July 17, 2015
Student loan debt has reached crisis proportions.
Former college students – not all of them graduates – owe a staggering $1.2 trillion in student loans, according to most estimates.
Don’t even think of trying to count to 1.2 trillion. If you counted one dollar every second, it would take you 31,000 years to reach a trillion.
The average borrower in the college class of 2015 owes an estimated $35,000 in student loan debt. As with all averages, some debts run much higher. With tuition at many private universities running upwards of $25,000 a year, it’s not hard to find former students owing more than $100,000. Try paying that off at the kind of entry-level salaries most college grads start at. Try paying it off working as a waitress or bartender, like so many of them are forced to do.
Part of the problem is that for most students it takes longer than four years to get a degree. Fewer than one in four college graduates do so in four years or less, and only about six out of 10 manage to do so in six years.
True, for some fields of study like petroleum engineering, the debt load can lead to a lucrative career with a relatively easy payback. But don’t think you can pay back your student loan anytime soon if you plan to major in crowded liberal arts fields like sociology or political science.
Student loan debt is like a cancerous tumor that spreads and ruins your financial health. It destroys your credit background, making it difficult to qualify for auto and home loans, even if you earn enough to afford them. A job paying $40,000 a year right out of college sounds pretty good to most recent graduates. But if that person is sitting on $40,000 in student loans he or she will have trouble qualifying for a mortgage or starting a family.
Contrast that with a skilled trade job making $40,000 a year. Most trade workers learn their craft in apprenticeship or on-the-job training programs, which pay them a living wage while they learn and typically feature hefty raises once they are fully qualified. Others attend vocational schools, which do charge tuition, but a small fraction of what they need to pay at most colleges. Moreover, some trade employers will reimburse employees who pursue vocational tuition.
Every year the imbalance grows worse between the cost of a college education and its earning power. If you have manuals skills and are mechanically minded, better think twice before you sign papers to take on student loan debt.