Student Loan Debt is Out Of Control

[James Klymus]

After coming across an article the other day talking about 30 distraught college grads (sorry don't have the link), who have tens and even hundreds of thousands worth of student loans, it brought the reoccurring thought back to my head:

Why the hell do we let kids borrow 10's and 100's of thousands of unsecured dollars for a largely worthless education?

Student Loan Resources: Financial Aid & Loan Debt Management

Student loans account for over $1 trillion in debt in America. Learn to acquire, manage, pay back different types of financial aid and other student debts.

www.debt.org

Stats according to this source: Total student loan debt - $1.4 trillion, $2,800 accrued every second, average student graduates with $37,000 in debt

This isn't an argument for wether school is worth it or not.

Some people need a college education for their career path. What I'm thinking about here is the idea that it's necessary to go to school, whatever the burden or cost.

It seems like everyone and their mother (Literally) carries student loan debt. Even some of the people on this forum carry student loan debt, from a time when you were a fresh faced 18 year old who thought an art degree was a good choice.

Let's talk about that too. About the letting 18 year old children take on tens of thousands worth of debt per year.

When I was 19, I went to go buy a new car from the dealer for ~$35k (Yes, poor decision). I was making $36k/year at the time. When I was in that finance office, they laughed and said there was no way I was getting approved for this loan on my own. I needed a cosigner. I wasn't making enough and didnt have a high enough credit score

I later stepped back and thought about that. The bank wouldn't loan me money for a car, which is a physical good that has an inherent marketplace value, albeit one that depreciates, but the point is that in the event of me not paying, and them repossessing the vehicle, they would be able to recoup some of their money from a fire sale of the car, and probably sue me for the remainder of the loan in the mean time. They would get out scot free.

But you can get a loan for double, or triple that amount, if you spend it on education with no guarantee of finding a job in that field. Without a credit score, or even employment! There is no physical asset to repossess, Nothing to sell to recoup the cost of the loan. You can never bankrupt it, and you'll most likely be paying on that loan for a decade minimum, if you make the minimum payment.

I'm 24 right now, So I see a lot of my friends and people around me accumulate all this debt, get thrown into the real world and panic. All of the sudden they really understand that it wasn't just numbers on a screen, it's $600 a month coming out of their checking for the next 10 years.

Heck, most of the people I work with at my job at a RESTAURANT have a college degree and student loans.

So why the heck do we do this to our selves as a society? Better yet, why don't the grown adults who are sending their kids off to a 4 year university say "Hey, maybe taking on $30,000 a year in debt so our kid can get a $40,000 a year job ISN'T such a great idea""Maybe he's better off staying with us and going to community college, and not blowing $15,000 a year on room and board"

I'm not one thats big on conspiracy theories, but I can't help but wonder if this is all apart of a system to control the population. There isn't much time to have an existential crisis when you're eye ball deep in debt. Plus, the government gets a nice steady income of tax dollars from the masses.

Again, this isn't an argument for wether school is right or wrong. It's an argument for common sense and staying out of crippling debt.

What's a possible way out of this? I don't see people doing much about this problem. Most people are aware that taking $100k in loans to get a $40k/year job is a bad deal, but few seem to do anything about it. Shoot, it's even become a meme!

 

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[BellaPippin]

I think the same, 100% agree with you. Tons of things don't require a degree. Heck idk how I am where I am rn making 55k/yr with an Associates. My banking experience just helped me step it up a bit. That's the perfect amount for just me, no car, no student loans (associates was out of pocket with 25% discount because of tuition reimbursement from the bank) and no credit card debt.

But it's part of the script, and what's even MORE broken is that the whole "study your passion" I mean I love painting but I'm not gonna get a BFA anytime soon. I am self-taught, I am taking this certificate program that is just 7 very core classes that are gonna refine my skills, and my living can come from something else. I don't need a BFA to paint. Everybody ignores the market.

