Hats Off to the Graduates… Now Pay Up!
Posted on May 24, 2006 15 Comments
Across America this May, millions of college students will graduate. If they’re anything like me, the most important thought on their mind is concern over what shoes they’ll wear to the ceremony. (Mine were a kind of espadrille wedge and I have no idea what happened to them.) The most important, that is, until the exit meeting with debt counselors.
I remember this meeting vividly. One afternoon meeting in a musty university auditorium, one little blue book called “Exit Counseling Guide for Borrowers,” one question that changed my life and forever woke me from my intellectually induced slumber. “Will you select the standard, extended, graduated or income-contingent repayment plan?”
OK, I’m being dramatic. Sort of. You see, until one week from graduating, actually repaying my college loans was the farthest thing from my mind. I had already accepted a job (an internship, despite my parents’ best advice against it), made living arrangements and packed my things. My remaining concerns before leaving my college town (Peoria, Ill.) amounted to the following:
1) Determining which bars I would visit during Senior Walk (an all day pub crawl).
2) Considering whether my newly-purchased tangerine dress would clash with my graduation garb.
and 3) Detailing plans to keep in touch with my college roomates.
Payment of student loans was clearly not on my mind. So, when I received the bill for $15,000 ($26,ooo with interest) for 10 years, I wasn’t quite prepared for it.
Impossible, I thought. I received scholarships! I worked during college! My parents and I had been paying some sort of balance, hadn’t we? What’s the difference between a graduated plan and a standard plan? Why did I take an internship? Why is it suddenly so warm in here?
My student loan counselor encouraged me to choose the standard payment plan. I had no idea what that meant, but given what I know now about interest, I’m glad I made that choice. Still, five years after graduating, student loans continue to take a heavy toll on my financial life.
Don’t get me wrong, my student loan debt is under control. Since I lived with my parents after graduation, I started making payments right away. I’ve never been late on my loan checks, and I continue to pay $200 every month to the Department of Education. I’ve got about $9,000 left to pay on my premium. And I understand that my job and career are a direct result of my diploma.
Yet, sometimes I wonder what our generation is giving up to be saddled with the growing burden of student loan debt. It’s a fact that the price of education is increasing at a much higher rate than inflation. According to the Washington Post, the average 2004 public university graduate had amassed $17,000 in student loan debt, while those graduating from private schools averaged $22,581. Meanwhile, the interest rate on Stafford Loans has jumped to 5.3 percent and will leap to 6.8 percent after July 1. The national stats and averages about increased loan debts go on and on.
What does it mean for our future? That I don’t know. But I can tell you that I currently pay more to student loans each month than I put toward my retirement fund. Until this year, I was paying more to student loans each month than I put in my savings account. I haven’t been able to save as much due to loans, so it will take longer for me to save for a house and finance a wedding (my boyfriend has loans, too). Thus, it’s going to be a lot later in life before I can even consider having kids.
Woah, woah! You think I’m playing the victim here. On the contrary. These are choices that I made, choices that I continue to make every day – and they’re similar to choices my friends have made. I chose to go to school and take out a loan. I chose my career path and my job. I choose where I put my savings every month. And I choose how much I pay to student loans every month.
With this post, I’m simply making a point. I hear everywhere that student loans are “good debt.” Something to be encouraged. But if we look at them in the context of what they provide, we have to also look at them in the context of what we sacrifice for them. Could some individuals be better served without them? Particularly those who have no desire to stay in the workforce more than the ten years it takes to pay a loan back, those who take jobs that don’t require a degree, or those whose interest areas require specialized training rather than a liberal arts education?
I often wonder why we pressure students of every kind, regardless of their interest, to pursue a college degree – specifically a bachelor’s degree (at least in my world). I wonder why I had to use loans to cover general education courses, courses that had no significance to my career, that I already covered in high school – Western Civilization, Theater (or other fine arts elective) or Econ 101, for instance.
