Shattered Dreams...Student Loan Slavery
When someone gets accepted to college, they are often overflowing with enthusiasm...but when they graduate, they may find themselves shackled to a student loan with no job and no idea how to dig themselves out of what might be a lifelong attachment to debt.
More than 1.3 trillion dollars are owed on student loans spread out over 44 million borrowers...the average balance per borrower $35,000.
Because the federal government generally gives student loans to anyone, they insist that the debt follows a person throughout life. This means that in the vast majority of bankruptcies a student loan won't be charged off and that the IRS and private debt collectors will be the constant bedfellows of those behind on their loans.
Many private lenders use cosigners to get student loans approved. This means that many parents and grandparents unwittingly, are also on the hook for the debt. As a matter of fact, 90% of private student loan debt includes one of these cosigners. The catch even if the borrower (the student) dies these cosigners will still have to pay. According to the most recent statistics 40% of cosigners are currently paying the loan debt.
How can you avoid heartache? Above all else try and pay for college without taking out any loans even if this means a less prestigious school or community college. If you do need to get a loan for school try and keep the loan to half of your first years’ salary, i.e., you expect to get a job after school that pays 40k a year so your maximum debt for school should be 20k. If that doesn't work have a hard cap on the debt making sure it is absolutely no more than your projected first year salary.
Another thing to remember is never use student loan proceeds to pay for anything besides the education itself. Pay for housing food and transportation with money you earn, or even better live at home and go to school.
When picking a subject for school think practical. Ask yourself is this a profession that people need? Will there be a market for my skill? Sure, having in depth knowledge of English Literature or some other interesting field is cool, but likely it won't pay the bills. Don't be ashamed to go to school for a shorter period and get a skill people need such as: Nursing, HVAC, Electrical, or some other practical field. These fields can be very lucrative and have lots of opportunity for growth. Not everyone can be a high paid white-collar worker, we all need solid practical services, and this fills a real and immediate need.
What else can you do? Whether you are the parent, or the student make sure you have a mastery of basic financial literacy. Recent data indicates only 17 states require high school students to take personal finance as a class. That means 33 states have no requirements for this type of education. If your school was like mine the required personal finance class was dry and not super engaging. This leaves personal experience which can be a tough teacher...especially since many parents don't even discuss money with their kids.
Just remember debt lets your past dictate your future. If you want help learning about finances, contact me about one of my financial literacy classes. I conduct them live over Zoom; classes are kept to 10-20 students. It is 1 hour a week for 8 weeks, and it is $25 per class or $200 total. It is practical, engaging and motivational...and after all isn't $200 better than a lifetime of shattered dreams and slavery to student loans? Please send me a message or email for more information.
AFC® Accredited Financial Counselor Candidate
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