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Millennials Regret their Student Loan Debt. They Overestimated Starting Salaries.

mom2collegekidsmom2collegekids 84104 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
https://www.businessinsider.com/millennials-overestimate-starting-salary-cant-pay-student-loan-debt-2019-9

“Nearly half of millennials said the biggest mistake they made with student loans is thinking their starting salaries would cover their monthly payments, a new study shows
edited September 14
46 replies
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Replies to: Millennials Regret their Student Loan Debt. They Overestimated Starting Salaries.

  • KnowsstuffKnowsstuff 4249 replies17 threadsRegistered User Senior Member
    I saw this also. Like how many students understand what it means to take out student loans. I assume very few. There should be a mandatory course in school about all of this like Freshman year.
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  • twoinanddonetwoinanddone 22994 replies17 threadsRegistered User Senior Member
    My daughter just called me today to ask a question about her loan. "My payment is $217 and now it says I only owe $184. Why?" I had to explain about interest accruing from payment to payment, and since she made her last payment at the end of Aug, if she pays now she's only paying 14 days of interest. Oh.

    These kids really don't understand. I didn't either but sadly after 40 years of paying bills and loans and taxes, it is so much clearer to me now.

    When my other daughter was setting up her insurance, 401k, etc for her first job, I told her to remember that her loans would start in Nov. Oh. And her car payment and insurance. Oh. Suddenly that paycheck didn't look so big. Oh oh oh.

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  • ordinarylivesordinarylives 3173 replies43 threadsRegistered User Senior Member
    edited September 14
    Well only 1000 respondents, less than 1/5 th number of freshmen at my public flagship, and no idea if they were a representative sample. Average millennial salary at less than 35k is probably not an average for college grads (as even at my no name institution in a low COL area new grads have a higher average salary than that) and yet the loan amount of 29k used is for college grads.

    Now, do new grads overestimate first salary, oh yes. We survey our new freshmen every year (not scientific and definitely not representative, but still) and they predict an average starting salary of 60-80k. Would that make a difference in how much someone feels like they can borrow? Yep.

    But really? I'm not particularly mathematical and I can spot the problems with the numbers used.


    edited September 14
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  • Mom2aphysicsgeekMom2aphysicsgeek 4580 replies56 threadsRegistered User Senior Member
    U's have drug/alcohol courses students are required to complete prior to classes starting. It would be a simple process to require a financial/loan course prior to allowing loan disbursements.
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    This is when the reality of that student loan hits. For a number of the kids, it’ll come as a Christmas present since they often defer the payback till December.

    We helped our youngest get set up in a new city, new job, with new car, new furnishings and furbishings. The company paid for the actual move, a few nights hotel, really not a whole lot. Kid already saying hevis going to look for an apartment share next year because the studio is a pricier option. Yeah, he.s feeling the electric, cable WiFi, renters ins, car insurance, car payment, metro card, gasoline, food and entertainment costs. Reality is different than on paper.

    A family member visiting his city this week, friend’s showing up, and he has plans to come back home next month for a weekend for an event. Cuts deep into that paycheck that has shrunk after medical, disability, taxes, SS, 401 K, dental etc etc are taken out. He’s now rethinking coming back home for Thanksgiving and Christmas.

    And he is one of the lucky ones! Has a job with a living wage, family that has kicked in support (down payment for car, all expenses while apartment hunting, down payments, deposits for for apt, paid for apt stuff, etc). No school loans! Several of his friends, even with heftier salaries are struggling already without parental support and school loans looming. Several of them had to restrict job hunting to near their parents because even with generous job reimbursement, even some frontage of money, they could not afford the expense of settling in s whole new area.

    Even after college , when job offers, pay level that SES, those with family support have a huge advantage. The loans are just one more thing
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  • twoinanddonetwoinanddone 22994 replies17 threadsRegistered User Senior Member
    They do have to take a pre-loan online 'course' before the can get the loan. They click through that about as fast as the drug/alcohol course, and they find it just as interesting. My kids still took the loans, and they still drank the beer. Honestly, I was surprised my daughter even noticed the 'amount due' was different today and called me about it. She seemed to understand my explanation and she is NOT math savvy. I told her just to pay her loan 'about every 30 days' and not to pay it 'whenever.'

