A Note About This Post
This post is a little longer and more in-depth than most of my more "typical" ones. That's because it is meant to be a comprehensive guide to help you navigate the student loan phenomenon and, more importantly, how to not become a victim of it.
My goal is to help shape (or reshape) your thinking about student loan debt while giving you some practical reasons and specific strategies for avoiding it. This material will be broken down into more bite sized chunks in subsequent posts, but I wanted to create a centralized more "cornerstone content" type of resource for you to use as a guide.
Disclaimer concluded, enjoy!
Almost every time I think about the topic of student loan debt, the first image that comes to my mind is the the scene in the Star Wars’ Episode, “Return of the Jedi” when Rebel Forces leader, Admiral Ackbar realizes he's been lead into an ambush and shouts,’ “It’s a trap!”
If you’re not familiar with what I’m talking about, or need a refresher, you can find it here at @ 1:40).
While the nostalgia and humor of the movie clip help to lighten the mood a little, the reality of the student loan crisis is anything but nostalgic or humorous.
The consequences are downright financially terrifying in some cases.
Student loan availability and utilization IS a very real trap that so many unsuspecting, uninformed, starry-eyed students and parents fall into.
As a financial coach, I’ve had the sobering experience of sitting kneecap to kneecap with some of these students and parents that are dealing with the destructive consequences of crushing student loan debt.
It’s definitely not pretty and often it’s downright heart breaking. We'll talk about a specific case of this a little later on.
Normally, the journey to perpetual debt serfdom begins innocently with the process of applying to schools, while simultaneously applying for "financial aid", all embraced with great optimism.
The Dreaming Phase...
At this early stage, it appears all too likely that a post-graduation “dream job" delivering untold levels of prosperity is all but imminent.
This ideal job will deliver such a financial boon that any college debt incurred would just be a financial “drop in the bucket”, or a non-issue. Also, this opportunity will arrive immediately upon the conclusion of the graduation ceremony, if not sooner.
Perfect! Everything is going according to plan! :)
Obviously, that's a ridiculously optimistic scenario and I would be very happy for you if it played out that way (without the debt part, of course).
But as we've seen time and time again, the reality of post-graduation (assuming that graduation is actually reached) is usually far less “dreamy” or ideal and more regularly ends with an entry level, low paying job propping up a mountain of debt which then lingers for many years.
Don't get me wrong, I'm not here to discourage you from dreaming.
No, please do keep on dreaming.
I'm just encouraging you to be wise and informed about the way in which you go about funding the dream. In other words, avoid debt like the plague!
In most cases, it's almost impossible for young, inexperienced pre-college students to possess the ability to appreciate the financial weight and complexity that awaits them once they've either graduated or dropped out of college and their student loans come due.
A lack of life experience coupled with financial illiteracy are the key culprits here.
Lack of life experience aside, one of the major problems is with our education system and how the pivotal skillset of 'financial literacy' is not something that is taught as part of it.
"Teacher, when are we going to learn how to navigate personal finance and student loans?"
Unfortunately, rather than teaching students "how" to think (critically), our education system is more oriented toward indoctrinating students in "what" to think.
And as financial literacy is a subset of critical thinking, it is WAY outside that equation.
This all but non-existent training in the laws of logic and its resultant critical thinking skills are actually at the root of this whole mess.
But, I digress...
A result of this extreme deficit in financial literacy, is that our schools are churning out hordes of unsuspecting and financially illiterate future student loan debtors.
Tragically this lack of understanding of the "financial aid" that's being signed for eventually robs or greatly postpones this poor unsuspecting crowd of so many life and financial opportunities post-college (i.e. home buying, starting a family, saving for retirement, debt-free vacations).
Unless these young folks have a knowledgable and responsible adult/mentor advising them as to the dangers of debt, the reality of post-college student loan repayments (which can sometimes equal or exceed a mortgage payment) is never even remotely grasped.
As financial coaches, we see this all the time and it's very sad to observe and to have to help them navigate the consequences of this often tremendous debt load.
Today, more than anything I want to grab your attention and, with all of my might, cause you to consider this information as though your very life depends on it.
And actually, from a financial perspective, your life does depend on it whether you can see it right now or not.
So, I want you to picture me poking my head from out of your computer screen and begging you, "please, please don't do it..."
And I know you might be thinking, "wow man, that's a little intense, sin't it?"
Yes, it is, but I'm willing to be a little intense and even somewhat ridiculous to make the point.
I'm dead serious when I say that I really want to spare you possible decades of regret from a decision to take on student loans that's normally made in about 10 minutes.
