News broke yesterday about President Biden’s student loan forgiveness plan, which can get rid of up to $10,000 of student loan debt for those earning less than $125,000 per year. Students with Pell grants, federal grants for low-income students, can get up to $20,000 forgiven.
Cue the hot take machine.
Some are outraged for having to pay other people’s debts. Some are worried it will only add to the national debt. Others believe the loan forgiveness program doesn’t go far enough, as the average student loan debt is anywhere from $15,000 to $30,000, depending on the source.
Regardless of how you feel about the plan, the cost of higher education has climbed steadily, as has the associated debt (inflation-adjusted). Perhaps the most telling statistic is that, according to this McKinsey study, the repayment rate dropped from 75 percent in 2009 to 57 percent in 2016. In other words, graduates are finding it harder and harder to pay off their student loans.
What has your student loan experience been? Tell me in the thread below.
Honestly, I'm too old to remember how much student loan debt I had or what the interest rate was. I think it was about $10K. I started college in 1993, and tuition was around $2,000 per semester--so cheap as I compare it to tuition now (and I do compare because I've just had kids complete college). The worst part for me was all the credit card debt I accumulated during those years. There were multiple people on campus every day handing out credit card applications. I had a card for every department store when I did not have a real job. I was uneducated and undisciplined, and I racked up some debt! It took me about 10-15 years to pay off all student loans and credit card debt.
What are the issues I see today?
1. Secondary schools are pushing every kid to go to college. I've worked at two universities and raised four kids. Not every person *should* go to college.
2. Inflation of tuition is criminal.
4. Interest rates on student loans are criminal.
3. Students take out loans with no end goals in mind. They put little thought into how much they'll earn when they graduate; therefore, do not understand how they will be shackled to debt for years. I've seen many students become "career students" because they graduate with one degree and have no idea how they are going to get a job and pay bills (no practical experience...just book knowledge). So they decide to do a Masters program. And then there is the PhD and then they have "degreed" themselves into a corner because no one wants to hire them (because they have too high a degree and no real work experience).
Sorry for jumping on the soap box, but this is a great post on a topic that hits a nerve in me!
Here's my student debt story: I don't have one. (unnecesssarily long comment incoming)
I'm going to say something a little bit controversial, maybe even offensive here. If you were foolish enough to take out a student loan as a young person (let's say 18-25 years old), you might kinda deserve that debt. Now, let me explain. I'm not calling anyone stupid. Nor am I discounting the predatory nature of some of these lenders and institutions, the social pressures from parents, teachers, and peers to take out a loan to go to the best possible college, and lack of experience with the world (and with finances) as factors in these bad decisions to take on student debt. Heck, I came within a hair of taking out a massive loan myself to go to film school.
But at the amounts we're talking about these days for the average student loan far exceed anything reasonable for a young person just starting their life and career. If you can't pay your tuition by, for example, working a part-time job while you go to college, then your college's tuition is too high, and you should consider other options. I don't buy the argument that it's an investment in your future when the principal cost of that investment is hundreds of times higher than you have ever made, or are likely to make as an entry-level worker, which only cripples you financially for years to come, making your life a constant hellish gerbil-wheel of paying down interest on the loan, not to mention the principal.
It should be obvious (though I understand to many it is not) that you are mortgaging years, perhaps decades of your life to some goliath financial institution at ugly rates of interest under sketchy, hard-to-understand repayment terms. For me, the writing was on the wall, and I saw student loans as the sucker's game that they are. After all, how many people graduate and go straight into a desirable job with a decent salary? Many four-year degrees are becoming increasingly worthless or unnecessary, making the whole concept of college sort of questionable. It's unfortunate that a four-year degree is seen by many companies as a kind of checkpoint, as a barrier of entry for many jobs that could easily be done with a decent high school education, maybe a bit of community college or vocational training.
