- Personal Finance»
- Paying for College
Is Going to College Still a Part of the American Dream or Now a Nightmare?
When did it become impossible to pay all your bills, and have a little extra left over from your paycheck for enjoyment? It seems that even if you have a college degree, you can’t make ends meet, how would you even consider raising a family in today’s economy?
Let’s see if we can figure out what’s going on?
You start elementary school at age 6...
then start high school at 14 and graduate at 18.
Here is where you used to have a choice of either going to college for another 4 years to get your masters, bachelor’s or associate’s degree, or going to a trade or vocational training school to get certified in the field of your choice for much less time and money.
But, the way things are today, no matter what you decide to be, you will need a college degree and possibly, even more, depending on what field you would like to get into. Matter of fact the education that you need today to get a good paying job makes certified associates, who graduated from a trade school, look like dropouts!
Another thing worth mentioning is, Just to get a job as a dishwasher or to mop floors, you need a high school diploma nowadays!
So, you decide to go for it and get a student loan to go to college.
But, by the time you get your masters, your loan accrued to over $200.000.
Now you’re a 22-year-old college graduate who holds a master’s degree but you’re in debt for over $200,000.
You hit the pavement and began your job search
After searching for two weeks you were hired for your first job that pays an annual starting salary of $65,000, which is above average.
A recent survey done by the National Association of Colleges and Employers showed that individuals who graduated from college in 2016, taking on one out of ten careers that range from engineering to communications, earned an average of $50,556, which was actually up 5% from 2014 when they earned an average of $48,127.
The time, that mom and dad dreaded all your life, has come, where you will move out of their home and into the world as a responsible law-abiding, middle-class citizen.
In order to do that, you will need more money. You need money to pay rent and a move-in deposit for a decent apartment. Then you will have to buy some furniture, food, and other things you may need. You will also need money for a down payment on a new car since you will need transportation to get around, then, of course, you have to Insure and register your car to drive it legally. So you have no choice but to take another $10,000 personal loan.
Now you are almost $250,000 in debt.
The Cost of Education Today
Let’s talk a minute about the cost of education today. The minimum amount you could borrow for college used to be $2,500 per year; it has now gone up to $31,000 for 4 years. When the average college graduate starts his/her new job; he/she will already be heavy in major debt.
More than 70% of the college graduates in 2012 began their journey over $30,000 in debt. Yet, the college graduates in 2015 topped that by graduating with more student loan debt than any other college graduates in US history.
Now the total amount of student debt has gone even further and surpassed $1.3 trillion. That’s more than every American’s combined credit card debts.
The worst part is, even if you never finish and get your degree, you are still obligated to pay back the full amount of the loan with interest, and starting in 1976 a new law was passed stating you could no longer file bankruptcy on student loans, nor would they be dischargeable. Therefore, many dropouts have no choice but to default on their student loans, which is why the default rate has increased each year and since 2005 it has more than doubled.
According to a Bloomberg report in 2014, college tuition has increased 4 times faster than the entire consumer price index since 1978…
- College tuition increased by 1,120%
- Food saw a 244% increase
- And medical expenses increased by 601%
The following is an actual loan repayment schedule for a previous college graduate…
In a plea for help, this college graduate wrote…
“The severity of my situation goes a bit deeper than "I owe this money, help me" - I am actually forced to live with my parents (forced = I am lucky! But...) as the monthly payments for just my private loans are currently $891 until Nov 2011 when they increase to $1600 per month for the following 20 years... attached is my payment plan. I also mentioned I have a job - which is great! And I probably have my college education to thank for that! Except there is still no way to make these monthly payments, and live on my own as a contributing member of society. Neither of my parents, nor I, really knew how this would pan out — unfortunately — and now that I'm here, I see no real light at the end of the tunnel. “
Here is what your student loan repayment schedule may look like…
Now let’s figure out your balance.
You started off with a student loan of $200,000 which they added $89,920 interest for a total of, $289,920. You will have to make 120 payments of $2,416.00 a month to pay off your school loan.
Now you also have another $10,000 personal loan to pay off, let’s estimate your APR at 10.94% which would equal to $608 interest plus your loan amount would give you a total of $10,608 to pay back. To pay this loan off in 12 months you would have to pay $884 per month
Let’s not forget your car payment. Assuming you bought a 2017 Mazda MX-5 Miata for a total of $28,406 and your down payment was $2000 your APR is 2.900% you have 24 payments of $1,220 per month. Nice car huh?
Your car insurance is roughly $96 a month, and of course, you need to fill up your tank with gas at least twice a month, so let’s add $100 in for that. Cell phone monthly payment is $70. Your rent for your apartment is $800 per month, Utilities $150, food for a month? Maybe $500, Household and personal items each month cost about, $200, finally cable and internet service, $60.
The grand total is $6496, a month. Well, that’s not good. You only make $5416 per month. You are in way over your head!
Where did you go wrong? The reason you went to college was to have a good paying career, be independent and live comfortably, save a little money to buy a home and have a family someday. People on welfare will have more money to spend than you, who have more expenses than earnings.
Going to college used to be a part of the American Dream, but now it seems more like a nightmare!
But you can’t just give up; you have to prevent your loans from defaulting. By all means, do not let this affect your credit score. Your credit report means everything today; it defines who you are, what you will have, and where you will be. So, do whatever you can to keep it topnotch.
Before you jump into consolidating or taking more loans think about the consequences. Consolidating will affect your credit score and private personal loans may have even higher interest rates and doesn’t have any options for repayment like student loans do.
If you need some time or are out of work, you can get a forbearance on your student loan. If you are not making enough to make your payments, you can refinance your student loans and lower your payments, although it may take longer to pay them off, at least you know that someday it will be paid rather than defaulting on it.
The main message I’m trying to convey is that there are going to be a lot of obstacles in your way as you try to move up the ladder of success, and as you climb more will be thrown at you in an attempt to stop you and put you behind rather than ahead.
Do not let anything stop you or get in your way! Use your head and don’t fall into any traps or let anyone trick you! Do some research before making any important decisions in your life.
It is your life, so you are the one who will have to pay the consequences or reap the benefits!
You have already gone so far, do not let anything stop you from achieving and living the American dream that everyone was meant to live.
© 2017 vegasmisha