Recently, we’ve been tackling different perspectives on student debt. We had an interview with a soon-to-be grad, who faces paying back $50,000 in student loans, and wrote about how recent grads are faring in the workforce, detailing 5 different stories from real-life recent grads. We also addressed the media’s treatment of millennials, and how to stay financially fit during college. One of the things we stressed in that article was to take on student loans as a last resort, and now, post grads still paying off their loans would probably agree with us.
Viewed collectively, student debt is another expense on top of all the standard fixed expenses — housing, food, transportation. It’s one more chunk of money that has to be set aside every month. For that reason, student loan borrowers, who are well into their adult years, are putting off spending, saving, and marriage.
The American Institute of CPAs conducted a survey among 200 people, and this is what they discovered:
- 41% said they have delayed saving for retirement.
- 40% have put off purchasing a car.
- 29% have postponed home purchases.
- 15% said they have even put marriage on hold, delaying tying the knot due to student debt.
- 60% revealed they feel some amount of regret about the decision to fund their education through student loans.
So what exactly does living with debt mean? It means dealing with incredible pressure to make constant and consistent payments, often for years, with dire consequences for the borrower who fails to make payments. This financial pressure can force a recent grad into a taking a low-paying job (possibly not requiring a 4-year degree), just to pay the bills. Studies are showing that 50% of recent grads are currently unemployed or underemployed, so this scenario is actually very common.
Student debt is slowing the progression and personal development of today’s graduates. With such high college costs, sometimes taking on a student loan is unavoidable. However, it’s important to note sacrifices that have to be made in order to pay off those loans.
There are a few ways to avoid such high college costs. Commuting from home means reducing or eliminating the cost of housing. Going to an in-state college is also sure to be the cheapest way to get a college education. Having graduated from a school that charged over $40,000 a year, I personally feel that my friends who went to CUNY schools, likely received the same quality education that I did. Finally, doing well in high school will pay off by making you more desirable to colleges, giving them an incentive to offer you a scholarship. You can also look for scholarships on your own and apply to as many as you like.
According to CollegeData, a “moderate” college budget for an in-state public college for the 2012 to 2013 academic year averaged $22,261. Here are other staggering numbers:
- One-in-five households carry student loans.
- The average debt is increasing by 5% to a new high of $26,600.
- The average amount of credit card debt per household is around $7,000.
- The budget for a private college averaged $43,289.
Student loans are a double-edged sword, appearing as a gift at first but sometimes a curse later in life. As MyBankTracker’s most recently graduated editorial staff writer, I’d like to share my own perspective, and some advice.
Do I fit into the average statistics? Yes and no. I haven’t needed to save for a vehicle, being a born and bred New Yorker. I haven’t even begun to think about a home purchase, as I graduated not even one year ago. What I have begun saving for, is a nest egg. That way I’ll never have to fear being destitute or go back to taking money from my parents (see my piece on my own financial story). The way I see it, my $2,000 student loan is cutting into the money that would otherwise be going towards that nest egg
I know, I know – $2000. It’s practically laughable, considering the average is near $27,000. I definitely count myself lucky. However, if even I feel pressure with only $2,000, think of the pressure others feel carrying close to $27,000. My friend Kristina will graduate owing $50,000 (see her interview below).
Now, onto that advice. Graduating debt-free is undoubtedly the best way to graduate; however, if that isn’t a possibility, just be sure to apply for work several months before graduating (it took me four months to find something).
Take on extra-curricular activities in college, do well in your classes, and make yourself well-rounded with internships. The key to preparing for your finances is to make yourself as appealing as possible to employers. That way, you’ll be on a steady track to one day, being debt-free.