If you think about the student loan crisis, you will realize that we have a long road ahead of us. We have yet to put a huge dent on solving it. In fact, if you look at the statistics, you will realize that it does not seem like we are doing anything to solve it. If we are doing anything to the student debt at all, it is obviously not working.
Based on an article published on NYTimes.com early this year, it is apparent that student loans continue to rise. In fact, to quote the article, it is revealed that “delinquencies continue to rise, and loans continue to be made without regard for the ability to repay.”
The article explained that student loans were initially created to help low income families have the chance to get a higher education. That is still happening but the whole system seems to be in error. Instead of helping, we find young adults struggling for the first ten years of their corporate life. It is creating a bigger problem for new graduates. Although they have the means to earn more compared to high school graduates, they still have the student debt to take care of.
Three reasons why the student loan situation in the US is scary
There are three important reasons why the student loan problem in the country is scary.
Student loans are advertised as a good debt that is necessary.
There is truth to this – that we cannot deny. Study reveals that graduates really earn more compensation. This is why college debt is often advertised as a good debt that is necessary for young adults to succeed in life. The explanation is this – it is a type of debt that has the ability to put money in your pocket. That is because it can open more opportunities for you to earn. But even if that is true, you should realize that the student debt is compromising the money that you should have been enjoying.
Student loans are given to confused and innocent borrowers.
In most cases, student loans are offered to borrowers who do not understand the real effects of debt in their life. Not only that, they are unaware of their actual capabilities to pay off this debt. At the time that the debt is made, there is no way for the borrower to know how they can hope to pay it back because they are still studying. If they have a hard time getting a job, that will not stop the student debt from being billed to them.
Student loan delinquencies continue to rise.
Another scary fact about this debt is that the delinquency rate is steadily rising. As mortgage and credit card delinquencies improve, the student loan is going the other way. It keeps on rising just as the amount of debt is also going up. We need to consider this fact because it clearly shows the inability of young adults to pay off this debt. To add to this scary fact, lenders are still issuing student loans despite the trend that borrowers are having a hard time paying it off!
These are the reasons why student loans make college education seem worthless. If we are not careful, this might result in another economic crash.
Recent study reveals that Americans still want to go to college
Surprisingly, despite all of these facts, Americans still believe that college education is a must. In a recent poll done and published on Gallup.com, 70% of Americans believe that it is very important for consumers to have a postsecondary degree. 24% believe that it is somewhat important. Only a mere 6% believe that this is not necessary at all.
The other findings from the poll are as follows:
44% strongly agree that a certificate or a degree beyond high school is necessary to get a good job.
40% strongly agree that a college degree can lead to a better life.
89% believe that institutions providing higher education need to change so that the needs of students can be met.
Less that half of poll respondents believe that institutions are not doing anything to change and improve.
Gallup provided an explanation in this poll results that revealed how consumers know that student loans are destructive – but that they still believe that college education is necessary. It is safe to assume that when it comes down to it, they will opt to put themselves in debt if that means that they can get access to this higher education. That is because they believe it is a necessity towards a better standard of living.
How to go to college and minimize debt
It is true that student loans may be worth it because a college education can really open more doors to help you improve your life. But while a college education is a necessity, you have to remember that student loans are not. There are ways for you to get an education after high school and it does not always have to end up in debt.
Here are some things that you can do to keep student debt from being a problem after you graduate.
Work on the side. One of the most effective ways for you to break free of the student loan statistics is to just work your way through college. People have done it so you cannot say that it is impossible. They had to work during their spare time and it paid off in the end. They are able to enjoy their salaries entirely because it does not have to be split with student debt payments. There are so many things that you can do to earn on the side. You can babysit or provide tutoring services. Or you can have yourself employed by the college you go to so they can waive off your tuition. That means you only have to worry about your daily expenses and your books.
Be frugal. Another way that you can keep yourself from too much student debt is when you live a frugal life while in college. This is possible for you to do if you concentrate on the expenses that are necessary. New clothes, for instance, should not be high on your list if you still have clothes to wear. You need to prioritize food and your school expenses before you think about your wardrobe.
Keep an eye on your credit card spending. One of the things that make student debt a burden is the fact that it is often combined with credit card debt. The high interest of credit cards can be quite a financial obligation that can cripple the finances of the young adult. It can be too much to bear if this is accumulated on top of the college debt. That means you have to make sure that you keep any credit card spending in moderation. If you can manage it, just spend in cash only. That way, if you cannot afford it, you will be forced not to spend on it.
Understand your student loan. Lastly, if you really have to borrow money, make sure that you understand student loans. This is one of the regrets of a lot of young adults who have graduated with student debt. They said that they wished they know how hard it will be to pay off this type of loan. If they did, they mentioned that they would have done more to keep their debts low. That may be better financial management skills or a more frugal lifestyle. If you understand how student loans work, you can make better decisions about this debt.