    The average salary might be $35k (damn those history majors bringing down the average!) and that doesn't even count those NOT working, those in grad school, or those taking the grand tour of Europe after graduating. My history major (^^) doesn't make anywhere CLOSE to $35k.
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  • ordinarylivesordinarylives 3173 replies43 threadsRegistered User Senior Member
    we “teach” loans as part of the mandatory orientation course. The students have to figure accrued interest, payments AND they are introduced to average starting salaries of our grads. Most believe they will make well above average, and 50% (this year) think they are heading for professional school in a high paying field. I'm telling you, loans are not real yet to freshmen, and I don't know that instruction will make them real.
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    That bill every month makes it real. The same for a lot of parents who took out loans to avoid paying for college while their kids were there and didn’t save before they went. Then the chickens come home to roost and feeding them is expensive

    I took out a large number of loans (PLUS) for our oldest but started paying on them as soon as they were dispensed It was very painful. About 15 years of them with those years when we were paying for multiple dispensements really painful. 7 years of paying for 4 years worth of loans. The payment schedule for paying all 4 years in unison for 10 long years with additional interest was ridiculously more—the effect of capitalized interest, that 6 months “grace” period. That was all that cheered me in the rough 6 years when we were paying for all 4 years in unison.
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  • ucbalumnusucbalumnus 78266 replies690 threadsRegistered User Senior Member
    The trend of each generation since the boomers getting poorer at the same age probably has a lot to do with entry level jobs requiring greater educational credentials over time*, requiring young adults to spend more on education (and taking on more debt to do so if they do not have parental money for that) just to get to where previous generations were in terms of income level at their age.

    *e.g. accounting 150 credit requirement, occupational therapy now requires a master's degree, jobs that do not require bachelor's degree skills and/or knowledge prefer or require applicants to have a bachelor's degree, etc.
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  • doschicosdoschicos 21145 replies219 threadsRegistered User Senior Member
    I'd also add in:

    less job stability/more job hopping

    reduction in benefits - no pensions, self-funding of 401Ks and self-management of the same which many people do poorly at

    expensive healthcare

    in many areas of the country, less appreciation of real estate vs baby boomers

    more consumerism/I need it now mentality vs the silent generation

    and lots of other reasons.
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    My one kid’s apt mate makes a very good salary, but in addition to loans is paying for higher education costs including a number of certification exams. He’s broke. To keep up with his peers in Manhattan in lifestyle was too expensive. He was in full financial aid in college and says he felt like was on pretty much the same footing with his classmates even coming from a low income family. Kids at his private LAC did not overflow with money; everyone seemed to have to watch the spending and he always felt he was doing just fine, even well with full costs covered. He looks at those years as the best ever.

    Well, moving to NYC without parental support for that first job is a killer. Coming up with the payments for that apartment, transportation and taking part in what young people, college grads do in NYC can make you feel poor indeed. And he had loans. Only direct loans but he took out extra because his parents could not pay the EFC, do he got that $4k or so more when parents denied PLUS. Also a bit of Perkins loans. And some PLUS for graduate school.

    He makes more than my son, but the loans and lack of parental help are really hurting. Most important here, however, is money management. My son is far more frugal, having lived off campus at his urban college for 3 years and having to juggle expenses. However, watching his roommate eke out his payments is making my son hesitate with starting grad school whet he will have to start scraping. Yes, it’s that painful.
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  • thumper1thumper1 74816 replies3279 threadsRegistered User Senior Member
    Unless these students have grad school or professional school debt...their undergrad debt max in their names is $27,000.

    If the have undergrad debt higher than $27,000, some one co-signed their loans. Maybe someone should be discussing the down side of having any loans that need co-signers for undergrad school.
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  • doschicosdoschicos 21145 replies219 threadsRegistered User Senior Member
    My one kid’s apt mate makes a very good salary, but in addition to loans is paying for higher education costs including a number of certification exams. He’s broke. To keep up with his peers in Manhattan in lifestyle was too expensive. He was in full financial aid in college and says he felt like was on pretty much the same footing with his classmates even coming from a low income family. Kids at his private LAC did not overflow with money; everyone seemed to have to watch the spending and he always felt he was doing just fine, even well with full costs covered. He looks at those years as the best ever.

    Well, moving to NYC without parental support for that first job is a killer. Coming up with the payments for that apartment, transportation and taking part in what young people, college grads do in NYC can make you feel poor indeed. And he had loans. Only direct loans but he took out extra because his parents could not pay the EFC, do he got that $4k or so more when parents denied PLUS. Also a bit of Perkins loans. And some PLUS for graduate school.

