- Personal Finance»
- Mortgages & Loans
How a College Degree and Student Loan Will Keep You Poor
Face it. A college degree today is a gamble, a rolling of the dice. Despite all the studies, many grads out there are kicking themselves in the head about the amount of time and money spent obtaining a degree in something that, well, is like a ball and chain around their neck. Granted, if you have selected the major properly, got 4.0 GPA, even with a student loan, you are feeling good and your entry salary. Unless you came from a rich mom and dad, where your subsistence was paid by them and college tuition, you probably have student loans that are causing you nightmares.
The student loan debt in the US is about $1 trillion dollars-that is an incredible figure that is owed by students and since many loans are defaulting, another catastrophe is in the making. Student loans are defaulting faster than when the recession began and have doubled. The reason is lack of jobs and lack of decent wages and other issues. Some students have debts hitting 75,000 upon graduating that translates into a monthly payment of $900, and when you only make $2000 a month working "not exactly in your degree field" it is depressing. Some grads who are pursuing a Masters have loans that consume 40% of their monthly income at some low level pay job like in a restaurant. Once students max out their better governmental loans, the only option is private loans and this is where things go whack! Whack because they have variable rates. A student loan can haunt you for life because these usually are not discharged in bankruptcy and there is no Statute of Limitations for collections. Deferring loan payments also are costly. One student funded their last two years of a private college with $80K in government and private loans to become an interior design. This loan rose to $100K by the time she graduated. Now, five years have passed, and she still owes $98K because of interest and she works as a low paid administration assistant. Some 25 years from now, when she is middle aged, she will have paid of the loan with $211K in interest and principle payments.
Hopefully, by then, she will be working in her field!