CNBC recently profiled the student loan crisis in the United States. This year, the nation’s student loan total will top out at $880 billion. That’s nearly $1 trillion. Wow! A whole lot of zeros indeed. Sure, the story focused on those with hard-luck stories. Crisis cases create compelling programs. The average student can expect to graduate with $24,000 in student loans. In today’s economy, does a student loan still make sense?
I’m not prepared to rule out student loans entirely. After all, I’m a student loan recipient. I also wouldn’t make the CNBC special because I’m not in default, attended a low-cost, state school, and borrowed about $10K less than the average. Student loans should be used sparingly as a last resort after all other avenues (scholarships, grants, part-time gigs, less expensive schools, etc) have been exhausted.
Student loans limit your options. The loans will dictate when you need to start work and the type of work you’ll need to pursue. Let’s be honest. Many borrowed much more than was needed to fund a college education. A few years of partying on borrowed funds can end in years of forced servitutde to the almighty student loan gods.
Each year, 1 out of 5 student loans enters default status. These loans will become attached at the hip. Bankruptcy will not discharge them. Wages can be garnished without a court judgment. In some cases, professional licenses can also be impacted. Once you retire, your social security payments can also be garnished. I am a realist. Student loans can be an effective tool. However, no one signing up at 18, 19, or 20 thinks “I have a 1 in 5 chance of making the worse financial decision of my life”.
Can you really afford those odds?
Read more on the CNBC coverage here.