A Lifetime Burden

July 12, 2016

Student debt can stay with you forever

It was chilling to read a recent Wall Street Journal article detailing what can only be called a crisis with student debt, most of which is owed by college graduates or, worse, college dropouts. The article (subscription required) said that 43% of some 22 million borrowers from the federal government’s main student-loan program have stopped paying back their loans or are so far behind in payments it’s likely they’ll never catch up. The past-due amount owed is a staggering $200 billion+.

Most of those indebted former students simply can’t afford to make the payments. They are out of work or working in low-wage jobs that barely pay living expenses. Many are living with parents or crammed into tiny apartments with roommates to share the cost. The Wall Street Journal article focused on the problem their debt presents to government finances. Let’s take a look at it from a different perspective. What’s it like to be a former college student owing tens of thousands of dollars?

If you are lucky enough to land a job in a high-paying field, the debt is manageable. You can pay it off in a few years and get on with your life.

But suppose you can’t find any kind of job that pays enough to live on and service your debt. You can try to make minimal payments but at that rate it will take decades to pay back your loans, even if you receive regular pay increases.

Having debt hanging over your head is the financial version of walking around carrying a backpack full of rocks. Want to buy a car? Good luck getting a car loan, and if you do find someone willing to lend you the money to pay for an auto, you’ll probably have to pay an elevated interest rate, which just adds to your debt burden. A mortgage to buy a home will probably be out of the question, maybe for your entire lifetime. In some cases you might even have trouble renting an apartment if the landlord asks for evidence of financial means to pay the rent.

At some point you may have to consider filing for personal bankruptcy. This might clear some of your debts but, depending on who you borrowed from, student loan debt is not always forgiven even in a bankruptcy. Besides, bankruptcy will severely diminish your ability to borrow money for the foreseeable future, whether to obtain a home, an auto or whatever. You might even have trouble obtaining a credit card and, if you do qualify for one, will end up paying killer interest rates.

Countless lives have been ruined by the burden of unmanageable debt. People who owe a lot of money often dig themselves into deeper and deeper holes because they keep borrowing more money or use credit cards to pay bills they can’t put off. Many people who find themselves in that situation suffer health problems from the stress of always thinking about money and which creditors they can most easily avoid paying.

I’ve said it before and I’ll continue shouting it from the proverbial rooftop, the trades offer well-paying careers without borrowing unaffordable sums of money. Many trade apprentices earn money while they learn, and even if you attend a vocational school that charges tuition, the amount is almost always far less than the typical college education costs. Pursue your dream, but also factor in the value of a debt-free lifestyle versus lugging around that bag full of rocks.

Oh, and while you’re at it, take five minutes to listen to this hypothetical college commencement address.