I like to advocate for establishing more technical schools in the U.S., or at least making two-year associate's degrees a more acceptable qualification for most jobs, since, let's be honest, anyone with half a brain can do the majority of entry-level jobs out there. Myself, I wanted to work in the film industry when I was just starting out, so instead of throwing away tens of thousands of dollars and years of my life, I just moved to Los Angeles and sought out unpaid jobs & internships where I could build my experience and professional network until I got enough experience to start getting paid, eventually making a decent little career out of it before I decided to burn it all down and start over in South America. It was hard, I was broke and struggling for years, and had to take on whatever part-time or odd jobs I could find in order to pay the rent in the meantime.
I know the sort of path I just described isn't available in every industry, but what I'm saying is that you can be creative and find a way into whatever it is you want to do without leveraging your credit beyond your ability to pay back any time soon, or ever. For any young people reading this, DON'T DO IT! Don't let our broken financial system sucker you into becoming yet another pod-person in their banking matrix, feeding off your life energy in order to enrich themselves. Not unless you're absolutely sure that what you want to do requires an expensive four-year degree, graduate school, etc., like a doctor or a lawyer. Even then, tuition costs in general are too damn high, and until they come back down to a more reasonable level (if they ever do), kids are going to be stuck with an impossible Sophie's Choice: to go their own way in an increasingly uncertain world, or to cripple themselves with debt as one of their first adult acts in life.
Most of the blame lies with the banks, schools, teachers, and parents who fail to understand the implications of massive student debt for young people, or just don't care, even encouraging their children to take it on as the only possible means to succeed in this world. When I say that you deserve that debt if you're foolish enough to sign on the dotted line, I mean out of basic ignorance, not stupidity. You walked into a trap you didn't even know was there. At 18, your brain isn't even fully formed yet, and we're so bad at teaching kids about true financial responsibility (hint: it's much more than just saving money and frugal spending) that they just have no idea what they're getting into. This could be a valuable learning experience for kids who jumped in without fully understanding the consequences, but it shouldn't come at the cost of the next decade or more of your financial life.
The real fault lies with others WHO SHOULD KNOW BETTER and are willing to let young people start their lives with tens of thousands of dollars (or more) of debt as a precursor, and who consider that sort of thing normal. Thank god I had the presence of mind to look objectively at what was happening to people like me at that age, getting caught in the student debt trap and chewed to pieces before they even knew what was happening. And this doesn't even begin to cover all the other predatory lending out there which targets students and young people, or just people who don't know any better, like high-interest credit cards, payday loans or personal loans.
The bottom line is that the system as it stands is screwed completely sideways. There is no reason that a full four-year education should be a prerequisite for most entry-level jobs, and shame on us for not providing more realistic vocational training options for jobs that don't require that much education. Factory jobs you could start just out of high school have gone the way of the dodo, but 1-2 years of vocational training is more then sufficient to start an entry-level job in many industries.
In Colombia, SENA (Servicio Nacional de Aprendizaje) provides state-subsidized vocational training in hundreds of different fields all over the country, from agriculture to computing to hospitality, for young people as well as older career-changers, and I think it could even serve as a model for something we could start doing in the U.S. This is one of those areas, like health care, that even poor Colombia has done much better than the U.S., which for all its money and power and prestige can't seem to get around to fixing for its own people.
And speaking of shame, shame on our government for allowing banks and schools to get so wildly out of control with tuition costs and credit options. Taking out a loan of $50,000 to start a business is looked at with far more scrutiny than is given the average student loan application, and is more likely to result in a profitable operation that can pay back a loan quickly than the average student's chances of paying off that amount, plus interest, within even a decade of graduation. But market forces dictate that, where government regulation fails to prevent it, supply will always be created to meet demand, and if schools create demand for huge student loans by jacking up tuition to astronomical levels, banks who are not prohibited from doing so will continue to offer those financial products to unwitting consumers.
And finally, I have to acknowledge that student loan debt is the one kind of debt that not even DEATH can absolve you from. People, companies, even countries can go bankrupt and have their debts forgiven. But defaulting on student debt will follow you to the grave and beyond, as your heirs will inherit that debt, and it cannot be written off via bankruptcy or any other ordinary means available to those who overextend themselves. For victims of the student loan crisis, it's like being bitten by some zombie virus that transforms you into an undead wage slave, who then rises from the dead to pursue its descendants, passing on the same horrible disease to them.
