Harsh Reality On Student Loans + Some Valuable Help

by Martin

There’s a harsh reality when it comes to paying off student loans. Do you want to know what this harsh reality is? A majority of student debt is the direct result of acquiring high amounts of student loans to pay for a college education that will financially not justify the investment.

What does this mean? It means that if you want to work in a field where you won’t be making lots of money, it’s going to be difficult to justify the 50 grand in student loans.

Why does this happen? Why do young people acquire massive amounts of student debts that will follow them for decades to come? Is it possible to figure out how to reduce student loan debt early on?

Unrealistic expectations about student loan debt.

To be honest, I don’t think many of us knew what to expect prior to beginning college. Some of us had unrealistic expectations going into college, while some of us really had no expectations. Either way it’s rare that most young people think about paying back student loans or student loan consolidation prior to entering college. We all think we can start an online business and launch the next Facebook.

False dreams.

We all want to change the world. We also want to make some money doing it. Some jobs are very rewarding (i.e. Social Worker or Teacher) but simply don’t earn what is considered a “high income.” These are very well respected jobs in society. Unfortunately, they don’t lend themselves to earning a justifiable income for the high amounts of student debt that may be used to get them.

Lack of information.

Sure we all look into salary expectations after college. The only problem is that most of us are fairly biased when conducting this research. Nobody looks at the low-end. We all look at the high-end and expect to be making the big bucks right off the start.

This begs the question: is a college education still a decent investment?

At the end of the day I think that it still is. Without dwelling into a debate about the ROI of a college education, I would like to move on to the next topic… Now that we’ve discussed why student debt is often very high, let’s try to look at how this can be combated.

How can you minimize the amount of student loans you acquire to pay for college?

Paid work terms.

A paid internship can do wonders for your student loans situation and how you pay for college. Not only will you get a chance to throw your name out there, but you’ll make some money too. Don’t dismiss the small wage that most work terms offer. Earning money throughout your college career can put you well ahead of your peers. You can also have some money to invest in the stock market.

Work during the summer.

If you have no luck with finding a work term and can’t slip in a part-time job into your school schedule, you can always work during the summer. I’ve heard many young people balk at this idea, but it’s really not that bad. There’s usually not much going on during the week as it is. You might as well use this time to make some money. Sleeping in until 3 and watching Fresh Prince of Bel Air reruns isn’t the best way to spend your summer.

Attend a community college/school close to home.

An option that I’ve discussed in the past when it comes to saving money on college tuition is to attend a community college. A community college education may not be as prestigious as attending a private college.

However, the real question here is: can that community college education land you a similar paying job? For many careers the answer is no. For some careers the answer is yes. It all depends on your situation, what you want to study, and what field you want to work in after college. All I’m saying is that you shouldn’t dismiss the value of a community college education without at least looking into it.

I DO understand that there’s more educational assistance available from private schools. What needs to be taken into account is the cost of moving, rent, and all of the expenses that come with living on your own. You could save thousands of dollars by staying at home to attend college.

Of course, you do miss out on the college experience (drinking on Tuesday nights) but you won’t have to deal with student loans into your 40s.

Please try not to fall victim to this harsh reality of the majority of student debt. I understand that college is likely the most fun time in one’s life. I’ve certainly had my fair share of fun the last few years. Just make sure your student debt doesn’t plague you as you want to move on in life. We want to help you with student loan debt before it’s too late.

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{ 8 comments… read them below or add one }

1 Jacob Rios

I wish I would have paid more attention to reality when I was deciding on which college to attend. I had an opportunity to go to my local community college for 2 years, tuition free. That would have allowed me to save up the necessary money to finish school at another insititution, and be out of school with little to no student loan debt.

Of course, me being the cocky 17-year-old kid I am decided that I was too good for community college. That led me to a private college; as well as about $45,000 in student loans.

The only good thing about the college I went to was the accelerated program, which allowed me to graduate with my bachelor’s in 2 years. It was also beneficial because I was able to land a pretty good paying job for my field, for graduates in my field.

I think weighing the opportunity costs of going to community college versus a 4-year university is well worth the time, especially if there are incentives to make your college education much more beneficial without the penalties of taking out massive loans. I just hope that parents can really drill into their childrens’ heads that they need to think things through before making a final decision about where to attend college.

