We all know how the American Dream sounds…
Get into a good college, get good grades and get a good job. Simple enough, right?
The average borrower in the class of 2016 has over $37k in student loan debt according to student loan guru Mark Kantrowitz. This is a 6% increase form 2015 and is helping to contribute to the $1.45 trillion overall student loan debt in the United States as of August, 2017.
Is there an answer to this problem?
I’ve paid off more than my fair share of student loans. At what point do we step in and help prepare our students without saddling them with a lifetime of debt?
Students are doing what they think is best in order to build a successful career, accumulate wealth, and retire early. Unfortunately, we’ve made it normal for students to think they have to take on unreasonable debts to thrive, and it’s our mess to clean up.
How We Caused the Student Loan Crisis
Roughly 8 million borrowers have defaulted on their student loans. Who’s to blame here? The student loan crisis happened because we lacked preparation and foresight – all of us.
The “System” Failed Us
People need money to live, but we don’t teach students how to use it properly.
In a 2015 study, The Center for Financial Literacy at Champlain College, discovered that only five states require students to take a dedicated semester of personal finance courses. Additionally, almost a quarter of the states don’t require financial literacy courses to be completed to at all. Only 10 states require 15 or more hours of personal finance education in all of high school!
Advanced finance courses shouldn’t be mandatory, but every student should have a working knowledge of how interest rates and the compound interest equation work. Certain life skills are essential for everyone to understand, but we aren’t taking the time to equip students with the knowledge they need to make rational financial decisions for their future.
The Parents Failed Us
Parents should provide their kids with a worst-case scenario before selecting a college.
During the college search process, many parents are highly involved and they want the best for their children. However, there needs to be a strategy behind the search that allows the student to think realistically about their college choices and what life will be like after graduation.
The discussions I had with my parents about colleges centered around each school’s reputation, cost, and undergraduate programs. Was I a fool to not financially map out my own future?
Unfortunately, we’ve put college on a pedestal and said the cost is just a necessary evil. To truly prepare, students need to have a realistic sense of their starting salary range coming out of college based on their interests. They then need a backup plan if that doesn’t come to fruition. Spending $150k on college in hopes of having a lucrative enough career to manage the debt is a dangerous gamble.
The best way for parents to approach this may be to give the student hypothetical situations. Comparing different starting salaries, cities and college costs can serve as a much-needed reality check for a high school student. Parents need to do their best to prevent their children from making educational decisions that can hinder them financially for much of their adult lives.
The Students Are Failures
Ultimately, when it comes to a decision as big as college, there is no one to hold accountable aside from the student. It’s their decision, their education, and their financial future.
Having a sense of awareness regarding what skills they want to develop and what industries they’re interested in is important because it allows the student to realistically evaluate potential career prospects. The student loan crisis is partly due to a sense of complacency until the time comes to “figure things out”.
I knew I would be an economics major, but I had no idea what potential jobs or industries I was interested in. I’m not the one to expect a handout, but we learn many things in school we don’t need. Has high school lost all practicality?
We can’t force people into certain jobs and we can’t make students want to grow up. What we can do is make potential career prospects a more tangible high school experience. What if every student had a better sense of what they wanted to do? Would the student loan crisis be this bad?
Let’s Work Towards the Solution
Change will only happen when everyone buys in.
The college process is intimidating, overbearing, confusing, and downright stressful for students and parents alike. Unfortunately, the way we’re doing things has gotten plenty of students into lifelong financial ruin. We can all do better – the parents, the students, and the system.
The student loan crisis has to be attacked from multiple angles. Parents need to realize that preparing students for life after college is a pivotal aspect of preparing them for college. We also need more personal finance courses in high school and students must dedicate themselves to becoming more financially aware. If we do those things, we can beat this problem together.
Let’s commit ourselves to approaching college in a way that everybody can benefit from, and most importantly, let’s commit ourselves to achieving the financial freedom we all want.
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Are you struggling with student loans? How are you approaching the issue? Leave your thoughts in the comments below.
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.
After earning an undergraduate degree in Economics and a Master of Arts in Management at Wake Forest University, Josh has paid off over $90k in student loan debt in 3.5 years. By founding Home at 30, Josh wants to help you make the most of college, build a successful career, and achieve financial independence.