    He makes more than my son, but the loans and lack of parental help are really hurting. Most important here, however, is money management. My son is far more frugal, having lived off campus at his urban college for 3 years and having to juggle expenses. However, watching his roommate eke out his payments is making my son hesitate with starting grad school whet he will have to start scraping. Yes, it’s that painful.


    What industry is he in that he pays for his own certification exams? I'm used to employers paying for that sort of thing.

    I do know many young people working and living in NYC. To my knowledge, a substantial chunk are being subsidized in their 20s by family. I would think it challenging to live in an expensive city with sizable student loan debt on top of high living costs.

    We've encouraged our own kids to think twice about where they decide to start out their adult lives and careers with an eye to affordability and quality of life.
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  • cptofthehousecptofthehouse 29423 replies58 threadsRegistered User Senior Member
    edited September 14
    If your parents are denied PLUS, you can get $4k or so more in Direct Loans each year That can bring student loans up to the $50k mark with interest. Not to mention that Perkins loans were in effect till about a year or so ago. That can add another $10k to the loan ante though they do not accrue interest while in school, I believe.

    Then, some schools have their private cache of loans they give to students. Usually no interest or very low. But it has to be paid back on schedule. If you are in default, they won’t release your transcripts.

    I know a number of kids who are also stuck repaying the co-signed loans because their parents simply cannot and it would hurt both parties’ credit if those repayments don’t happen. Not to mention that they may go after any federal benefits. I know a grandparent whose social security got garnished due to co-signing a college loan that wasn’t getting repaid.

    For kids who come from low income families, even getting that college degree and living, even good wage job , doesn’t mean that extra struggles that peers who have parental financial support do not have, causes extra stress, hits the bottom line hard and makes one feel poor. Expectations that it’s going to be easy living financially are often hard dashed
    edited September 14
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  • ucbalumnusucbalumnus 78266 replies690 threadsRegistered User Senior Member
    doschicos wrote: »
    less job stability/more job hopping

    Employers often require job hopping by having frequent layoffs, or otherwise encourage job hopping by preferentially recruiting and hiring those who are currently employed.
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  • twoinanddonetwoinanddone 22994 replies17 threadsRegistered User Senior Member
    I do know at least one recent grad who had about $40k in loans who took all the direct loans ($27k), plus interest on at least $2k/yr on the unsubsidized part (and more than that may have been unsubbed), plus the $4-5k extra that she took because the parent was turned down for a PLUS loan for at least 2 years.

    I think the total can sneak up above $27k pretty quickly, and a lot of students don't qualify for subsidized loans so they are all unsubbed and interest is added for those 4 years.

    But the story is really about the new graduates not understanding that they all won't be making $50k, and that the $300/mo payment really cuts into that disposable income.
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  • mom2collegekidsmom2collegekids 84104 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
    Knowsstuff wrote: »
    I saw this also. Like how many students understand what it means to take out student loans. I assume very few. There should be a mandatory course in school about all of this like Freshman year.

    Freshman year of college is way too late. If anything, students need to learn this stuff when they’re frosh/soph in high school so that when they’re making a college list, they’re taking into account affordability.

    That said, it’s obvious that the PARENTS are also very naive about the impact of student loans. I recently talked to a parent who had just dropped off her daughter at an OOS public where mom had just cosigned the first of four large loans. Her daughter is majoring in journalism (and the school is not a known J school). I asked her what did she think her daughter would be earning upon graduation, her response was: we never discussed that. ???!!!????

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  • mom2collegekidsmom2collegekids 84104 replies1025 threadsForum Champion Financial Aid, Forum Champion Alabama Forum Champion
    "My payment is $217 and now it says I only owe $184. Why?" I had to explain about interest accruing from payment to payment, and since she made her last payment at the end of Aug, if she pays now she's only paying 14 days of interest.


    This is a biggie. I don’t think most people realize that if they start pay early, they can pay more towards balance.
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  • TenzimomTenzimom 5 replies1 threadsRegistered User New Member
    "My payment is $217 and now it says I only owe $184. Why?" I had to explain about interest accruing from payment to payment, and since she made her last payment at the end of Aug, if she pays now she's only paying 14 days of interest.


    This is a biggie. I don’t think most people realize that if they start pay early, they can pay more towards balance.

    @mom2collegekids I do not understand all of this above. Could you break this down please? Thank you.
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