Student-Debt Crisis

I just recently watched a news segment regarding the student-debt crisis, and it really has me thinking. For one, nearly 3,000 Americans default on their student loans each day because the burden to pay the loan has become intolerable. This action, not one taken lightly I’m sure, destroys their credit, causing damage to future plans and independence. According to Lindsay (2018), a contributor of Forbes magazine, students are told three main myths about their student loans in regards to repayment and expectation. The myth being that it will be easy to pay off your student loans within the 10-year window post graduation. Once the Department of Education made that information available, analysts learned that only half of student borrowers paid off their loan within 20 years, not 10 (Lindsay, 2018). This fiction delivered by borrowers starts to create a glass ceiling that only further enhances the awareness of social stratification, and makes it more difficult for classes to change their tax bracket. Essentially, despite “equal” opportunity, it’s not easy to climb the social ladder.

While not everyone cares about climbing the social ladder, it does come with its perks. Now I’m not saying that those who are of the more affluent don’t deserve it, but opportunity isn’t granted to everyone equally. The more education you have, whether it be collegiate, financial literacy, insider knowledge, or what have you, the easier it will be to seek and find opportunity.

The government “wanted” to make it easier for students of less affluent social classes to rise through the socioeconomic ladder by offering grants and creating an easy way to get loans, but the cost of that loan due to interest could be upwards of 15% of your total loan depending on the loan itself and the type of interest rate you choose. Models below are used on a fixed rate of 6.8%.

The average student leaves college with approximately 25-30k in student loans. At an interest of 6.8% or higher and a minimum payment of $50.00/m, within the four-years that student was in college, they have already accrued $3,800.00 or more just to have a loan to get them through college, and an additional $1000.00 (approximate: number was 952.00) each year until your loan is paid. If you are able to pay off your monthly payment, that interest over a period of 10 years is $9524.14 in interest alone. For more calculations, http://www.finaid.org/about/ will offer you a free calculator that is completely adjustable. Keep in mind, the minimum payment was $50.00 of a 287.00/month payment. Increasing the payment to $290.00, only resulted in a drop of $100.00 in interest over the course of 10 years, still adding almost 10,000 extra for your college education.

I have read several arguments saying that student should be more responsible and work through college so they have less to pay, or that students should seek more financial opportunity like scholarships, or even make sure they choose a cost effective college and earn more “useful” degrees. Speaking from experience, I worked full time in college at a gas station earning 12.50/hour. I worked there through high school, so by the time I got to college, I had approximately 2 years to save money, but in that two years of saving money, my paycheck went to saving for a car to get me to school and work, gas to put in that car, and insurance to make sure I could drive the car. My parents taught me responsibility. Responsibility does not guarantee wages. At the end of each paycheck, I had maybe 50.00 to put in savings. As a high school student, I was only legally allowed to work 20 hours a week at $8.00/h.

Fast forward to college, I was working almost full time 35-38 hours a week earning more, but with those earnings, I had to buy a newer car because my high school car quit working, and I gained a car payment of $200.00/m, higher insurance on a financed car, and the cost of books. I also paid monthly payments on my student loans to combat the accruing interest, and by the end of it, I am still left with about 54,000 in student-debt, and I will end up paying $21,000 in student loan interest, even with refinancing. My parents took out a loan for half of that within another company with an interest rate of 3.4%, much smaller, but since it’s a personal loan, the payment is much higher. The payment on this is $400.00/m, but because I want the loan gone faster, I pay $600/m. Because of this, I can’t afford my own place because I pay for my car, my cell phone, my insurance, my own groceries, gas to get to work in a fuel efficient car ($180/m) out of a 2,000 monthly paycheck as a teacher, and I put away most of my money into savings for a down payment on a house.

Student loans are a burden regardless of how smart you are about it, how hard you work, or the type of work you go into. I consider my degrees useful because I will always feel that children deserve a teacher who cares about them regardless of the wages. If we want better people, it starts with education, and the desire to continue education shouldn’t create fear.

 

https://www.forbes.com/sites/tomlindsay/2018/05/24/new-report-the-u-s-student-loan-debt-crisis-is-even-worse-than-we-thought/#35c82b8ce438

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