I met with a student this morning who is trying to figure out how to pay his tuition bill for the upcoming Fall 2012 semester. He already has taken out roughly $50,000 in Stafford Loan, and does not have willing parents, or sufficient credit, to take out a PLUS loan or a private student loan. This means that he only has $7,500 left to take out in Stafford loans before he reaches his lifetime maximum. Funny thing is, he does not seem worried.
I also asked this student how his job prospects looked. His reply? “Oh well, I suppose I will go to Grad School. I still don’t know what I want to do!”
This sounds incredibly stereotypical, but it was a real conversation I had with a student today. This is the same line of thinking that leads so many people to take out payday loans without thinking about the financial ramifications down the road.
So, how do we combat the student loan debt demon and avoid a generation of college graduates who cannot repay their student loan debt?
It starts in childhood.
I firmly believe that the student loan problem is a result of mismanaged expectations on the part of college students. All of their lives they have been told to pursue their dreams. Get a college degree. Conquer the world. Well, without trying to be cynical, it’s pretty difficult to conquer the world when you can’t find a job or pay your bills.
Being realistic and brutally honest about what it takes to become wealthy is a good start to avoiding taking out student loan debt. Having a clear plan to reach this goal will ensure that the education decisions a student makes aligns with their life goals.
One more thing to consider is that being wealthy is not the goal of every student, nor should it be. In fact, most of the happiest people (ok ALL of the happiest people) I know are not wealthy by the world’s standards. They live simple lives, yet are more fulfilled, and genuinely happier than their financially rich counterparts.
Just something on my mind on a rainy friday afternoon in the southeast…
The common mistake done by our students is applying for loan without thinking about the result. They usually think that that’s not a matter how much they take as student loan. But reality is after the college life they get drowned in the deep sea of debt. So financial planing is necessary. There is no guarantee that the world comes to you after college.
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Very interesting view. Perhaps, aside from student perception itself – which is really a great factor, there is also a great responsibility beforehand to provide sufficient information for better management of loans.
You are so right – not everybody is going to be wealthy. In fact, capitalism isn’t set up to succeed in that type of climate. This society wouldn’t function if we didn’t have trash collectors and receptionists and machinists who bring in a modest income.
Elizabeth @ Broke Professionals recently posted..Professional Profiles: Sarah, the International Grad Student
This is actually really important for us to know especially the students and the parents as well.. But I am thankful you have great idea for us..
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that is a shame that the person you were having a conversation with is almost out of funds and is unsure what to do about it. I think even worse than the student loan debt they will have is being that far in debt with out having a degree to show for it!
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Thank you so much! The article is so informative.