It's almost as if our institutions and government don't care what happens to the next generation, that they just want to make as much money off them as they can, while they can, before the whole thing comes crashing down around them… Almost.
I'll start. I graduated with about $25,000 in student loan debt in 2003. It took me 13 or 14 years to pay it off. I attended Boston College. The tuition was about $30,000-$35,000 a year back then (which doesn't include room and board and all the other associated expenses). The tuition today is north of $60,000. Estimated overall cost is almost $80,000.
Honestly, I'm too old to remember how much student loan debt I had or what the interest rate was. I think it was about $10K. I started college in 1993, and tuition was around $2,000 per semester--so cheap as I compare it to tuition now (and I do compare because I've just had kids complete college). The worst part for me was all the credit card debt I accumulated during those years. There were multiple people on campus every day handing out credit card applications. I had a card for every department store when I did not have a real job. I was uneducated and undisciplined, and I racked up some debt! It took me about 10-15 years to pay off all student loans and credit card debt.
What are the issues I see today?
1. Secondary schools are pushing every kid to go to college. I've worked at two universities and raised four kids. Not every person *should* go to college.
2. Inflation of tuition is criminal.
4. Interest rates on student loans are criminal.
3. Students take out loans with no end goals in mind. They put little thought into how much they'll earn when they graduate; therefore, do not understand how they will be shackled to debt for years. I've seen many students become "career students" because they graduate with one degree and have no idea how they are going to get a job and pay bills (no practical experience...just book knowledge). So they decide to do a Masters program. And then there is the PhD and then they have "degreed" themselves into a corner because no one wants to hire them (because they have too high a degree and no real work experience).
Sorry for jumping on the soap box, but this is a great post on a topic that hits a nerve in me!
Here's my student debt story: I don't have one. (unnecesssarily long comment incoming)
I'm going to say something a little bit controversial, maybe even offensive here. If you were foolish enough to take out a student loan as a young person (let's say 18-25 years old), you might kinda deserve that debt. Now, let me explain. I'm not calling anyone stupid. Nor am I discounting the predatory nature of some of these lenders and institutions, the social pressures from parents, teachers, and peers to take out a loan to go to the best possible college, and lack of experience with the world (and with finances) as factors in these bad decisions to take on student debt. Heck, I came within a hair of taking out a massive loan myself to go to film school.
But at the amounts we're talking about these days for the average student loan far exceed anything reasonable for a young person just starting their life and career. If you can't pay your tuition by, for example, working a part-time job while you go to college, then your college's tuition is too high, and you should consider other options. I don't buy the argument that it's an investment in your future when the principal cost of that investment is hundreds of times higher than you have ever made, or are likely to make as an entry-level worker, which only cripples you financially for years to come, making your life a constant hellish gerbil-wheel of paying down interest on the loan, not to mention the principal.
It should be obvious (though I understand to many it is not) that you are mortgaging years, perhaps decades of your life to some goliath financial institution at ugly rates of interest under sketchy, hard-to-understand repayment terms. For me, the writing was on the wall, and I saw student loans as the sucker's game that they are. After all, how many people graduate and go straight into a desirable job with a decent salary? Many four-year degrees are becoming increasingly worthless or unnecessary, making the whole concept of college sort of questionable. It's unfortunate that a four-year degree is seen by many companies as a kind of checkpoint, as a barrier of entry for many jobs that could easily be done with a decent high school education, maybe a bit of community college or vocational training.
I like to advocate for establishing more technical schools in the U.S., or at least making two-year associate's degrees a more acceptable qualification for most jobs, since, let's be honest, anyone with half a brain can do the majority of entry-level jobs out there. Myself, I wanted to work in the film industry when I was just starting out, so instead of throwing away tens of thousands of dollars and years of my life, I just moved to Los Angeles and sought out unpaid jobs & internships where I could build my experience and professional network until I got enough experience to start getting paid, eventually making a decent little career out of it before I decided to burn it all down and start over in South America. It was hard, I was broke and struggling for years, and had to take on whatever part-time or odd jobs I could find in order to pay the rent in the meantime.