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2 Tina

I’m a junior in college and I will be graduating wtih no debt at all. in fact, it’s likely that I’ll be graduating with at least $10,000 in my savings account (plus whatever my roth IRA is worth at that point). Here’s what I did/am doing:

-Worked at least 40 hours every summer, and at least 25 during the school year. In high school/beginning of college, I worked at a store in the mall. Now, I work in an office as a bookkeeper. My major is accounting, so it really ties in.

-Saved as much money as possible. I don’t go out as often as my friends, but I get to enjoy my savings while they do not.

-Keep my GPA at around 3.6-3.8, which allows me to get scholarships (note: the scholarships I’ve gotten were relatively small, but any amount helps!). If you work hard, it pays off. If you slack off, it shows.

-Chose to attend the local state university, where tuition is only around $9,000 per year. As a result of my constant working and saving, I’ve been able to pay for each semester in cash, with no loans.

-Four years ago I purchased an old used car for $1,500 cash. It runs fine, and I don’t have to worry about car payments.

-Charge less than 30% of my credit limit, and pay it off in full each month. I don’t want to graduate with credit card debt either.

The main points are… Work, save money, keep your credit card debt to a minimum, and try to pay as much for school NOW as you possibly can. It’s easy to say, “Oh I’ll pay for it after I graduate,” but when that time comes, paying your debt won’t be any more fun. Also, a few of my friends chose not to work during the semester, and it’s really doing them no good. While they say they want the extra time to study, they just end up wasting time.

Wow, I totally just wrote a novel as my comment. Sorry!

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3 ctreit

There are two things that I would like to contribute to this discussion.

1. A bachelors degree is kind of a necessity these days. It is getting increasingly important to attain a masters degree if you want to set yourself apart from your peers. You want to get the first degree as cheaply as possible so that you can still pay for a masters degree.

2. I am not so sure “that college is likely the most fun time in one’s life” as you say. As far as I am concerned, college is about getting an education. You are paying good money for it. You may as well get what you are paying for: en education. In turn this education will allow you to get a job that is fun, interesting, and challenging. At least this is how it worked out for me. I do not regret sacrificing some fun during my college years.

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4 MD

Don’t get me wrong, college is a very serious time. It’s also likely the most “care free” time of your life in a way. Of course you will have more fun in the future. It’s a different kind of fun. Drink cheap beers after a midterm at the local bar is nothing like a challenging/rewarding career. Two different levels of fun.

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5 Budgeting in the Fun Stuff

I will say that facing financial reality in college will leave you with a much better foundation for the start of your adult life. I was way better off working three part-time jobs and graduating with a business degree and no debt than the English majors that had $40,000 in student loans.

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6 MyFinancialObjectives

Thank you for this post, Many more people need to hear it. Colleges and Universities have continued to raise prices, at a rate higher than inflation I MUST add, and yet are students getting anything MORE out of the institution? A question maybe we should be asking more often? Colleges and universities are causing millions of young adults to be in debt for dozens of years-often times unjustifiably, as you stated.

If I could do it over, i would have gone to a community college for my first year, and then a cheaper college for the remaining three years. I received an excellent education, though it WAS not cost efficient, I could have gotten comparable elsewhere…

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7 MD

I wouldn’t advise every single student to go to a “cheaper” school because often times the most expensive schools offer the most financial assistance and you may even end up paying less. Unfortunately, too often do young people attend a more expensive school without looking into all of the financial assistance options. The end result is massive amounts of student debt that are going to take at least a decade to pay off.

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8 Julie Mendez

One thing that I often mention to young acquaintances: pick the school that matches your intended career and future plans. I went to an elite private school because of my specific major, and the high profile alumni association attached. And yes, I still have the student loans to prove it (though I refinanced several years ago and have an exceptional interest rate.)

But I was horrified at the time to see my freshman year roommates – who wanted to become elementary education teachers spend $30K per year on their education! It just didn’t seem wise, when a close family memberwent to a state school with a very prestigous education department and probably spent less than $30K for her Bachelors, Masters and upper advanced degrees. She is now in a position where her successful career is flourishing(finalist for State Teacher of the Year award) and has not hampered her personal family life with truckloads of debt that couldn’t be paid off before she was ready to retire. Some positions, like teaching, have a cap on income potential, and once you reach it, what do you plan to do?

So pick the school for the specific department, and the quality of the alumni network. Then look at your assumed projected earnings, and ask yourself if that $35K per year tuition bill is worth it.

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