Approximately 20 million Americans attend college each year. Of those, about 60% borrow money to be able to go. Depending on what source you use those outstanding college loans total somewhere between 902 billion and 1 trillion dollars for all Americans.
The sad part of those college loans is that 60% of those loans are held by folks that are older than 30 years old. Even more striking is 17% of those loans are held by people 50 years old and older. Some of those loans may be in parents’ names, but those loans are being paid at a time when they should be focused on preparing for retirement. In any case, it is clear that many people spend a large part of their adult life trying to pay for their college education. In addition, in most cases federal student loans are not bankruptable, so if life takes a turn for the worse those loans can be an anchor weighing you down for years.
The saddest calls
I listen frequently to Dave Ramsey‘s daily radio program. There are two calls that come in from time to time that I find extremely sad.
One type of call comes from someone swimming in debt. After some discussion we discover that they have tens of thousands of dollars in student loan debt and we find out their degree is in something like social work. Now, I have nothing against social workers. Many devoted social workers do much good for society. But it is insanity to go $100,000 in debt for a career that is likely to only pay $25,000 a year. Those poor callers will likely spend years digging out of that hole. It will truly be an anchor around their necks for much of their adult lives.
The other caller may have actually gotten a degree in a good paying field like medicine or law. They are making a good income but now it is 5 years after college. They are married and holding that first baby. Suddenly mom has no desire to go back to that 8-5 job. She only desires to be with her new baby and is calling to find out if she can quit her job. The problem is there is still that enormous debt hanging over her head and if she no longer has that doctor or lawyer income coming in, her family will be seriously in trouble financially.
Those kinds of calls are so sad because there are few good answers. When you are 18 and signing the loan papers you don’t think about these kinds of things. But those loans can radically damage your ability to live the life you dream later in life.
Time for parents to be parents
While certainly some of the blame in these situations resides with the kids, I think that their parents share some of the blame too. As a parent, it is our responsibility to guide our children when we see them making decisions that are not wise.
What are the potential earnings?
Help your children look realistically at what the potential earnings are for the field they are considering. Sites like Salary.com can be good sources for what the average earnings are for various occupations. The Bureau of Labor Statistics publishes an Occupational Outlook Handbook that provides detailed information including average salaries for a large variety of professions. Take some time to help your teen understand what kind of earnings they can expect in their planned career. That doesn’t mean you should only choose occupations with a very high expected salary. That can be a recipe for dissatisfaction and burn out too. Still your child needs to have a realistic understanding of what they may expect to make.
What if they don’t finish?
Make sure your child understands that while many start college, the dropout rate is pretty high. According to the National Center for Education Statistics of the students who started the process of earning a bachelor’s degree in 2004, only 58% had earned their degree by 2010, 6 years later. What about those other 42%? Many now have large student loan balances and no degree to help them earn money to pay them off. I know many think “that’s fine, but it won’t happen to me”. But many of those 42% probably felt that way too.
What do I want to do with my life?
18 year olds often have no idea what they really want to do. This isn’t a reason to not get an education. In fact, in the process of getting that education they may discover what they want to do. The problem comes when a student runs up large student loan debt only to discover they really don’t like the profession they hoped to pursue.
Does the name on the diploma matter?
Help your child understand the costs of various universities. In reality, with only a few exceptions, it is the knowledge you gain that matters, not the name of the college on the diploma. Employers care whether you will be able to help them solve problems and make money, not what school you attended. If you are short of funds, it is much better to get that degree from a cheaper in-state university and graduate with little or no loans, as opposed to graduating from an “elite” private school saddled with tens of thousands of dollars in debt. Better yet, you might be able to get some general requirements out of the way at a local community college or 2 year college and then transfer to the more expensive university to finish your degree. When you get your diploma there will be no difference between you and a student that went there for 4 years and you’ll have paid a lot less money for that piece of paper.
Don’t let student loan debt destroy your child’s life
Please don’t take me to be anti-education. I believe that especially in today’s society it is very difficult to be successful without a degree. But it also very hard to be successful when you start life deeply in debt and face years of payments. I know college is extremely expensive and gets more so every year. There are ways though to get the degree without having to mortgage your future.
As parents it is our duty to do our best to help make sure our children don’t make decisions they will spend a lifetime regretting.