@garland That was how the student described his major in the facebook article ““I got a Degree In The Written Arts, which is the most pretentious way of saying ‘English’ that my school could think of”
True, but maybe not the best source for a generalization about English majors.
The interest on a student loan only compounds once, when repayment starts. After that it is interest in one pot, principle in another. You pay interest first, so some on the reduced payment plan may never touch that principle pot.
Yes & no. There are things that can trigger capitalization of interest, which definitely makes the loan more expensive in the long run. Here is a good article about it: https://www.nerdwallet.com/blog/loans/student-loans/student-loan-interest-capitalization/.
Looking back as someone who is on the other side and paying back my (fortunately very small) loan balance this is definitely what I was told by many adults in my life when I was in high school and considering my options. Many people told me that it was normal to take on 20-40k in debt that that I could “definitely pay it off” when I graduated.
I really feel for students, particularly first-generation, who are apparently not mature enough to drink or in some cases vote (for those who are not yet 18), who are nonetheless expected to make savvy financial decisions about student loans even in the face of well-meaning advice from adults to take on tens of thousands of dollars in debt. It was also my experience that first-generation students around my age were led to believe that a college education was a near-guaranteed ticket to a lucrative career (because that was more the case for our parent’s generation). Basically, I think a lot of under-privileged kids who are looking to go to college find themselves in an echo chamber of bad advice and I don’t think it’s reasonable or compassionate to expect all of them to have made better decisions in light of the circumstances. I was very, very lucky to have found the CC community and benefited from more savvy guidance than what was available to me at school and home.
Many of my friends from similar backgrounds are now in the boat of having upwards of 20k in debt (in one case, 100k) with jobs that don’t pay enough to pay down the principle and little hope of ever being debt-free (several work for at-or-near minimum wage in the service industry). Among them are some who made stunningly bad financial decisions against the guidance of adults in their lives, but others were actively encouraged in their decisions. Ultimately my point is that many people with exorbitant student loan debt thought they were making reasonable financial decisions at the time, and not everyone has access to an adequate support network of people who could have advised them otherwise.
For kids who are on track to graduate on time from a reputable school, I don’t see loans between the Federal subsidized limit ($19,000) and Federal overall limit ($27,000) as an excessive amount of debt. Adjusted for inflation, my student loans were on the high end of that range; without them, I wouldn’t have been able to afford college.
It is hard to know if borrowing is worth it. My daughter graduated on time from a reputable school, but with a degree in history and museum studies. Good paying job prospects are just not there. If she does get a job, I really doubt it will pay enough to have a car (with payments and insurance), health insurance, rent and food, and still have enough to pay a $200-300 student loan payment. She’s working a low paying job for the next six months and then will have to decide what to do when the student loan payments kick in. It will not surprise me if she enters a income based repayment plan and gets caught in that quagmire of interest growing faster than she can repay the loan. She’s under the $27k mark.
Her sister has no trouble paying her loan as she’s got a good, professional job but not every college grad gets one. My niece who graduated with honors spent two years living at home working a fun but low paying sales job and then got a job in DC. Problem is that DC is very expensive and she didn’t earn enough to pay her student loans. She was lucky and her parents paid for them for a year (and her cell phone, health insurance, and sent her a lot of care packages and paid for her cat). With her first raise, she took over her loan payment but she was 3 years out of college by then. She’s still living paycheck to paycheck, doesn’t have a car, lives in a tiny (tiny tiny) efficiency apt. In fact, she lives more like a poor college student than she did when she was a college student.
There are many college grads who get low-paying jobs: selling cars, renting cars, clerical, secretarial, travel agent, food service and many others. Even a degree in STEM is no guarantee of a high salary. Undergrad degrees in math and biology don’t translate into high paying jobs.
Paying back a loan when you have to relocate and/or live in an expensive area is tough, especially when you’re paying all your other bills, most of which were formerly handled by the parents.
I don’t think this has changed that much over time, just the dollar amounts are different. When I graduated and took an entry level job 30 years ago I had taken the maximum loans through the federal guaranteed student loan program. I don’t remember the amount but it was the maximum (around $10,000 I think) and at that time it was a 10 year repayment term. After paying for necessities (rent, food, health insurance, and utilities) most months there was just barely enough left to cover the loan payment but I made it work. I had no cable TV (actually all I had was a 13" black and white TV) and looked at coworkers driving new cars with envy. I realized right away that if I didn’t have the loans I could have driven a new car and had cable. This realization drove me to work harder to be promoted, actively look for better employment, and pay down the principle whenever I could.
In the long run I learned a lot about budgeting, career development, and college financing. It also showed me the value of college savings long before I even thought of having children. Overall a somewhat painful process but one that surely changed my later life for the better.
I know a kid, three years out of college, who constantly complains about his student loan of about 40k and worries about how long it would take him to pay it off. He is single, shares an apt with two others and works hard in a job that pays about 45k/year. One day, he shows up in a brand new Subaru Outback that cost him 27k. It was financed by a low interest 6 year auto loan. He is a big outdoorsy type, so I guess he felt justified buying an item that gave him satisfaction of doing well. Personally, I felt the purchase was a poor choice, given how much of an emotional burden the student loan payment was on him.
Then, we must question if a 40k student loan is such big deal given that there a few items in life (car, house, health insurance, etc) that are comparable or more in monthly costs as a student loan,
In high cost cities such as DC, it is not uncommon for recent college grads to get a roommate and share an apt/house for a few years.
Yes, she could live in a shared apartment and maybe pay less, but she really wanted to live alone. Her best friend was living close by but the BFF was still in school so sharing with a non-student probably wasn’t best for her, and the friend probably could afford more as her parents were still subsidizing. The sacrifice is that she lives in a tiny efficiency, has no car and walks to work. Most of the apartment share places were farther from her work (she works very close to the White House) and would have required a transportation pass, so in the end probably cost as much as the tiny efficiency.
My daughter with a good job spends a LOT on her rent. Her compromise is she bought a used car (good deal) and she makes her boyfriend buy his own orange juice because he likes the expensive kind and she thinks that’s a waste.