I’m not saying these courses don’t hold significance in my life. They helped me develop background knowledge on a variety of subjects and affected my world view. But does anyone go to college anymore to become “well rounded” and expand their learning in general? Perhaps people do. But is growing as a person justifiable for the price we pay, the sacrifices we and our parents make? That’s a question that requires objectivity. I’ll tell you when I’m done paying off my loans.
Category: Money
Tags: student loan
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15 Responses to “Hats Off to the Graduates… Now Pay Up!”
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May 24th, 2006 @ 1:46 pm
I completely understand, I’m in grad school now and will emerge with $47000 in student loans, it makes me sick to think about it. And I actually *teach* the gen eds, it’s my livelihood and what I will do for the rest of my life hopefully. But it makes me very upset to know that the financial burden of a well-rounded education is becoming more and more extreme for undergraduates. And as a bearer of a lot of loans and a relatively uncertain employment future, I empathize with those who feel slighted by the system.
Love your blog, I check it all the time!
May 24th, 2006 @ 2:23 pm
That was great. I too understand. I was lucky and walked away from undergrad from a private school with only $9,000 in loans. But then I went to grad school (at another private school), where my loans now total over $40k. Luckily, I consolidated all my federal loans early and locked in at 2.625%. But future grads won’t be so lucky. It does make it harder to do things, but since I don’t have any credit card debt, I was able to buy a house. Now I’m working to pay it all off.
The good thing I think that can come for all the debt is that it might help our generation to teach our children better about money. My mom taught me well, and I hope to one day pass it on to my kid(s).
Love you blog too!!
May 24th, 2006 @ 2:24 pm
But if we look at them in the context of what they provide, we have to also look at them in the context of what we sacrifice for them. Could some individuals be better served without them?
I totally agree with you! I am not convinced that a college degree means anything for some fields. Some of the best minds I’ve met in IT, never finished college or did not study computer science. Often a degree is not relevant to an actual vocation.
I’m not trashing a college education here. I have one and I enjoyed college, but I also know that for some fields, practical experience counts for a lot more than book knowledge. Some degrees are simply not vocational training, but some are (like accounting or engineering).
May 24th, 2006 @ 4:34 pm
I totally hear you! I just paid off my student loans from law school – $14K+ capitalized interest, making payments since 12/96, and finally paid off 6 months early, due to an unexpected bonus. I was so tired of writing that check ($ equivalent of a car payment)or seeing the direct debit from my checking account every month. Luckily my payments got lower as interest rates went down, but I was still sick of the debt. I also got off easy debt wise – many of my classmates put their whole tuition on student loans, so on top of undergrad loans, some were looking at $60K or more of debt. And first year lawyers don’t get paid as much as the press would lead you to believe. In retrospect, I realize that I made a worthwhile investment in my future; however, I worry about what my daughters may be faced with. They’re young (8 and 5) and we’re saving some for their college, but we also have to think about retirement. A college education is a wonderful thing, and opens so many doors, even if the degree is unrelated to the job. However, even public universities are becoming more out of reach as tuition costs rise while states cut their budgets. I don’t know what the future holds for my children, so we’ve told them early on that yes, you will go to college, but we will need to look at ways to pay for tuition, including scholarships, savings and work/study. The worst that could happen is that they pay for their education the way my husband and I did – work fulltime and take advantage of tuition reimbursement benefits. We both gained valuable work experience along with our degrees, and the two combined actually helped further our careers faster than the traditional college/go to work route.
Whew, sorry, long post – this is something that strikes a cord with many folks. Love your blog!
May 24th, 2006 @ 5:52 pm
Great post and blog!
I totally agree. I have about a year left and about 10k in student loans and will have more when/if I go to graduate school. I have a fear when I get done and am on my own that it will be a major burden and delay a house purchase. And unfortunately from my understanding any new loans taken out after July 1 will be at a fixed 6.8%. Since interest rates are high right now this means pretty much an end to consolidation at very low rates.
I have also thought about whether or not a college degree should be pushed for everyone. I think one of the major reasons it is pushed that way is that it is really treated as a job license for many jobs instead of training for the actual work.
