I was browsing YouTube lately when I came across a startling headline: “student owes $1 million in student loan debt.”
My jaw nearly hit the floor.
At first, I’m thinking “wow, this must be the most educated person on the planet. Who likes school that much?” My second thought was, “unless this person wins a game show, they’re totally screwed. How is this allowed to happen?”
I played the Dave Ramsey video, turned the volume all the way up and threw my lunch in the microwave.
I needed to hear this.
To sum it up for you, here’s what happened:
- Mike Meru earned his undergraduate degree without taking on debt
- He then went to USC to become an orthodontist, taking out $601,506 in student loans
- He consolidated his loans twice, and over time, his debt ballooned to over $1 million
He makes monthly payments of $1,589.97, which doesn’t even touch the principal. So guess what? The debt keeps growing! Luckily for him, he’s taking advantage of student loan forgiveness, and after 25 years, his debt will be forgiven. By then, it’ll have expanded to $2m, he’ll have paid $1 million into his loan, and on top of that, he’ll owe $700k (at current tax rates) for forgiveness of debt.
I thought my situation was bad. Relatively speaking, I was only in the hole $170k! That’s a small fraction of this guy’s debt! He’s making me look like a genius!
But wait. The story gets crazier… evidently, there are 100 other people in the U.S. who owe $1 million in student loan debt. Wow.
As a society, here’s where we’ve gone wrong:
We value education for the sake of it
For personal growth and development, I believe a great education is as valuable as anything else. I also believe in the law of diminishing returns, which says there’s a point at which the benefit gained from an activity is less than the money or energy invested.
In other words, you eventually have to go get some experience.
We all want to have PhDs, MBAs, etc., but those titles only get you so far (although they’re great starting points). In the long run, no one pays you based on the number of diplomas or plaques on your wall; they pay you based on your ability to get the job done.
Even for a high achiever in a well-paying field, there comes a point where the cost of education becomes too great a burden to bear. I’d say the $1 million mark is probably twice that.
Get your education. Get as good an education as you can. But don’t get too comfortable being a student, because at some point, we’ve all got to put our smarts to good use.
No oversight and no defaulting
In case you didn’t know, consumers don’t get much support when it comes to student loans. Betsy DeVos and the current administration in Washington believe in having a single, streamlined federal loan program. Because of that, they believe loan servicing companies shouldn’t face “additional state regulation” – or as any reasonable person would call it – basic consumer protections.
So there you have it. The federal government has teamed up with for-profit colleges, allowing 18-year-old students to take out hundreds of thousands of dollars in student loans which they can’t possibly default on.
An 18-year-old with no income would get laughed out of a bank’s office for trying to secure a mortgage. But the bank takes on risk in that situation. Student loan servicers on the other hand? They’ll get their money one way or another. Whether it’s from the student or the taxpayers, they don’t care.
We’re stuck in our ways
It’s one thing to know that the college system is broken. It’s another thing to take the sort of action that’ll change the system for good.
And believe me – the system is broken.
A study from Next Gen Personal Finance shows that less than 20% of Americans are required to take a personal finance course to graduate high school. And these are the people who are expected to make solid financial decisions when it comes to college and debt?
America has turned education into a business, and it’s a business that makes a lot of money. And if you know anything about money, it buys influence – especially in Washington D.C. So in case you’re waiting for politicians to save us, don’t hold your breath.
One student at a time
In my mind, the best way to solve the student loan crisis is to educate as many students as possible about personal finance. Since public schools won’t get the job done, it’s up to us.
Home at 30 will continue to fight the good fight, one student at a time, because we’ve experienced the weight of student debt firsthand. The Money Master Intro is a free resource which was created to help solve this very issue.
We all recognize the problem at hand. The real question is: what are we going to do about it?
All opinions expressed on this blog are solely those of Home at 30 and are in no way affiliated with any other organization or institution. The purpose of this blog is to give general education and information about investing, wealth, careers, and college; It is not intended to be professional advice.
Author: Josh Ramos
After earning an undergraduate degree in Economics and a Master of Arts in Management at Wake Forest University, Josh has paid off over $130k in student loan debt in 4 years. By founding Home at 30, Josh wants to help you make the most of college, build a successful career, and achieve financial independence.