Optimism, haste and low information are our enemies here and I've seen way too much destruction to not jump up and down about it a little.
"Please, please don't do it..."
Though it may not seem so dire from your current pre-college vantage point, I’m here to implore you to take a look at student loan debt from the perspective of “you” in 10-20 years from now.
This is the moment that you want to dig below the surface and shake off the "fairy tale" that's likely being presented in the glazed-donut-with-chocolate-icing form of student loans (i.e. "it's free money" or "everybody has student loans").
Baloney! It's pure slavery you're signing up for and you need to know that now!
This student loan ridiculousness is even reaching new heights. We're now hearing stories of students being encouraged to take out debt to "go have some fun", like in this article. Crazy, right?
Now think about how much you would kick yourself in 10-20 years for taking out student loan debt you could "have fun" or "party".
Sounds improbable at first blush, but I can tell you I've seen it happen.
So read, heed and internalize the content of this post and your future self will thank you profusely, I promise.
You will have saved yourself so much of the pain that goes along with unwittingly accepting the idea that “student loans are just a part of life”. I
'm here to tell you that statements like that one are a lie and you'll do well to train yourself not to believe them.
The fact is, many, many people have completed college without the monkey of debt riding their backs on the way out (including me). We'll talk about how to get through college without debt, but let's first jump into some sobering numbers and a cautionary tale.
Also, in case you were thinking, "maybe, I can just consider bankruptcy if I can't repay". It is REALLY important to understand that student loans are not eligible for bankruptcy protection. I know many people who didn't understand this until AFTER they had a ton of loans they couldn't pay.
As of this writing (August, 2018), the national student loan amount owed is over $1.5 Trillion.
For me, that number is so enormous that it's actually hard to conceptualize.
Trillions? What are those?
Apart from the national debt, I can't even think of something that would number in the trillions that I could effectively articulate. Can you?
Yes, it's a huge and impressive number, but what does it really mean?
You see, the problem with really big numbers like $1.5 trillion is that they are really just an abstraction for most of us.
I agree that it's important to present them for sure. But by themselves they're just a kind of unfathomable concept.
That is, until we zoom into what the actual effects of the number is on an individual or on a family.
It’s only at that more human level we can see the painfully granular consequences of this grand canyon sized student loan crisis and hope to find the motivation and emotion to actually do something about it.
Jessie Suren's story is really an echo of millions of college students saddled with crippling student loan debt.
She’s young, from a working class family and striving to find a more financially sound future than what she saw growing up.
Jessie shares in the hope of so many Americans in that, she wants a better life and believes that college is the vehicle to get her that life.
And, like almost 45 million other American student loan debtors, she didn't fully grasp the gravity of a $90,000 student debt load until it came time to start repaying.
That's when the reality landed on her like our 1.5 trillion pound boulder.
You can watch Jessie’s story here.
Like most of us, growing up Jessie heard the mantra, “go to college so you can get a great job”.
"If you go to college and do the right things, everything will work out", she even muses in the video.
And while she believed that message (as did her mom), she didn't understand the details of what she was getting herself into by borrowing almost $100k to finance her education.
Unfortunately, this is the way the scenario plays out for so many young people.
They don't have the ability to understand the full error of their debt decisions until AFTER they're out of school and get those first couple of debt repayment bills.
In Jessie's story, this is the moment she realizes that she has no idea if or how she will ever be able to pay down the debt.
Her dread and despair are palpable in the video.
Tragically this is totally normal, and a direct result of the pervasive financial illiteracy we talked about earlier.
These young people and their parents just don't understand what they're signing up for until it's too late.
And sadly, this story continues to repeat itself all over our country with no real end in sight.
So, the point of Jessie's story for our purposes is that it puts a much needed face on that $1.5 trillion of student loan debt and gives us an example of what not to do so you avoid hating the yourself in the future.
Again, this warning and preventive information is really all about YOU, both now and in the future.
This is all about helping you to gather the information and wisdom you need to make wise decisions in the present, so that your future self looks back and lovingly thanks you.
"Are you going to hate me or appreciate me, future self?"
If you watched Jessie's story (and so many others like it), you will see the defining characteristic of the subjects is regret.
Regret for not “educating myself”, regret for “taking what the loan officers said at face value”.
You’ll also often hear the phrase, “If I could do it all over again”.
I want for you to not have those regretful feelings.
As a financial coach, I have to say that the after-effects of student debt is one of the issues I've seen that both breaks my heart as much as it angers me.
It breaks my heart because there are so many young people who are lead down this path without a shred of guidance from adults (including the education system) in their lives that should be advising them with both love and wisdom.