I stumbled upon a discussion on Twitter (don't go often but I don't remember what I was looking for); our president was giving incentive to certain degrees, mainly related to engineering, probably STEM too and such. People were having a MELTDOWN crying because "it is unfair that you won't pay for my music therapy degree" B*** the country doesn't need that right now! Another one was like "So what I'm majoring in psychology, F me right?" FUN FACT: Argentina has 200 therapists per individual making us the country with most psychologist. AND YOU WANT A SCHOLARSHIP? Entitled and blind AF, I swear.

Now the 18 year old I think is young enough to not know better, they are just told that's the way it goes. The parents, well, also haven't been taught better. I always say "people should travel or work for a year before picking something to study". Man I've changed interest so many times in these past ten years from all the discoveries I've had on my travels. So many kids start something and realize it's not for them. By then you have some debt though! They also hit me with the "oh no...if you leave for a year you will never come back" which is BS. If you want to come back you will. I did and when I did I was 10x more mature and graduated with honors because I was doing it with a purpose I was certain about.

Honestly I feel I'm not knowledgeable enough of the system here and the economics aspect of this to come up with a suggested solution but I feel you. I honestly believe it's a matter of ignorance. If they knew better, they just wouldn't go take a loan unless idk they want to be doctors for example. Something in demand. Highly marketable skills. Etc. Noooobody teaches you that ever.

 

[Ismail941]

What Most People don't realize that Trade/Technical College 2 years is Better than Traditional 4 Years College

 

[NursingTn]

It is crazy. Oh well, it is what it is. The best thing you can do for them is become an entrepreneur success story.

 

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[biophase]

The reason they lend you that much money is because you can’t bankrupt your student debt away. So it’s guaranteed to be paid back.

 

[Lex DeVille]

What I find strange (for this forum) is that the focus of discussion so often centers around student loans being good or evil, worth it or not, part of a mass conspiracy etc. and I'm not saying they aren't, but we, as a forum, have little influence or control over any of that.

We're entrepreneurs. Business owners. For those who have a degree, it's time to figure out how to use it and how to make it useful for you. For those who have a lot of student debt, build a business to pay for it. For those considering a degree, take time to ask yourself if and how it will help you reach your life goals and how you can do it without putting yourself in debt forever!

Maybe this topic needs a new thread, but it would be nice to see discussion about HOW entrepreneurs can solve or have solved this problem for themselves. I'm pursuing an M.A. for around $24,000 out of pocket. My latest business idea will finish repaying it in one year. After that I'll pursue a Doctoral degree, and again, I'll pay for it prior to graduation.

Student loan debt is an epidemic problem for the general population. But entrepreneurs shouldn't worry so much (unless you plan to solve the problem and make that your Fastlane business). Entrepreneurs find solutions. We figure out how to make the world conform to our life standards and not the other way around. So while I agree that loan practices are shady at best, I want to know what Fastlaners are doing to solve the problem for themselves (or at scale!).

 

[socaldude]

When I was 19, I went to go buy a new car from the dealer for ~$35k (Yes, poor decision). I was making $36k/year at the time. When I was in that finance office, they laughed and said there was no way I was getting approved for this loan on my own. I needed a cosigner. I wasn't making enough and didnt have a high enough credit score

Interesting that you bring cars up. Funny how there's actually laws that protect consumers involving big purchases like cars called lemon laws. They vary from state to state yet almost all have them.

And yet you spend thousands on a college degree and you get a job at Applebees or Buffalo Wild Wings and zero protection.

One of the things you notice about all universities is that they are building buildings. They pay big Bucks to professors and coaches and have almost no interest in improving the value of college degrees. They have found that they can just pass the cost to the student in the form of tuition cause after all they will get approved for thousands in loans guaranteed by you the taxpayer.

Colleges, parents and teachers will vehemently fight for the idea that college is worth millions in terms of return and yet NONE will put their money where their mouth is. If college is so valuable then guarantee it, put a refund policy on the back of the degree. CRICKETS.

 

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[James Klymus]

What Most People don't realize that Trade/Technical College 2 years is Better than Traditional 4 Years College

I agree with you that trade school is good for someone who wants to get into a trade. Not everyone will want to though.

 

[James Klymus]

Maybe this topic needs a new thread, but it would be nice to see discussion about HOW entrepreneurs can solve or have solved this problem for themselves.