I think that the experience and learning, including the general ed classes, is a great benefit and something everyone should consider. However, with the cost as high as they are now, and rising, I think its only worth it if it will furthur your career and enjoyment of life. I hope in about ten years, I’ll have a much more optimistic take on it.
May 24th, 2006 @ 6:56 pm
I can’t help but feel ill feelings towards people who had parents pay their student loans for them.
May 25th, 2006 @ 1:28 am
Student loans are unnecessary. BS in math wiht minors in business and sociology, MBA finished two years ago. No loans, no help from parents, worked fulltime, assistance from employer. Delta Mu Delta honors society in business member.
May 25th, 2006 @ 1:46 pm
My parents told me from a young age that i would go to college – there was no discussion, even though neither of them finished college. I never knew there were options – always thought I had to go to a tradional liberal arts college and pick a degree available there. I’m not a good student, so 4 years into my college education when I still had no idea , I found a art/tech school and loved their way of teaching. Unfortunately, they were very expensive and 18 months later I graduated with $25 in student loan debt. Like you I never thought about it until the exit seminar on paying it back! Then – complete panic!!!! So frustrating now that I’m married and want to have a house and a kid and I just CAN’T financially. Higher education is just too expensive.
May 25th, 2006 @ 5:33 pm
Great Post by the way….
I have $141,000 in student loans from undergrad and law school. In undergrad I worked, had grants, and took out the absolute minimum I could to survive. In law school, I also took out a lesser amount than necessary–most of my living expenses were covered by my husband. I also had grants and scholarships. My husband now has close to $50,000 (having paid some down)–he also had scholarships. My loans come due the first of July, and I’m sick to my stomach wondering how I will afford it. My husband and I are by no means spendthrifts–we eat almost every meal at home even! But I know money will be tight, tight, tight here very soon.
May 25th, 2006 @ 8:04 pm
I just try to remember that my liberal arts degree is supposedly on average worth $1.7 million. (The difference in lifetime earnings between having one and not.)
May 25th, 2006 @ 8:13 pm
When we were looking at college savings accounts for our son, we made sure funds in 529 plans could be used for vocational/technical training as well as traditional colleges. I do want him to go to college, but if he wants to be a welder or something like that, I’m going to support his choice to skip the fancy-pants 4 year degree in favor of more relevant training. I think when I’m talking to him I’ll try to be careful to say “if you go to college” not “when you go to college”, but I’ll also make it clear that I think college is a good idea and will give him more options. But I just don’t want to push him into it.
Of course, he’s only 2, so I should probably not worry too much about college except to save what I can.
Good post, Nicole.
May 25th, 2006 @ 10:05 pm
Thanks for a great post!
I am freaking out lately because I know my first student loan payment is due in July… yikes! I’m glad to know I’m not the only one worried about paying back my debts from school. It really stinks!
May 26th, 2006 @ 5:33 am
The liberal arts thing has never made much sense to me. I think American high schools need to get better at covering general education and then colleges and universities should teach people just in their major area (and any prerequisites) and they will get done quicker…. and why are medical and law degrees post-grad degrees in the US? I did high school in England and undergrad in Israel. I did my PhD in the US and am a professor in the US currently. My opinions don’t make me popular with most of my colleagues
OTOH I don’t think that university level education should be TOO narrowly vocational. Study economics rather than accounting for example at the degree level. Well I could go on and on about this stuff
May 26th, 2006 @ 10:46 am
I’m an avid reader of your blog and I appreciate your sound ability to put the finacial jargon in lamen’s terms. But your current blog does not apply to me yet, so I was wondering if you could lead future university students like me that are getting no financial help from parents or relatives to make good decisions on taking out a student loan. Where do I start researching and what I’m looking for is where I’m stuck.
Thanks again for all the help you’ve given and I look forward to your response.
May 29th, 2006 @ 7:59 am
Interest free student loans in New Zealand.. woot! :>