‘I’m Drowning’: Those Hit Hardest By Student Loan Debt Never Finished College

Happy Monday All! This week’s article discusses the student loan crisis from a new angle. “‘I’m Drowning’: Those Hit Hardest By Student Loan Debt Never Finished College” by NPR takes a look at the situations of those who have student loan debt without the benefit of the degree.

As of February 2018, 70% of college students graduate with student loans. This fact is quoted quite a bit and is used to describe how bad the student loan crisis has gotten, which is completely accurate. However, this fact fails to take into account the flip side of the coin:

The 6-year graduation rate was 60 percent at public institutions, 66 percent at private nonprofit institutions, and 21 percent at private for-profit institutions. 

National Center for Education Statistics, NCES

What this means is that within a 6 year timeline for public colleges, there is approximately 40% of students who do not graduate from college, but STILL have college debt to pay off.

College Isn’t Always the Answer

While college can easily be sold as “the only way to get ahead in life,” college may not actually be for everyone. It can be a great leg up for someone who wishes to pursue a career requiring a bachelors’ degree (or beyond). However, not all people need a degree in order to pursue a career that they enjoy that can provide for them.

Meanwhile, to take a stab at a degree that they do not receive, 3.9 million students took out student loans. To make matters worse, many of them can’t pay them back. With their student loans now in default, there are further affects other than the personal debt.

Collapsing Credit

Once a loan enters into default, credit scores can become affected. At that point, this can influence

Purchasing or renting a home, like Ashlee, age 27:

Ashlee lives with her mother in Louisville, Ky., and says she wants to move soon. But her debt has ruined her credit, which makes it hard to find a new place to live.

Or buying a vehicle like Heather, age 44:

Heather: “I get unbelievable interest rates for vehicle loans.”

Opening up a credit card like Shawn, age 27 or Dali, age 22

“I can’t finance a car and can’t get a credit card,” [Shawn] says. “If I can’t get a secured credit card, I’m definitely not going to get a mortgage.”

“I haven’t applied for a credit card,” [Dali] says. “I already know I’m going to be declined.”

Preventing Progress

With all of the negativity associated with these loans, it’s hard not to get disheartened. So, understandably, now those that have student loans either from a degree they never received or one they’ve never used are hesitant. They’re hesitant to go back and finish their degree or to pursue a new endeavor that could move them forward like starting a business or attending trade school.

With the average amount of debt a graduate takes on being ~$37,000, that money could have gone towards any number of things instead.

These student loans can become a drag on the recipient. They can prevent them from things like getting a car that they may need in order to get to any job or from starting their dream business. With potential barriers like this, it should make us all reconsider if college is always the right path.

How to Improve in the Future

Stop Hyper-focusing on College

There is a LOT of focus in high school about having students attend college. It’s actually a statistic that most high schools will use to tell if they are succeeding as an institution. However, this logic is flawed. There are many jobs, even high paying ones that do not require a college degree. Mr. Money Mustache, a very popular personal finance blogger, has a post called “50 Jobs over $50,000- Without a Degree” that lists out quite a few options.

College acceptance/attendance should not be the benchmark to determine a good high school. If a student pursues a career that does not require a college degree, that does not mean that the high school or the student have failed. It’s just a different path.

Not to mention that not all positions for college graduates are paved in gold, the average salary for a college graduate is $47,000. Considering the list mentioned above for 50 different jobs that do not require a degree that can earn over $50,000, this doesn’t seem to be a significant enough difference. Of course, 70% of those who average $47,000 in income every year still have to pay back their student loans; while those who do not attend college do not have any debt and get a 4-6 year jump on their salaries and savings.

By encouraging students to following their interests, even if that path does not include college, the number of college dropouts without debt can be reduced.

Ensure Understanding of the Dangers of Student Loans

On the flipside, for those that do want to pursue careers that require a college degree, the severity, impact and overall details of student loans should be reviewed with high school students. There are arguments in place that those who take on student loans should obviously pay them back since they agreed to them in the first place. This thinking isn’t incorrect, but it doesn’t take into account that the folks signing up to tens of thousands of dollars of debt may not even be old enough to vote yet.

I know for a fact that I did not fully understand the severity of my student loan situation when I first attended. I had barely had any conversations with my parents about who and how school would be paid. The answer was that I needed to pay it. So, I went for loans.

Luckily for me, the career that I wanted did pay fairly well right away and I was able to keep my student loans under my first year’s salary for my position. This was not, however, because I knew mathematically that this was a good decision. It was pure dumb luck and I know many that were in the same situation I was, some fared better than others.

My point is that this shouldn’t be left up to luck and should be thoroughly reviewed with high school students prior to even applying for college. This includes the standard interest rates at the time, estimated payments and the effect of compound interest. With this information in hand, if a student still wants to pursue a degree at a university, they should be encouraged as much as possible. However, without all of the facts, young adults make decisions to affect the rest of their lives based on luck and that’s just not good enough.

Are you still paying off student loans? Did you complete your degree? And did you fully understand the implications of taking out loans before you decided to go to college? Let me know in the comments below!