I agree with you that we here don't have much influence over a 1.4 trillion dollar problem. Its not like one person can solve this.

I think the solution to the problem is prevention. As far as what to do after you've accumulated the debt? What else is there to do besides pay it back?

Yes we will find creative ways to pay our loans back HERE. We dont think like the general population here though. Most people will moan about how the government won't pay for their art degree.

I've heard some friends say they're just gonna keep paying and hope the government forgives their loans one day. Hope isn't a very good plan, as most of us know here.

 

[ZCP]

I keep popping into these threads with the same thing .......

What did you do this week to help a kid out of this rat race? Who did you teach about basic economics, finance, etc.? What are WE DOING TO MAKE THIS BETTER?

Can talk all day. Get out there and help a starfish today. Ask a kid in middle school / high school what they plan to do. Then sit down and talk it through with them.

Had a blue collar family high school kid a while back .... i'm going into the army. Why? Not sure. It would pay for college. Do you want to be in the army? No. Mom and Dad had the idea. Do you know what other options are available? No. Aren't you buying and selling cars? Yes, making decent money. Have you looked into getting a dealer license? How do you do that? Isn't your grandfather looking for some small investments? Yes. Could he bankroll you setting up a local car lot? Probably. Have you asked him? No, hadn't even thought of it.

The kid is setting up for his dealers license and looking into business classes at the local college. We MUST help expose kids to ideas that the sheep / slowlane parents may not even know exist.

Challenge: talk to one high school kid today and open their eyes for possibilities that are Unscripted !

 

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[BellaPippin]

I keep popping into these threads with the same thing .......

What did you do this week to help a kid out of this rat race? Who did you teach about basic economics, finance, etc.? What are WE DOING TO MAKE THIS BETTER?

Can talk all day. Get out there and help a starfish today. Ask a kid in middle school / high school what they plan to do. Then sit down and talk it through with them.

Had a blue collar family high school kid a while back .... i'm going into the army. Why? Not sure. It would pay for college. Do you want to be in the army? No. Mom and Dad had the idea. Do you know what other options are available? No. Aren't you buying and selling cars? Yes, making decent money. Have you looked into getting a dealer license? How do you do that? Isn't your grandfather looking for some small investments? Yes. Could he bankroll you setting up a local car lot? Probably. Have you asked him? No, hadn't even thought of it.

The kid is setting up for his dealers license and looking into business classes at the local college. We MUST help expose kids to ideas that the sheep / slowlane parents may not even know exist.

Challenge: talk to one high school kid today and open their eyes for possibilities that are Unscripted !

In this aspect the Rich Dad board game is an interesting way of showing people how to put money in their pocket rather than spend on stuff that depreciates. Basically is LIFE but with a income/expense sheet and your goal is to make your income more than your expenses so you can quit your job.

Now, does anyone bring this into schools? NOPE. I don't see myself having kids and I don't think I see "Little Biz Owners Workshop" being a success with slowlane parents but whenever I hear my bf's kids (8/10) say something too slowlane-ish I try to say something that will make them be aware of that "hidden" option

 

[ShamanKing]

I keep popping into these threads with the same thing .......

What did you do this week to help a kid out of this rat race? Who did you teach about basic economics, finance, etc.? What are WE DOING TO MAKE THIS BETTER?

Can talk all day. Get out there and help a starfish today. Ask a kid in middle school / high school what they plan to do. Then sit down and talk it through with them.

Had a blue collar family high school kid a while back .... i'm going into the army. Why? Not sure. It would pay for college. Do you want to be in the army? No. Mom and Dad had the idea. Do you know what other options are available? No. Aren't you buying and selling cars? Yes, making decent money. Have you looked into getting a dealer license? How do you do that? Isn't your grandfather looking for some small investments? Yes. Could he bankroll you setting up a local car lot? Probably. Have you asked him? No, hadn't even thought of it.

The kid is setting up for his dealers license and looking into business classes at the local college. We MUST help expose kids to ideas that the sheep / slowlane parents may not even know exist.

Challenge: talk to one high school kid today and open their eyes for possibilities that are Unscripted !

This is one of my Whys.

