Why is student debt a problem?

$30,000? Are you sure? That seems ridiculously low for the ridiculously overpriced tuition prices in the U.S..

I'm not sure how repayments work there, but from what I understand they start pretty soon after graduation, regardless of personal circumstances. That can be pretty crippling to someone that's struggling to find work in their local job market, I'm sure.

Add interest to that and it's probably something that runs away from a lot of people real fast.

/nvm

OldWiseGuy said:

Two observations.

If college grads earn on average $1million more than H.S. grads over their working life, and the average student debt is a mere $30,000, what's the problem?

Speaking personally I had no 'net worth' at all until I was in my 50's. After 30 years of working and raising my family I had only $20,000 in savings. So I have little sympathy for those who struggle with student debt, especially if they default.

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The problem with student debt isn't actually among those who graduate college, but those who don't. Everyone in the world has created an online college or some other form of "alternative" education.

These schools charge upfront for an entire two year course, then complete a student loan application and collect their money.

Anyone who does not complete the course is still on the hook for the entire loan. In the end they are worse off than when they started.

The average student debt for the class of 2016 which is the most recent I can find is $37K. And remember, that's the average. It includes people who don't have any debt at all and those who have a huge amount of debt. Repayment starts within 6 months of you no longer being a student and the average payment is just south of $400 a month. And you often pay more in interest payments then you do for the principle.

The historical value of a college degree was largely based in their relative rarity. A degree usually meant being able to find a better paying job and being in more demand.

Some college degrees today will probably not significantly financially outperform not having a degree. The traditional route of graduating from HS, going straight to college, taking your best guess as to the major you want, taking as many loans as necessary, and getting the BS or BA made sense 30 years ago. Today it's a straight shot to a financial ball and chain for some.

One of my daughters took the traditional route for a math degree and found good enough jobs to pay off her debt by the time she was 30. One daughter went two years for an Art degree then decided to drop out. She lived at home and worked 3rd shift on a manufacturing line and paid off her loans and put some money in the bank over the course of a few years. She's now married with 2 kids. Our third daughter went 2 years for an English degree, then decided she didn't know what she wanted to do. She lived at home and worked at a fast food place for 3 years. She paid off her loans and put money in the bank. She went back to school after that and because she was older, qualified as an independent student and got a lot more grants. She graduated with a 3.99 GPA, no debt, and money in the bank. Basically, 2 BS degrees and half a degree between the three of them and all were out of debt in their 20s.

Going to college is a huge financial decision with many ramifications. Many (probably most) do not seriously research the costs and expected payback. 30 years ago, most college degrees were fairly close to a guarantee for earning more money over a career. Today, some degrees are a mostly a guarantee for decades of debt and financial hardship.

OldWiseGuy said:

Why would those who have no student debt be included with those that do?

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That's how averages work. The average graduate has a certain amount in debt. It's usually not the average student with debt, but just the average student.

OldWiseGuy said:

Sounds like you graduated and found a good job.

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/nvm

OldWiseGuy said:

Two observations.

If college grads earn on average $1million more than H.S. grads over their working life, and the average student debt is a mere $30,000, what's the problem?

Speaking personally I had no 'net worth' at all until I was in my 50's. After 30 years of working and raising my family I had only $20,000 in savings. So I have little sympathy for those who struggle with student debt, especially if they default.

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Here's why it's a problem.

In effect, people who don't need or want that kind of education are suckered into paying for it because wages are so low they think that's the only ticket to even basic stability. But it isn't.

They get sold a fake product for a ton of money.

Debt is generally bad. You shouldn't purchase anything you can't afford. If you see a college education as an investment, understand that all investments are risks. So, yeah, it's not a "problem", any more than investing in a company which later performs poorly is a problem. It happens. So be wise.

OldWiseGuy said:

Average debt for college graduates is about $37,000-$39,000. Many don't graduate but still have debts of lesser amounts, which brings the average down. Also of importance is that those who do graduate, albeit with higher student debts, are more likely to repay debts fully as they are more likely to achieve well-paid employment.

