
From Skateboarding Kid To Life Expert In Two Years Not Likely
It is not easy to make a career decision when you have just recently started shaving daily. I recall when a neighborhood boy turned sixteen and sold his “totally cool” long board to my oldest son. The neighbor boy was changing the long board in for keys to a jeep. This same boy I had seen using his long board to get through the neighborhood and to the pool for a couple of summers. In the blink of any eye he is driving his jeep through the neighborhood and in another blink was turning eighteen and graduating from high school to go on to college.
Kids go from skateboard to car to college in just a matter of two or three years. To think that they can be riding a skateboard one day and just a couple of years later be making the decision about WHAT they want to be for their entire life – is silly.
This is one reason that four-year graduation rates are virtually non-existent and most schools advertise six-year rates. This contributes to the rising cost of college, postpones full-time income opportunities, and increases reliance on loans to pay for college.
This natural indecision combined with escalating college costs IS the reason we need to adjust our thinking about financing college.
If the college you will be attending, mom, dad, grandma, grandpa, rich uncle Tom or Aunt Suzie, or a Trust Fund will NOT be funding your college education – then you should proceed cautiously and responsibly.
The Student Debt Apocalypse
Consumer Reports is celebrating their 80th birthday helping consumers with excellent consumer reporting using detailed research and analysis. They did a good thing getting attention to this college debt topic with their August 2016 article titled The Student Debt Crisis: Their Lives On Hold. They did a fine job interviewing and photographing several people experiencing the effects of college debt, providing survey results of over 1,500 people with college debt and even have some video interviews worth checking out.
The videos alone would be a good required educational series for high school juniors about to embark on their senior year and the college application and decision process.
The idea that 42 million people currently have college debt in the US is mind boggling and is a result of decades of reduced federal contribution to public higher educational school systems and escalating tuition costs – soaring at an over 5% annual rate since the eighties.
As reported by Consumer Reports, this chart above shows the percent of graduates with college debt has increased from approximately 25% in the early 1990’s at an average debt of around $10,000 to nearly 70% of graduates in 2016 with an average debt of around $37,000.
Four Ways College Debt Ruins Lives
Below are some of the harmful effects of college debt that can ruin lives. The below factors contribute to poor health, instability, bad credit, damaged relationships, and lack of freedom.
College Debt Creates Stress
The American Institute of Stress (yes, there is enough stress in the US to support an institute for it) states that stress is a condition or feeling experienced when a person perceives that demands exceed the personal and social resources the individual is able to mobilize. In other words, when you feel like you are in over your head or are facing something that can’t be achieved, then you are feeling overwhelmed by pressure known as stress.
In college debt terms, if you are swimming in debt and it feels like you will never be able to pay it back – it will create stress. This financial strain, or shall we call it wallet drain, can be stressful for many.
The greater the debt, or the greater the feeling of inability to pay back the debt, the greater the stress. With 7.6 million Americans in default on their college loans, you can rest assured they have experienced this stress.
There are actually eight ways to pay back college loans, the eighth and worst kind is in default mode. Using the 2016 average graduating college student debt of about $37,000, in default mode of payback with fees and interest accumulation the total payback period will be nearly 23 years. That is 23 years of monthly payments of nearly $500 for a total of $129,000 in debt repayment. The reason for the extended period is likely a shift from public loans to private loans to allow for a longer payback period, with fees and higher interest costs included.
The bad thing about this default form of repayment is that it can be avoided. If the debt was paid back on a “pay extra” plan, the total pay back period could be just seven years of the same roughly $500 per month. This would be a total debt repayment of $46,000 – saving nearly $80,000 and sixteen years of payments.
The main problem contributing to long payback periods is because the borrower experiences an inability to make monthly payments, whether it be due to hardship or unwise spending, thus triggering the default debt spiral.
I don’t know about you, but for me, just owing somebody money is stressful. Every month having an obligation to dole out your hard earned money. Without fail. That’s tough to do. And to just be starting out life on your own with that type of long-term obligation can be stressful.
When you are pressured to make choices and take jobs for the sole reason of “paying the bills” then you experience tension and start to have your freedoms restricted and your choices limited.
This creates stress.
For someone like Anita Brewer, featured in the Consumer Reports article, working as a teacher’s aide with $160,000 in student loans (the loans actually started out as $60,000 but ballooned with fees and interest once in default status) and no ending in site to her nightmare – you better believe she lives with stress every day.
College debt is one debt that cannot be relieved through insolvency or personal bankruptcy.
Once you have the debt, you have to make good on it.
College Debt Creates Conflict
Let’s pretend for a second that your grandpa is about to have a 75th birthday party. You and your cousins decide to host a nice celebration event at a local venue and invite family and close friends. There are ten cousins organizing and you decide to split the $1,000 cost equally, $100 a piece. Imagine if one of your cousins did not pay and you had to pay their share to cover the required costs to have the party. You are certainly glad grandpa’s party was awesome and he had fun, but the party is over and your cousin best pay up, right? That was the deal.