To teach kids (specifically those that are lost or hate it) that college isn’t the only way to create wealth or generate income. I want to link happiness and quality of life to their choices.

On a side note I never bash anyone for going to college. I myself have a degree but it was paid by FASA. Some can do very well with it.

 

[MitchM]

Unless you know what you want to college for and why, most people should take a minimum of 1-2 years off first.

Also, I find it annoying that people start off with an expensive school instead of a community college for their first two years or more generalized education.

Doesn’t make much of a difference which college you’re going to for that stuff.

Then, with your excellent grades, less spent on education, and a more complete view of what you want to have a degree for - you can make a decision on whether you want to step it up.

I stayed in college for two years completely undeclared before dropping out, and it was the best decision I’ve ever made.

We rush kids through this conveyor belt as if they’re cogs being built for a well-oiled machine, when in reality the future of our country and our world depends on people having the freedom and perspective to pursue their own visions of the future.

Like Peter Thiel discusses in Zero to One: our education system primes us to be ready for anything, and in doing so creates a workforce who is exceptional at nothing.

Of course, this may be untrue in higher levels of education - but that isn’t even where most people are accumulating their debt.

 

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[Scot]

I'm pretty outspoken in the real world about how insane student debt is, so I figured I'd share my story and numbers.

My wife is a doctor, a veterinarian to be specific. When she graduated school, she had around $260k in student debt.. from a public university. Her average interest rate across the 20 or so different loans she has is around 8%.

In the 3 years since she has graduated and started working, her student loan debt has increased, close to hitting $300K. Why? Because she is enrolled in Income Based Debt repayment. This takes into account her income and schedules repayment on a sliding scale. Her repayments were not enough to actually pay down the principal, just the interest. And 8% on that much money is a LOT of interest.

Student loans are a scam. These federal loans, subsidized by the government, are making obscene amounts of money off of the education necessary for student to get advanced degrees. My main argument is that there shouldn't be interest rates this high, or at all for federal student debt.

My wife didn't get her masters in East African Literature with a minor in Women's Studies, she is a doctor.

Here's the kicker. She makes $70,000 per year. Shes actually near the top of the salary range for associate veterinarians in Florida.

Her income based loans were scheduled to go up to $3500 per month this year. But thankfully, because we had a baby and she was out of work for 5 months, they lowered it. Last year we paid $2500 a month, essentially, more than most people's mortgage. At this rate, she will literally die with her student loans intact.


If we did the math on how brutal this is...

$70,000 Salary
- $30,000 Debt repayment (Last years $2,500/mo)
- $12,500 Taxes
= $27,500 after tax

That comes out to around $13.22 / hr for a DOCTOR.

Now imagine she wasn't married. She'd have to pay for rent, food, health insurance, car insurance, gas. She wouldn't be able to.

This is why I started my business and got into Fastlane thinking. Not because I wanted to create a business or be entrepreneurial. But because I saw that we'd be slaves to a debt for the rest of our lives if I didn't.

So for anyone who prescribe to the talking points that millenials shouldn't have gotten big loans and that they just want handouts, look at the numbers above.

 

[ShamanKing]

I'm pretty outspoken in the real world about how insane student debt is, so I figured I'd share my story and numbers.

My wife is a doctor, a veterinarian to be specific. When she graduated school, she had around $260k in student debt.. from a public university. Her average interest rate across the 20 or so different loans she has is around 8%.

In the 3 years since she has graduated and started working, her student loan debt has increased, close to hitting $300K. Why? Because she is enrolled in Income Based Debt repayment. This takes into account her income and schedules repayment on a sliding scale. Her repayments were not enough to actually pay down the principal, just the interest. And 8% on that much money is a LOT of interest.

Student loans are a scam. These federal loans, subsidized by the government, are making obscene amounts of money off of the education necessary for student to get advanced degrees. My main argument is that there shouldn't be interest rates this high, or at all for federal student debt.

My wife didn't get her masters in East African Literature with a minor in Women's Studies, she is a doctor.

Here's the kicker. She makes $70,000 per year. Shes actually near the top of the salary range for associate veterinarians in Florida.