Sometimes this lack of advice is stems from ignorance (i.e. parents that don't understand).
But often times its cloaked in the buttery encouragements of finance "professionals" who glorify the access to the money while they minimize the subsequent realities of the debt.
I personally think the latter is criminal, especially given the consequences of this inherent conflict of interest.
But again, I digress...
It angers me that there is a whole industry oriented around roping these young people into horrible financial decisions.
Especially when these decisions have negative ripple effects, sometimes for the rest of their lives.
In the video, I think Jessie expresses both emotions (heartbreak and anger) very succinctly.
She says, “I thought everybody took out student loans and that’s just how you did it”.
And she later insightfully states, “an 18 year old shouldn’t be allowed to make these huge decisions on their own.”
I agree and that’s why we need to slow down for a minute.
So, if you’re a high school student contemplating college (i.e. where to go, how to fund it) and/or a parent of a soon to be college student, I implore you to press pause wherever you are in the process and consider the many stories like Jessie's.
I actually want to encourage you to do a YouTube search for "student loan crisis" and consume more of these.
There are unfortunately an abundance of them and they are all sobering.
I realize you may be in the “throes” of college shopping and there may be some very promising prospects of being accepted to your “dream school” and all that entails.
That’s all well and good, but I want to try to interrupt what can sometimes be the “mania” of college selection.
I want to give you some food for thought while I challenge some commonly held notions around school selection.
Remember, we're attempting to look at this situation from the "you" as you will be in 10-20 years.
Please don’t get a degree in underwater basket weaving or Scottish Kilt history unless you plan on teaching those subjects. And for crying out loud, don’t go into $100,000+ of debt for it.
The skills you're spending all of this money to acquire need to have some value in the marketplace. In the end, you to be able to make a living.
Please don't get misunderstand me here. I'm not at all suggesting that you abandon your dream.
You can indeed study to be a social worker or a teacher if that's what you feel called to do. I'm just saying, be smart about it.
Be careful about where you go to school and on how much you spend on your education. And PLEASE, don't go into debt for it!
What does this mean?
It means you're young and that what you're "on fire" for right now, may not last. Statistically it likely won't be what you end up doing as a career.
It's okay, take your time and consider that even your current trajectory may just be a means to a degree.
Case in point, I personally (after changing my major no fewer than 5 times) got my undergrad degree in history.
I've been in both sales and in the music industry my entire career. I've never once held a job in the "history" field.
The actual skills I gleaned from my degree program were the critical thinking and writing skills.
These skills have helped me learn, grow and perform at a very high level my entire professional life.
This may wind up being the case for you too. So don't fret too much about your current course of study.
Just get it done and move on.
At the end of the day no one cares WHERE you got your degree.
They typically only care THAT you got your degree.
I’ve been in corporate enterprise software sales for over 25 years. Never, not once, has anyone asked me either where I went to school or what my GPA was. I doesn't even come up in interviews anymore.
In reality, that question of where you went to school is nowhere near as important as you think it is.
At this stage, you're probably getting and earful of well-meaning advisors, overly concerned about "credentials" and "tradition".
This process requires you to find an advisor/mentor with the knowledge and experience of how real life plays out.
This prevent you from making a decision be based on current (overblown) influences.
Think about 15 years from now.
Someone might be saying you can't buy a house because your student debt repayments are too high.
Are you going to care you took on more debt for that out of state school?
Like we talked about before, you need some competent, trusted and wise counsel here.
You have to be willing to admit that you can't see all of the potential consequences.
The decisions sitting before you in this moment are complex and difficult to navigate alone.
You need someone with wisdom, integrity and love for you to help you traverse them.
Seriously, I want for you to be free from student loan debt.
There are other ways to fund college that do not include over-leveraging your future with debt, like:
I can easily recount the quantity of graduated and non-graduated college students I've coached that regret their student loans.... ALL OF THEM!
Put more simply, I've yet to meet the first person who gazes fondly upon their pile of student loans. I'm here to call you to avoid that climb at all costs.
So again, if you’re in the throes of “where are you going to school?” peer pressure, I encourage you to take a deep breath. Take an hour to slow down and study Jessie's story. Is it really worth it?
I may have just saved you tens to hundreds of thousands of dollars and years of suffering. I implore you to consider it now, while you're young and (hopefully) unencumbered by debt.
0. Stop All Retirement Investing (Until Step 4)2. Starter Emergency Fund of $10003. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)4. Full Emergency Fund of 3-6+ Months’ Expenses5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)6. College Funding (if applicable)7. Pay Off The Home Mortgage8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!