With almost 70% of American college graduates dedicating on average 18% of their salaries to it – the student loan debt crisis has never been greater. According to MarketWatch, 40 million Americans owe a total of $1.2 trillion in student loans. The only higher collective consumer national debt is from mortgages.
And student loan debt statistics are getting worse by the year. CNBC reports that the average student loan debt for a college graduate increased from $18,259 in 2005 to $35,051 in 2015.
Research from Citizens Bank predicts that 60% of graduates will still be paying student loan debt in their 40s, which is probably why MarketWatch warns that the national economy is facing a big hit. The student loan debt crisis is preventing graduates from saving for big purchases, like cars and houses, but also prevents them from saving for retirement, according to MarketWatch.
The financial hazard is already in place, with a quarter of borrowers unable to pay off their loans. The consequence is grave: “About 36,000 Americans lost a portion of their social security check in 2013 due to an unpaid federal student loan,” reports MarketWatch.
Can you go to college and still lead a financially healthy life?
How to Avoid a Student Loan Debt Crisis in Your Life
The student loan debt statistics are pretty frightening to face. It’s easy to get overwhelmed and want to jump ship – drop the college plan or simply hide your head in the sand.
But there are actions you can take to enjoy the benefits of higher education without drowning in debt for the rest of your life.
Graduate to Earn More Money
Avoiding or quitting higher education isn’t necessarily the way to avoid financial difficulties.
According to Sandy Baum, author of Student Debt: Rhetoric and Realities of Higher Education, you’ll be better off financially by finishing a degree. In an interview with NPR, Baum said that the median salaries of college graduates are around $20,000 higher than those of people who only graduated from high school.
Make Smarter College Decisions by Talking to People Who Already Have the Position You Want
Signing up to college means making a lot of choices, and you’ve got to ask the hard questions:
- Do I need to attend a prestigious university that costs 3 times as much as a public college? How do hiring managers treat candidates that come from cheaper colleges?
- If there’s preference for prestigious universities, what else can I do to impress potential employers without taking on a 20-year debt?
- Will the degree I want be worth the financial investment, or is there another program that can serve me better long term?
Thankfully, in today’s world, you don’t need to face these questions alone. You can go online and find professionals who already have the positions you want.
LinkedIn – a social media platform for business – is the easiest place to find them, and ask for a 15 minute Skype or phone call to pick their brains.
Contacting professionals in your field can build professional relationships that give you a shortcut to great positions, plus help you get tips on career management strategies or the skills you should probably develop beyond what you’re learning in college, like leadership skills.
The earlier you start following a researched career strategy, the faster you can move up the ranks, the less you’ll be burdened by the student loan debt crisis.
Get a Financial Advantage by Working in Your Industry Before You Graduate
Many students and graduates opt for minimum wage jobs, like customer service, that have nothing to do with their careers, because they don’t have the luxury to wait for their dream jobs. They don’t want to create a student loan debt crisis of their own.
But you can avoid it by looking for opportunities in your industry early on. True, many internships don’t pay, but some do. Alternatively, look for entry level jobs at dream companies, where you can make connections, learn from people who are doing what you want to do, and move up the ladder.
The more experience you gain, the easier it will be to climb up the career ladder and start earning a decent salary early.
That said, if you’re looking to get financial aid during college, it’s recommended to check the requirements before looking for work. Some programs limit the amount of money you can earn while remaining eligible for financial aid.
On the other end, if you excel at your workplace and show commitment to keep adding value to the company, some big companies will provide their own financial aid for academic purposes. That will make it easier to accelerate your career while you’re still in college.
No Matter What Your College Major Is, Get Financial Education So You Don’t Become a Statistic in the Student Loan Crisis
Student loan debt crisis is a real problem, and legislators haven’t yet figured out a way for students to start their professional lives without financial concerns. Therefore, you need to make sure you know what you’re facing.
Before you take a loan, research the starting and average salaries in your industry. Research the cost of living in your area or where you dream to move after graduation. Research rent, food, and other living expenses. Figure out what it would take to save up to buy your first home.
Take all that into consideration when choosing a college and a student loan. Make sure the amount you’ll end up paying every month after graduation won’t set you up for financial ruin.
In addition, ask your lenders about the possibilities of refinancing down the line to get better terms, and make a point to look into refinancing every few years.
That, and start saving.
According to CNBC, “every dollar you borrow now works out to $2 you’ll have to pay back later”.
Think about your biggest expenses first. See if you can choose a $10,000 school over a $30,000 school. Check nearby colleges or online colleges to see if you can keep living with your parents, and use rent money for tuition. If you can’t, consider living with roommates. Take baby steps toward saving, too.
If you can put aside $10 a week through high school and college, that’s $4,160 over 8 years – the equivalent of $8,320 you would have paid if you took it as a college loan.
Don’t ignore the student loan debt crisis because it’s not going away anytime soon, but don’t let it control your life either. Get creative and proactively look for ways to reduce your student loans, or at least make it easier for you to pay them back.