Her income based loans were scheduled to go up to $3500 per month this year. But thankfully, because we had a baby and she was out of work for 5 months, they lowered it. Last year we paid $2500 a month, essentially, more than most people's mortgage. At this rate, she will literally die with her student loans intact.


If we did the math on how brutal this is...

$70,000 Salary
- $30,000 Debt repayment (Last years $2,500/mo)
- $12,500 Taxes
= $27,500 after tax

That comes out to around $13.22 / hr for a DOCTOR.

Now imagine she wasn't married. She'd have to pay for rent, food, health insurance, car insurance, gas. She wouldn't be able to.

This is why I started my business and got into Fastlane thinking. Not because I wanted to create a business or be entrepreneurial. But because I saw that we'd be slaves to a debt for the rest of our lives if I didn't.

So for anyone who prescribe to the talking points that millenials shouldn't have gotten big loans and that they just want handouts, look at the numbers above.

My GF will be entering an accelerated nursing program here in Cali. Duration is 1.75 years and cost is $40k. Student loans, at best, will only cover 28k. The rest will have to be paid out of pocket or from other types of loans. She’s preparing for the program but also still deciding. I’ve asked her to write down the positive and negatives of pursuing to be a RN. So far looks like the negative side is winning.

 

[Mutant]

Growing up, going to university was always a given for me. This is because my Boomer parents encouraged it. They weren't fools though. They were both the first in their families to go to university & it completely changed the trajectory of their lives for the positive. They weren't blindly following a fake script, they experienced real generational change. I guess university could have that effect in the 70s. So why would they not want that for me? No one hands out a memo saying "by the way, the rules of the game - outside of your profession - have changed". I would still need higher level education to do what they did. Why would they know any different?

Whilst I'm all about that starfish approach, I fear for the wider society it's one of those things where it'll literally take a generation or two (or more?) for the "received wisdom" to change. Will Millennials be encouraging their progeny to take on the debt when they're still paying down their own & can hold it up to how their careers & finances have gone for the previous couple of decades?

Thankfully (for me) in the UK we have a different system of student loans - you only pay back a set percentage of what you earn above a certain amount, & the interest rate, for me at least is currently 1.75%. I wonder if it might take a system like that to stop a crash/mass default? I don't even know if such a system is possible in the US. Or desirable.

In terms of the fastlane for this problem, I've heard of companies that help out of state kids get in state tuition rates, but not much else.

 

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[WillHurtDontCare]

I have a math degree. Most of what I actually do day to day at work I learned from Google & StackOverFlow.

Not only are these degrees expensive, but you don't use a lot of what you learned. And a lot of the skills you end up needing you can get for free online.

 

[WillHurtDontCare]

Her average interest rate across the 20 or so different loans she has is around 8%.

Student loans are a scam. These federal loans, subsidized by the government, are making obscene amounts of money off of the education necessary for student to get advanced degrees. My main argument is that there shouldn't be interest rates this high, or at all for federal student debt.

I see red when I think of this topic, so I'll keep my mouth shut as much as I can. Quoting you for your sobriety.

8% interest on something you can't default on. Stew on that for a while.

edit: corrected to can't default on*

 

[ravenspear]

Everyone is different.

I took out 60k in loans to go to a 4 year school (which I spent 6 years at), this was a top 50 school nationally. It was the best decision I ever made by far. The education you get at top schools is better than community college. Now, Im not saying this is the best life decision for everyone. I needed that at that stage in my life to develop to the next level. If you are 18 today and you are already posting on this forum fired up about entrepreneurship, then you may not need college because you’re already ahead of the game among your peers.

 

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[James Klymus]

Can talk all day. Get out there and help a starfish today. Ask a kid in middle school / high school what they plan to do. Then sit down and talk it through with them.

I really think this is well intentioned, but it reminds me of the D.A.R.E program in schools.

It was well intentioned, and the goal was getting kids to not try drugs. They tried to logically sell kids on why they shouldn't be doing drugs.

Well guess what, the decision to do drugs isn't logical at all. There's peer pressure, human curiosity, relationships and a million other emotional factors.

So even though the program was well intentioned, it failed and some say it even caused higher drug use in teens.