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And those debts refer to the payoff amounts, not to the amount the students will actually pay before the loan is paid off. A person was loaned $37,000 over the four years of college will be graduated with much more debt than that (because interest has been accruing from the first day), and will pay much, much more than that before it's paid off.

If you look into the details of how it all works, the unholy arrangement between the education industry, the banking industry, and the federal government is literally a racketeering scheme, every bit as evil as any loansharking ever done by the Mafia.

When you look at how FedLoan actually does its business to keep people in debt and destroy their credit, it's truly a horror story. They may as well be breaking legs.

OldWiseGuy said:

Average debt for college graduates is about $37,000-$39,000. Many don't graduate but still have debts of lesser amounts, which brings the average down. Also of importance is that those who do graduate, albeit with higher student debts, are more likely to repay debts fully as they are more likely to achieve well-paid employment.

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"More likely" is not the same as a "done deal."

And you hear every day that that's less and less true as the economy has changed. It's very likely that the stats twenty years from now--if collected honestly--would show the difference.

But good luck getting honest stats, because the education industry, the banking industry, and the federal government are in collusion in this mess, and they provide all the stats.

I believe what honest stats would show is that persons who have been trained for specific vocations are the ones most likely to "achieve well-paid positions," and that is not necessarily with a bachelor's degree alone.

In fact, achieving a well-paying job is probably less likely with a bachelor's degree alone in today's economy than other methods of being trained for a specific vocation.

HTacianas said:

The problem with student debt isn't actually among those who graduate college, but those who don't.

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Any amount of college gets you a better job. Even one year of college gets you hired ahead of someone with only a high school education. My son dropped out in his senior year and I was surprised at how many people wanted more then a 2 year degree but they did not need to have full 4 year degree. Maybe they were trying to save the money they would have to pay for a full graduate. On one of my jobs I was the first person to look at the job applications and I was surprised at how many people turned in almost an empty page. I did not even bother to pass those on, I just threw them away. I had one guy tell me that people could turn in an application and they did not even have a valid phone number or anyway to get a hold of them.

joshua 1 9 said:

Any amount of college gets you a better job. .

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Maybe, maybe not.

One year of college won't get too many people a better job than being a journeyman welder or a guy with a networking certificate.

OldWiseGuy said:

Two observations.

If college grads earn on average $1million more than H.S. grads over their working life, and the average student debt is a mere $30,000, what's the problem?

Speaking personally I had no 'net worth' at all until I was in my 50's. After 30 years of working and raising my family I had only $20,000 in savings. So I have little sympathy for those who struggle with student debt, especially if they default.

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To me, it largely depends on the degree. If a student gets a degree in "forensic psychology" thinking that they'll end up as an FBI profiler....then they got swindled. It's an expensive degree that gives them no real chance to be anything other than a psychologist who specializes in an area nobody needs. If it cost what it was worth...I'd be fine with it.

The other example is a teaching degree, which is also rather expensive....yet teachers don't make nearly what they should. If it cost what it was worth...perhaps it could be a field that attracted more quality students instead of being looked at as a fall back option when your desired career never materializes.

In other words, not all degrees cost what they are worth and your average 17-19yo doesn't know how to spot value.

OldWiseGuy said:

Two observations.

If college grads earn on average $1million more than H.S. grads over their working life, and the average student debt is a mere $30,000, what's the problem?

Speaking personally I had no 'net worth' at all until I was in my 50's. After 30 years of working and raising my family I had only $20,000 in savings. So I have little sympathy for those who struggle with student debt, especially if they default.

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30,000 is quite cheap for MOST students especially if they lived on campus.
Plus, it takes some people 6 years to get their undergrad.
People like to clown the Millennials but they had to start later in life because they have WAY MORE debt than any other previous generation.

There needs to be forgiveness programs because the debt is egregious. If it continues there won't be enough people to fill the jobs and thus making the country a kingdom where only the few rich could get an education, while the rest remained extremely poor.

I talk about it in the link below.
http://master-elaine.blogspot.com/2018/07/sld.html