Financial Stewardship: How to Avoid Student Loans
Many believe that being in debt should not be given such a negative connotation as long as one can pay off the amount they owe. But what happens when people cannot repay their debts? Bad credit scores, repossession of the items one owns, and more unpleasant consequences follow failure to repay debts. One of the many problems within society is that people usually do not repay their debts; not completely, if at all, and certainly not on time. The debts people encounter are car and house loans, credit card debts, and, not as commonly thought of, yet rampant, student loan debt. Failure to repay student loan debt is an enormous issue among society today. If one does not repay their student loan debt, they are labeled as a delinquent. Due to this label, it becomes very difficult to obtain a car or house loan and some jobs become unavailable because delinquency tells employers, landlords, and lessors that your credit score is poor and your dependency is unreliable. A staple rule to follow is to only purchase what you can afford and similarly, this applies to student loans. Do not take on more loans than you can realistically pay off consistently, and in a timely manner. As students graduate high school, many will be faced with paying for college on their own. They will need to exercise every way possible to keep themselves out from under the burden of student loan debt. It is imperative to be a good steward of one’s money and not dive into crippling debt to attend college. For one to effectively understand the importance of financial stewardship in regards to student loans, studying the facts and roots about exactly how big this issue is and where it derives can help set the foundation for learning and forward thinking. This is a message to both future and current college students.
The American Student Assistance organization says that twenty million students attend college each year, and 60% of them borrow to help with the costs for college. Some may say, “Well 60% is a little more than half but what about the 40% who do not borrow?” What about the twelve million that do borrow?! Due to “just” these twelve million, there is 902 billion to one trillion dollars of debt owed currently only in student loans. 25% of those who borrow take loans of around $28,000 to pay for school. 10% of those who borrow take loans of around $54,000. 3% of these people borrow $100,000, and 1% borrows $200,000. That 1% of people, whereas sounds like a very small number, is still at least 120,000 people borrowing upwards of $200,000 just in student loans (AmericanStudentAssistance).
While it is true that a very small percentage of graduates pay back what they owe in the years immediately preceding college graduation, the majority of people who graduate still have the burden of thousands upon thousands of dollars in student loans that they may not fully pay off until late into their 40’s. In 2010-11, a poll taken states that 57% of people who graduated with a four-year degree graduated with debt. In 2007-08, of those who graduated with a Bachelor’s degree, 66% graduated with debt, and 10% of those borrowed more than forty-thousand dollars. At public four-year institutions, 62% of students borrowed to pay costs. Of those who attended private non-profit institutions, 72% borrowed. And at private for-profit colleges, 96% of students borrowed to aid payments for school (AmericanStudentAssistance).
It is apparent that there are thousands of students still repaying their student loan debts once they have graduated college, but how long do the debts take to repay? The majority of those who borrowed, 42%, are within thirty and fifty years of age before finally paying off their student loans. 44% of people who graduate and are still repaying are under thirty years of age. And even more unfortunately, 18% are older than fifty years old and they are still burdened with student loan debts. On average, 22% of college students get married during school and some start a family. Once they graduate they are focused on getting a good job, finding a house, a place to live, and settling down. Among the many things graduates are worried about, the last thing they need is the burden of thousands of dollars still remaining to pay for school. Not only is it unfortunate to be repaying student loan debts when you first graduate and then for the next ten years, but when you are aging and wanting to retire, you cannot because you still are repaying your debts for school. One finds that their life is completely consumed by paying for school; all one’s life (AmericanStudentAssistance).
Some may believe that it is not possible for there to be so much student loan debt; $902 billion . Broken down, who owes the most in debt and how old are they? From the ages of thirty to thirty-nine years old, there is $307 billion owed just in that age group. From those under thirty years of age there is $292 billion dollars owed currently. Between the ages of forty and forty-nine, $154 billion is still owed. From fifty to fifty-five years old, $106 billion is currently owed. And $43 billion are owed by people of sixty years and older. Once again, no one wants to be paying thousands of dollars in student loans right after they graduate from college. Graduates have more important matters to be focused on than to be burdened with debt from student loans. Not only that, but people who are sixty years old still paying billions; people who really need to retire and stop working cannot because of the insane amount of money they still owe (AmericanStudentAssistance).
It is one thing to have the burden of thousands of dollars in student loans to still be paid back but it is even worse if the payment is late. Out of thirty-seven million borrowers, 14% have overdue payments. 14% may not seem like a lot but taken into perspective, that is over five million people who missed their payments. Out of roughly the $902 billion still to be paid back, $85 billion is overdue. From 2004 to present day, only 37% of borrowers have actually been able to make timely payments without postponing payments or becoming delinquents. Two out of every five people become delinquent at some point in the first five years after entering payments for school; that is 41% of all those who borrow (AmericanStudentAssistant).