It sounds nice to say "Go grab a kid and sit down and teach them about economics and financial literacy!", but in reality very few kids are logical and would listen. It's like putting a plate of broccoli in front of a kid and saying "Here, eat this because it's good for you"

They haven't had a shitty job, shitty boss, crushing debt, an empty bank account when bills are due. They lack the life experience to make good financial decisions, which is why they get the loans in the first place.

If you sat a kid down, and they told you they want to go to school for art, You could have the most logical argument in the world on why that's a terrible idea, but a 16 year old isn't going to give 2 f's. If you're lucky they'll be polite and listen, but I estimate there's a zero percent chance they listen.

It's like sales, people don't buy based purely on logic, it's mostly emotions that drive decisions.

 

[luniac]

more like OUT OF CONTROL STUDENTS TAKING LOANS! lol
even when i was 17 and nowhere near any kind of fastlane mindset, college loans sounded insane to me.
I was poor as fuk, so 10's of thousands of dollars of debt sounded like a pure insanity to me.
thankfully i was so damn poor i got financial aid to go to City University. no debt here.

these american teenagers are brainwashed from a young age about having STATUS, so they take crazy a$$ loans to go to brand name schools.

its no different than spending 700 bucks on a pair of exclusive Nike's or some shit.

On one hand i feel pity for these people cause of the whole "brain is not fully developed at 17", but on the other hand give me a break.

 

[ZCP]

I really think this is well intentioned, but it reminds me of the D.A.R.E program in schools.

It was well intentioned, and the goal was getting kids to not try drugs. They tried to logically sell kids on why they shouldn't be doing drugs.

Well guess what, the decision to do drugs isn't logical at all. There's peer pressure, human curiosity, relationships and a million other emotional factors.

So even though the program was well intentioned, it failed and some say it even caused higher drug use in teens.

It sounds nice to say "Go grab a kid and sit down and teach them about economics and financial literacy!", but in reality very few kids are logical and would listen. It's like putting a plate of broccoli in front of a kid and saying "Here, eat this because it's good for you"

They haven't had a shitty job, shitty boss, crushing debt, an empty bank account when bills are due. They lack the life experience to make good financial decisions, which is why they get the loans in the first place.

If you sat a kid down, and they told you they want to go to school for art, You could have the most logical argument in the world on why that's a terrible idea, but a 16 year old isn't going to give 2 f's. If you're lucky they'll be polite and listen, but I estimate there's a zero percent chance they listen.

It's like sales, people don't buy based purely on logic, it's mostly emotions that drive decisions.

SO change your approach. Sounds like you are approaching it from a 'tell them' perspective.

Use their parents as examples ...... Mom not there in the afternoons? No, she works. Why does she work? What do you mean? She just works. She works for a reason. Where do you live? How much do you think your mortgage is? ..... then go through a simple family budget with them. Ask what their parents do, estimate what they make, show them the taxes..... then they begin to see that Mom works because she loves me and wants me to have all this stuff. Changes their perspective.

For your art student ....... i think going to school for art is awesome!! .... Ask them the other things that they want to do. Then build a plan to pay for art school doing things they want to do. Show how if they get a job and buy and sell 4 wheelers and get good grades to get a scholarship, they can pay for art school w/o loans. ..... or that maybe, they just like painting and really want to be an engineer. So they go to engineering school and take a few art classes along the way.

We need less 'telling them why that's a terrible idea' and more showing them the possibilities and how to craft a monetary solution for what they want to do!!

 

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[JAJT]

The reason they lend you that much money is because you can’t bankrupt your student debt away. So it’s guaranteed to be paid back.

Worth noting (for Canadians, anyway - I don't know about the USA) that you CAN, in fact, bankrupt away your student loans.

Everyone repeats that you can't again and again and again, and nobody EVER questions it, but there is a process you can go through to actually bankrupt your loans.

If you've been out of school for 7 years (or 5 if a judge agrees the payments are considered an "undue hardship") and you declare bankruptcy - your loans are eligible for being expunged along with all the rest.

You owe money — Student loans and bankruptcy

Repayment assistance programs If you are considering bankruptcy because of student loan debt, you may be able to apply for repayment assistance.

www.ic.gc.ca