You may have heard that student loan debt has surpassed credit card debt in the United States and totals over one trillion dollars nation wide. That’s a big number. Read on to find out how you can avoid becoming a student loan statistic.
Most students take around five years to graduate and the average debt load for graduates of public universities who complete in five years is just shy of thirty thousand dollars. Think about what you could do with an extra thirty thousand dollars after graduation. Then think what you would not be able to do if you had thirty thousand dollars to pay back, without borrowing more money to do it – not as fun.
This is a huge problem. Students are told that the only way to get ahead is to complete a degree, and student loans are available to make college “more accessible.” Some people advocate taking loans so students don’t have to work while in school so they can “focus on their education,” which I believe is some of the worst advice ever. Literally the opposite is true. Do you think the student who is paying their own way through working probably several jobs, being intentional and intelligent about cutting unnecessary costs, and who knows exactly what their education is costing them on a term-by-term, or even monthly or weekly basis is less focused than the student who borrows the money, throws it at the school and says “I guess it costs this much,” but doesn’t give it a second thought? I’m not saying that everyone with a student loan doesn’t care how much college costs, I’m saying that borrowing money makes it easier to ignore the cost because the money just appears.
It’s this kind of thing – play now, pay later – that is hindering graduates from achieving their goals of being free to use their money to buy homes, cars, and businesses, or travel, get married, or anything else after graduation. The pressure to take any kind of employment when loan payments come due is huge. So is the pressure to pay just the minimum payments and use their income to live large, because, hey, you’re one of the fortunate ones, the 42% (or less) who actually completed your degree, so you deserve it. Big problem.
The real problem is we are not looking at this the right way as a society. We shortsightedly see success as finishing a degree, no matter what it does to your finances, credit, or net worth, not to mention real skill, employability, or how you will be adding value to the marketplace. We need to re-evaluate where the real value in an education lies, which is why Debt Freeks believes the right way to a college education is the debt-free way, and I’m going to show you how to get there.
Let’s look at the numbers I mentioned above: the average student at a public university graduates within 5 years and owes on average $30,000. That means that the average student borrows the equivalent of about $500 per month or $6,000 per year. Wouldn’t it be great if there were a simple way to reduce that number so students owed less at graduation? There is. I call it the 67% solution. This comes from the idea that a savings of $4,000 per year will cut the average student debt by two-thirds or 67%.
But saving $4,000 per year is hard, right? Not exactly. That means that a student only has to reduce borrowing by a combination of cutting costs and increasing income by $334 per month, or $83 per week. Where I live in Oregon, that equates to saving $38 per week on expenses, and working less than five extra hours per week at Oregon’s current minimum wage, which could be done in one extra shift on a weekend. Sounds a little more doable. Over the typical five year period, this would reduce the average student’s debt load at graduation from $30,000 to only $10,000. The college in my home town, Oregon Tech, sees about a thousand students graduate in a five year period – if all these graduates could reduce their debt by two-thirds like this, their total debt would go from over $21 million to only $7 million – that’s more than $14 million that is back in the hands of students, giving them much more control of their financial destiny than any degree would.
If you haven’t checked out some of the reasons to reduce student debt yet, I encourage you to do so soon. Your stress will be less, and your opportunities will be greater when you aren’t weighed down by a huge loan payment after graduation
If you talk to just about any student, they will tell you that “it would be awesome” to graduate without debt, or with less debt, but few (less than one third) are able to do this. What will you do to reduce the amount you need to borrow to complete college? Will you take the needed steps to actually living awesome or just keep dreaming about it? Can you be strategic with spending and boost income by less than $100 per week? I believe you can, and that the result is well worth the hard work, because you’ll be much more free.
Get the latest report about accessing the hidden job market and launching your career right.
For help making your plan and implementing your own 67% solution, contact Debt Freeks and consider getting your own written Personal Financial Plan to go from “that would be awesome,” to “I am awesome.”