All over the U.S., colleges have increased tuition and that poses the question of “why?”. Why would, all of the sudden, colleges significantly increase the amount of tuition? The value of the dollar decreasing is not the problem. The issue at hand is that the availability of student loans drastically increased and has ultimately decreased the accessibility of debt free college. Universities originally knew that the people had a certain amount of money and didn’t have access to enormous loans and therefore, the cost of schooling equated only to the amount it took to pay the teachers, afford the facility, and pay for books; the necessities. But within the past ten years, student loans are readily available to college kids taking between twelve and fifteen credit hours. At this point, eighteen year olds have the ability to take out millions in loans, and the colleges certainly took note of that. They then knew that the people had access to large amounts of money and could “pay” to go to college. Also due to the easy accessibility of large amounts of money, the students feel that they have access to enough money and they can attend college for as long as they choose; six years instead of four. So, yes, people are getting an education, but their debt payments roll in just a few months after graduating and persist with interest until fully paid (PolitiFact).
Not only is schooling becoming more and more expensive, but also it is taking longer; also due to the availability of loans. The colleges know people have access to plenty of money and society puts pressure on being the best and the smartest. Therefore, the schools know that people are going to end up paying whatever they ask to obtain education. The Department of Education Statistics says that since 2007, students are now taking an average of six years and four months to obtain their bachelor’s degree; usually this only takes four years. These extra years may not seem significant, but that is still two more years that one would have to attend college and just that much more money they would have to borrow. Unless a highschool graduate begins college within a year of finishing high school, they average just under six years for a bachelor’s degree. At that point six years or more for college is almost inevitable. The more time students take to finish college, the more they have to pay (PolitiFact).
The statistics about student loans are shocking. Luckily, there are many alternatives for attending college verses throwing oneself into enormous amounts of debt doing so. To begin, students have the option of attending a school that seeks them. If schools are clearly trying to recruit them, then the university will make it possible for the student to gain acceptance and in turn, will also make scholarships readily available.
Another alternative would be to attend a community college and take general education courses that one would have to take anywhere else and then transfer to a school of one’s choice. Community college can also offer an opportunity to improve one’s academic standing if their high school GPA is not up to standards. The courses are still state qualified but generally, community colleges have smaller class sizes. This gives the teachers the opportunity to teach more closely to each student individually and creates a space for optimum learning. Better grades are much more appealing to state universities in regards to scholarships and acceptance letters. Community college can give students the second chance some may need.
Another decision to consider before making a conscious choice to move away for school is to determine whether the student really desires to attend a private school specifically or rather a public school. The tuition for private schools is significantly higher. Thus, when considering options and comparing how much universities cost side to side, solely attending a public school can save any seeking student thousands of dollars.
A big part of financial planning for college is to start planning early. Students can start as early as freshman year in high school to get ready for college expenses. One way to do this is by working a job while they live at home and have the least amount of bills and expenses every month. Doing so will better prepare the student for not only achieving their financial goals for school but also give them a firm foundation for the value of a dollar, setting them up for success as they enter the adult world of bills and timely payments. Not only is having job beneficial because of the money that can be put towards school, but many businesses will not even consider hiring a graduate if they have no work experience.
Research is a big part of choosing the university a student wants to attend. Taking the time to look into different schools and areas of study can also cut down on time and money wasted. Often times, students enroll in classes they start out believing they are interested in and then result in changing their major after realizing that particular area of study is not what they expected. At that point, the classes they just spent money on are null and void and the time spent was completely wasted; not to mention the money it cost.
Finally scholarships can be a big part of paying for education. It is accurate to say that scholarships are highly coveted but unlike the popular belief, they are more bountiful and accessible than many college students assume. Spending the energy it takes to maintain a healthy GPA is crucial to winning many scholarships. However, not all scholarships are based on academics. This is because a students worth and potential cannot always be measured by solely analyzing a GPA. There are scholarships at all universities available to students from all walks of life. Some of these scholarships include but are not limited to athletic scholarships, scholarships within specific programs, disability scholarships, heritage scholarships, merit scholarships, competition scholarships, etc. All this is to further prove that there is an abundance of ways a student can make the effort to avoid crippling student loans. It just takes that extra effort to set that financial goal and take the steps towards completing it.
The goal of this detailed analysis is not for students to read this and shy away from attending college because of the great expense. The purpose is to shine light on the problem at hand and persuade students to thoroughly look into other alternatives for continuing their education than to put themselves under the enormous burden of student loans to do so. Some of these alternatives, to recap, include attending universities seeking them, attending community college as a first step, narrowing down whether a private or public school is more appealing, working one’s way through school, researching careers and schools beforehand, finding and applying for scholarships, and many others. Some that were not mentioned include military opportunities and filling out FAFSA for government aid. It is the hope and goal for rising generations to read this and consider how important their financial planning for the future is and act on it. With hard work and determination, the youth of America is able to pursue excellent education and be debt free.
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