Next imagine if every time you asked your cousin for payment you would get an excuse for their inability to pay. You may get so frustrated that you stop asking and take the loss. You may decide to tell your mom or dad to talk to your Aunt or Uncle (parents of your cousin) so they can try to settle up.
Well college debt commonly creates family conflict at a much greater scale, because the stakes are higher, much higher than grandpa’s party.
When the “college party” is over then someone has to pay for it.
What happens often is that college loans are co-signed by other family members such as the parents, aunts, uncles, or grandparents.
So when the loan payments stop getting made for WHATEVER reason, take that party example feeling and that resulting conflict and multiply it many times over.
Imagine your family members getting bombarded with phone calls and mail from aggressive, loud, mouthy, abusive debt collectors – for your college debt. Imagine their credit being negatively impacted because you are unable to make the loan payments. Imagine the family drama, the hurt feelings, the impact at holiday parties or family reunions and gatherings.
The conflict is real and it’s painful.
College Debt Creates Hassle
It can be a hassle when you are required to make a monthly payment every month without exception at the risk of otherwise triggering late fees and the start of debt collections on your college loans.
It is a hassle when you attempt to pay for groceries at the store and your card is declined because you do not have enough money in your account after paying your college loan payment. Hassle with a side of embarrassment.
It is a hassle when you get a late fee for missing a college debt payment.
It is a hassle if you get another late fee by not paying last month’s late fee.
It is a hassle when the phone rings at 6 AM and a college debt collector is ready to harass you.
It is a hassle when this same debt collector calls every day, many times a day until you speak to them.
It is a hassle when you miss that fun weekend getaway trip with friends that you could so use because you have to make your college debt payment.
It is a hassle to try to explain to family co-signors why you cannot afford your college loan payments – and you need their help.
College Debt Creates Uncertainty
College debt may limit your ability to do the work you love or the hobbies you enjoy. You may have less time to devote to having fun and living in the moment.
This debt obligation and related stress can delay some major life decisions such as taking fun vacations, getting married, buying a home, or having children.
Debt can put your life on hold. This creates uncertainty about the future and can strain relationships.
Should I Go To Harvard To Become A Teacher?
Let’s say that Scott wants to become a teacher. Scott has day dreamed about Ivy League schools since he was a kid. It’s all Scott’s family talks about. Grandpa went to an Ivy. Uncle Tim went to an Ivy. Mom and Dad have said on multiple occasion that if Scott applied himself and worked hard, that he could get into an Ivy League school one day. Mom and Dad have also said that they do not have the funds required to pay for Scott’s college education. Scott ultimately was on his own.
After completing the college application process Scott is left with two options:
- To work his way through a community college or public university for four to six years and have no debt
- To accept his golden ticket to Harvard but come out with $100,000 in debt
The pressure to go to Harvard is high. Scott worked hard. He did everything mom and dad said to do. Mom and Dad have been telling everyone he got accepted to Harvard. But let’s remember one key thing. The end result is a starting salary of $35,000 as a teacher in Scott’s home state regardless of where he chooses to go to school.
I would say that unless Grandpa or Uncle Tim are willing to foot the bill and write that $100,000 check then hands down the best play is to take the prudent path.
Scott should choose the “graduate with no debt route”, especially facing a teacher salary at graduation.
The truth is that both institutions will provide the formal framework and training required to become an amazing teacher.
Don’t Let Debt Ruin Your Life
We have gone to the dark side with this topic, which is never fun to do. But it is based on the shockingly truthful reality reported by Consumer Reports. It is an epidemic impacting millions of Americans.
Some of the old ways of thinking about college no longer apply:
- The notion that student loans are “good debt” is outdated due to the HIGH cost of college today. It represents risk to your financial well being for not being practical in how you finance college.
- The notion that a college degree is always a good investment at any price no longer applies. Just look at the example we provided about going to Harvard to become a teacher. Or ask Anita Brewer or Jackie Krowen.
The Latin term CAVEAT EMPTOR is based on the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. In my humble opinion, that is a tall order for an eighteen-year old.
Let’s not let our kids ruin their lives with college debt if we can help it. Moms, dads, families, educators and grown ups of the world need to do their part in educating our college-bound kids. Especially when they are paying for it.
Although I may advocate for graduating college with no student debt, the reality is that we will continue to use student loans to pay for college out of necessity. The goal is manageable debt with payments that are affordable and can be re-paid on time or ahead of schedule. This should minimize and avoid the harmful effects outlined in this article. In the near future I will be writing an article that describes a blueprint for evaluating the cost of college.
Let’s focus on the things that matter when deciding where and how to go to college. Let’s help our kids factor the expected total college debt in the college decision making process.
We want to maintain our goal of getting into the best college we can with the goal of graduating with a job and no debt.