Thursday, April 19, 2012

Student Loan Blues

"Though college, I felt, was a sure thing,
As of now, unless gold I'm unearthing,
To pay off my loan,
I'll have to postpone
My homebuying, wedding and birthing."

An entire generation is blocked from building a life while in the thrall of its towering college debts, writes Sue Shellenbarger in The Wall Street Journal. Student loans, which reached $1 trillion last year according to the Consumer Financial Protection Bureau, may ofter eat up half of a young graduate's income, particularly if they have had to settle for a lower-paying job than they expected. Like the killer who won't die in a horror film, student loans can not only prevent one's qualifying for a home mortgage or car loan, but cannot be extinguished in a bankruptcy.

What can young people do to avoid such an unhappy fate? There are no panaceas, but some sensible suggestions would include:

  • Approaching college with the goal of building valuable, employable skills by which to enable one to pay the loans down faster; 
  • Taking price into account while shopping for schools, with a willingness to consider the lowest priced option;
  • Accepting federal or state loans (preferably subsidized) before private ones.

21 comments:

  1. Speaking narrowly of the young lady profiled, and shying away from stuff she can no longer change (like overpaying for a "business management" degree from a no-name school, which is only notable for a shooting 42 years ago), I offer the following advice:

    1) Lose the tattoo, or at least wear long sleeves. You have to sell yourself to get that better job...what are you thinking?

    2) MOVE! You have no kids and you're not a homeowner. You are mobile. Move to Texas, North Dakota, or North Carolina. Why are you in Beaufort? You are young and should be EXPECTED to follow the work.

    ReplyDelete
  2. I followed all of the above advice and I am in tip-top shape! Scholarships are also a huge bonus. Plus good grades. While schools have to fulfill all of a students "need" as reflected by FAFSA, what they don't tell you is that it is up to the school to decide what ratio of that fulfillment is grants versus loans. I kept my grades up and had all my "need" met through grants. Friends that were less focused on there academics and more focused on the frat house down the road ended up with loans rather than the grants (which don't have to be repaid).

    Now, I even plan to pay off my loans in 3.5 years rather than the allowed 10. I can do so by budgeting smartly and living within my means. No iPad for me until the loans are gone!

    Oh, and I did all this even by going to a college that costs more than $50,000 for tuition, room and board, as an aside.

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  3. Very sound micro policies all.
    On a macro level, I think it's time for some form of credit underwriting in student loans, so that lenders take the program of study (and perhaps grades?) into account when making a lending decision.

    ReplyDelete
  4. Don't Get Mad, Get Even (Secrets from the HR Department)

    Face it: Millennials are being screwed big time by the epic and collosal failures on the part of the boomer generation. i recommend the following:

    1) first and foremost, change your values away from the outdated models of the boomer generation of the perfect job, house, clothes, car, and other such materialistic nonsense.
    2) in the new paradigm, millenials will need 3 types of freedom: (a) work independence, or the ability not to identify oneself with what one does for a living (forget careers and job *opportunities*, there's no such thing. remember, in the new paradigm in the world of work, you are always expendable; (b) financial independence, which is easily gained by living a life based on simplicity, frugality, relationships, and localness; and (c) personal independence, or the ability to not fall for the materialistic, greedy, and self-centered lifestyle practiced by generations before them.
    3) regarding education: go to a community college, and then transfer to a state school (your degree will come from the state school)
    4) unless you're going to an ivy league school, skip the pricey private schools; all employers want is an undergrad degree and a pricey private university won't matter to the hiring manager
    5) begin the practice of ongoing personal development early in your life, by educating yourself about healthy eating,diet, and exercise, immersing yourself in financial literacy, and creating a mental diet alternative to mainstream media (i.e., read blogs, internet publications, to educate yourself on business, politics, the economy, technology, and society - all areas which affect the quality of your life).
    6) and finally: tune in...to possibility. turn on...to unprecedented freedom. drop out...of a society that has failed you. the person standing across from you is you in ten years asking what you are doing right now to take care of them. you can either spend your future and the quality of your life or you can invest in it. the choice is yours.

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