I know the sort of path I just described isn't available in every industry, but what I'm saying is that you can be creative and find a way into whatever it is you want to do without leveraging your credit beyond your ability to pay back any time soon, or ever. For any young people reading this, DON'T DO IT! Don't let our broken financial system sucker you into becoming yet another pod-person in their banking matrix, feeding off your life energy in order to enrich themselves. Not unless you're absolutely sure that what you want to do requires an expensive four-year degree, graduate school, etc., like a doctor or a lawyer. Even then, tuition costs in general are too damn high, and until they come back down to a more reasonable level (if they ever do), kids are going to be stuck with an impossible Sophie's Choice: to go their own way in an increasingly uncertain world, or to cripple themselves with debt as one of their first adult acts in life.
Most of the blame lies with the banks, schools, teachers, and parents who fail to understand the implications of massive student debt for young people, or just don't care, even encouraging their children to take it on as the only possible means to succeed in this world. When I say that you deserve that debt if you're foolish enough to sign on the dotted line, I mean out of basic ignorance, not stupidity. You walked into a trap you didn't even know was there. At 18, your brain isn't even fully formed yet, and we're so bad at teaching kids about true financial responsibility (hint: it's much more than just saving money and frugal spending) that they just have no idea what they're getting into. This could be a valuable learning experience for kids who jumped in without fully understanding the consequences, but it shouldn't come at the cost of the next decade or more of your financial life.
The real fault lies with others WHO SHOULD KNOW BETTER and are willing to let young people start their lives with tens of thousands of dollars (or more) of debt as a precursor, and who consider that sort of thing normal. Thank god I had the presence of mind to look objectively at what was happening to people like me at that age, getting caught in the student debt trap and chewed to pieces before they even knew what was happening. And this doesn't even begin to cover all the other predatory lending out there which targets students and young people, or just people who don't know any better, like high-interest credit cards, payday loans or personal loans.
The bottom line is that the system as it stands is screwed completely sideways. There is no reason that a full four-year education should be a prerequisite for most entry-level jobs, and shame on us for not providing more realistic vocational training options for jobs that don't require that much education. Factory jobs you could start just out of high school have gone the way of the dodo, but 1-2 years of vocational training is more then sufficient to start an entry-level job in many industries.
In Colombia, SENA (Servicio Nacional de Aprendizaje) provides state-subsidized vocational training in hundreds of different fields all over the country, from agriculture to computing to hospitality, for young people as well as older career-changers, and I think it could even serve as a model for something we could start doing in the U.S. This is one of those areas, like health care, that even poor Colombia has done much better than the U.S., which for all its money and power and prestige can't seem to get around to fixing for its own people.
And speaking of shame, shame on our government for allowing banks and schools to get so wildly out of control with tuition costs and credit options. Taking out a loan of $50,000 to start a business is looked at with far more scrutiny than is given the average student loan application, and is more likely to result in a profitable operation that can pay back a loan quickly than the average student's chances of paying off that amount, plus interest, within even a decade of graduation. But market forces dictate that, where government regulation fails to prevent it, supply will always be created to meet demand, and if schools create demand for huge student loans by jacking up tuition to astronomical levels, banks who are not prohibited from doing so will continue to offer those financial products to unwitting consumers.
And finally, I have to acknowledge that student loan debt is the one kind of debt that not even DEATH can absolve you from. People, companies, even countries can go bankrupt and have their debts forgiven. But defaulting on student debt will follow you to the grave and beyond, as your heirs will inherit that debt, and it cannot be written off via bankruptcy or any other ordinary means available to those who overextend themselves. For victims of the student loan crisis, it's like being bitten by some zombie virus that transforms you into an undead wage slave, who then rises from the dead to pursue its descendants, passing on the same horrible disease to them.
It's almost as if our institutions and government don't care what happens to the next generation, that they just want to make as much money off them as they can, while they can, before the whole thing comes crashing down around them… Almost.
I'll start. I graduated with about $25,000 in student loan debt in 2003. It took me 13 or 14 years to pay it off. I attended Boston College. The tuition was about $30,000-$35,000 a year back then (which doesn't include room and board and all the other associated expenses). The tuition today is north of $60,000. Estimated overall cost is almost $80,000.