Why Student Loans are a Bad Idea

Student Loans are a Bad Idea

The cost of college is rising at an alarming rate. Medical care is not even rising as fast as college costs over the history of price increases. Public in-state tuition and fees now average around $9,716 with private universities charging $35,676, according to U.S.News.

With the rising costs of tuition, more students are taking on debt to fund a college degree. It is now estimated total student loan debt is 1.56 trillion and the average monthly student loan payment is $222. Furthermore, it is not uncommon to hear of students taking over $40,000 in debt during their time in college. These disturbing statistics show a real problem with debt and college.

There really is no way to disagree that education is important. But at what cost does it truly make sense? Does taking out large amounts of debt obtaining a four-year degree ensure success in landing employment that will last a lifetime in a career field?

There are convincing arguments to both sides of the positive and negative aspects when it comes to college debt. However, going into large amounts of debt may not be the best choice for a majority of people. This does not suggest that a person should not get a college degree but going into debt is not the best decision.

What are some of the arguments for not having student loan debt?

1. Going to college does not guarantee a good paying job.

• According to the National Center for Education Statistics, about 40% of the students that enroll in college will not graduate. There is a difference in this statistic between private and public universities with private ones having a slightly higher graduation rate.

The issue with student loans in a non-graduating scenario is the cost really has no benefit in most cases. A person will have to pay back student loans with no gain from accumulating the debt. Life happens for everyone and there are things that can derail the goal of graduating college.

2. Student loans are forever.

• Lenders are very often happy to lend money for college. It is the only type of loan where the lender really has no idea on the ability or skills a person has to repay it in the future. The reason for this is student loan debt cannot be included in a bankruptcy. Student loans will stay with a person forever.

3. Student loans delay financial goals.

• With a large amount of debt in student loans financial goals, such as buying a home, are often delayed. Student loan debt can also have an impact on a person getting married or having children.

4. Will you graduate in 4 years?

• Students entering college regularly believe they will graduate in 4 years. Statistics show that for many it takes much longer. Changing majors or taking a little time off can easily extend 4 years into 6 or more. This can increase the costs and the possibility of never reaching graduation.

5. Choosing a college major is important and not an assurance.

• There is a good possibility the major a person chooses will not be what they expect after graduation. It could possibly be a major that lands a good paying job, but employment that is not what a person wants to do. It could also be a college major that has low paying employment prospects or one that has low rates of getting hired.

College degrees, such as elementary education or culinary have historically low starting and career salary averages according to Payscale. Picking a major with low paying odds does not leave much room to pay back student debt.

Student loan debt is not good when comparing the odds.

There was a time when just having a college degree almost did indeed guarantee a person a good job. This is not the case any longer. There are a number of factors that need to be considered with the odds of a college degree landing good paying employment and a career.

• It is estimated that 90% of careers all require skills learned on the job. Graduating from college and starting at a high salary is not realistic for many graduates. It will not be long after graduation before the student loan payments will begin and it could take several years to advance a career and pay rate.

• If after graduation a student has not built a valuable network and contacts, there is a true possibility of being unemployed for some time in their field of study until they get their foot in the door. This may happen at some point or it may never occur.

• The statistical information available when comparing the lifetime earnings of a college graduate compared to high school is often said to be 1 million dollars more in in favor of having a college degree. This may be true. However, the true odds are landing the right job. The factors associated with this are not always accomplished. It could depend on a number of variables like college major, school attended, a person’s skills, networking, and contacts. The 1-million-dollar difference is not a 100% truthful in all cases.

Student loan debt is a bad idea, but getting a degree is still a good plan.

Having a large amount of debt after college graduation can really delay or just put a stop to long-term financial goals. Although getting into debt for an education is not the best odds for success in many cases, it is still a good plan to go to college. The goal should not be to just get a degree but to obtain one debt free. Furthermore, going to college should not be only to get an education.

Making the Right Contacts

Because just getting a degree does not guarantee long-term financial success and a career, networking, and contacts are one of the big reasons for further education. The old saying, “It’s not what you know, but who you know.”, may be more relevant than ever in this day and age. With job applications being online a majority of the time, computer algorithms sort through thousands of applicants.

If you are thinking about attending a prestigious school, networking and not necessarily the education should be a focus. Studies have shown that just being an Ivy league graduate does not necessarily equal a better paying career. Yet, take into account the contacts made at a prominent university and this is what really likely counts.

College is no longer just about education in many cases. A lot of the information being taught in the classroom is now easily accessible on the internet or at the public library. The end goal is knowing the right people to get into the right position after graduation. A Harvard business degree may not mean much without knowing the right people.

Required 4 Year Degree

• Many jobs in different industries may require a college degree regardless of the major area of studies. This never made sense to me in many cases, but some companies still place an emphasis on this. The reality is that a college degree does not often make one person more intelligent than another. It is just a diploma showing the completion of college. It is one of the prerequisites for playing the game of getting a good job.

• According to a Career Builder survey, one-third of college-educated workers do not work in their related college major. Personally, I feel this statistic may even be larger. Often after school, college graduates may work in a few different fields while gaining experience and networking for the right contacts to eventually land the ideal position.

How do you go to college without incurring large amounts of debt?

• Because it really can be a gamble for a number of people to take on large amounts of debt in college, the best way is to self-fund a degree. Taking seven years to finish may be much better than being in debt for 20 or 30 years with student loans. Because statistics show that realistically many students complete schools taking more than 4 years, there is nothing wrong with taking a little longer.

• For new parents, planning early for a child’s education is imperative. Starting a 529 plan or Educational Savings Account when a child is born does not take a fortune to fund. There can be up to 18 years’ worth of investing. Depending on the college a child attends in the future it may pay for a large portion or all of it.

• Grants, scholarships or even military funding are all possible ways to pay for college or at least a portion of it.

• Tuition reimbursement through an employer is a possibility as well. However, these can be subjective as to the conditions of getting reimbursement. It will depend on the employer.

• Working at a job and saving the money to go to school may also be a possibility, but this will depend on the job and its earnings. It is not obtainable for everyone, but it can subsidize money from grants or scholarships.

Just don’t go to college.

The easiest way to not get into large amounts of college debt is to just not go. Although this has a real stigma to many people when the idea is even mentioned, college does not always equal long-term success. There are actually valid arguments for just not going.

• There is a resurgence in trades and trade schools. Learning a trade can many times be less expensive than a traditional 4-year degree. Many of these earn much more than a college degree without the large debt. There are plenty of electricians, welders, and plumbers that have earnings that outpace a college graduate.

• If you have the right contacts and network, there may be no reason to go to college. It really can be about who you know and not what you know. If you have friends in high places, there may be no reason to go to school or a big job can be had while taking a long time to complete school at your own pace.

• There are some entry-level jobs still available that have good long-term career prospects without a degree and they can even sometimes be some of the more stable ones. The only thing with this is once you start you should be in the mindset that this is probably going to be it.

Getting in the military early, law enforcement or even the postal service at a young age and sticking it out can lead to a long-term career and financial success. With these examples still having pensions at the end of a career, it is not often a terrible decision.

What is the best way to stay out of incurring large amounts of debt in student loans?

Deciding on getting a college degree or not to get one can be a difficult choice with the costs involved. Even with the rising costs, statistics show that it is better to have a degree in most cases than not to have one. Yet, this is not set in stone. There are exceptions to just about every rule.

The question is not really is it better to have a degree, but is it better to have one without large amounts of student loan debt. The answer to this in almost all cases is it is better to not have a mountain of debt. The odds of success with piles of student loan debt are not guaranteed. This is a real issue. Thus, it is really always better to have a degree without incurring debt.

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