Student Loans: a cautionary tale in today's environment

[u/calonmawr10]

I got into my dream school with a decent scholarship a couple weeks after the stock market crashed in 2008. My parents had saved diligently for myself and my twin sister in a 529 account, but we saw that get cut in half overnight. Despite all that, my mom told me to pick the school that would work best for me and to not worry about the cost because "we'd figure out a way to make it work". I applied for hundreds of external scholarships, but didn't get any. So, I chose my expensive private dream school, signed my life away to Sallie Mae (the solution to pay for it after my savings was exhausted, which I didn't know in advance), and started college in fall of 2009.

I was lucky to graduate with a good job thanks to the school's incredible co-op program, but also saddled with $120k worth of loans ($30k federal, the rest private). I met my amazing husband while there, and he was in the same boat. Together, we make a pretty decent living, but we currently owe more on our student loans than we do on our house. Even paying an extra $1k/month (our breakeven with our budget), it'll still take us many years to pay them off. It's so incredibly frustrating watching our friends from school (most of whom don't have loans) be able to live their lives the way they want while we continue to be slaves to our loans for the foreseeable future. No switching jobs because we want a new career, that doesn't pay enough. No moving to a different city, can't afford the hit to the salary in cheaper areas, or the huge cost of living increase in more expensive ones.

I'm happy with my life and that I was able to have the experiences I did (I absolutely loved my school), but not a day goes by that I don't wonder how my life would have been different if I'd made better financial decisions. Parents, don't tell your kids to follow their hearts if the only way there is through massive student loans, particularly if their career will not let them have any hope of paying them off. Students, have those conversations with your parents. If they say don't worry about it, question what that means and what the plan is. Now is the time to be having those discussions, before you've already registered for classes and are looking to pay that first bill. Don't make the same mistakes we did.

Edit:added paragraph breaks

Edit 2: Wow, I did not expect this to blow up so much! Thank you for the awards! It's reassuring (and a bit sad) to hear so many of your stories that are so similar to mine. For all the parents and high school students reading this, please take some time to go through the comments and see how many people this truly affects. Take time to weigh your college financial decisions carefully, whether that be for a 4 year school, community college, or trade school, and ask questions when you don't know or understand something. I hope with this post that everyone is more empowered to make the best decision for them :)

[u/Csherman92]

It totally baffles me how parents say “they didn’t know that it would cost this much,” it’s understandable an 18 year old is blinded by promises and experiences—but as a parent you KNOW better and how having large debts affect you and your family. The fees are outlined clearly for you on your bill. So think, 30k a year, for 4 years is 120k. That’s a decent house in some parts of the country.

I find it really hard to believe that as a parent with college aged kids, the parents have never had to take out a student loan, a car loan, personal loan, or a mortgage.

I was blessed where my parents explained this to me and I can’t believe so many people got taken advantage of because of the lack of financial literacy.

Parents, if you’re reading this...you KNOW better, so teach your kids to DO better.

Also—community colleges have the same classes for way cheaper and they are great networking opportunities if they plan to work and live where they grew up.

Also— college does not equate to decent job. Especially now. College gets you the equivalent of a high school diploma except it’s not free.

[u/Csherman92 → u/[deleted]]

Yea, but I find it hard to believe in 18 years, a parent doesn’t know how a LOAN works. A home loan and a car loan are the same principles.

Except student loans you can’t declare bankruptcy on.

I’m sure the parents don’t say “yes, I want you to be in debt as much as a house costs.” But “I want you to go to college.”

So- my other thing is...geometry, calculus, trigonometry, advanced math, really don’t matter to most students.

Graduating seniors should be taught how loans work. Aka interest=the cost of getting a loan. This means that a lender/bank will give you all of the money you need to go to this school—but this will end up costing more than the loan. Interest is a percent that is added to the balance of the loan. If the student wants to buy a car or a house...same thing. So the amount may be more or less, but it gives them a picture of how money and loans work.

A good program/project would have the students pick out a college, find the tuition and fees on their websites, and they find out what interest rates are for certain loans. Also, please talk about all the other fees associated with loans.

Or the instructor could periodically check on these and supply an interest rate. Many loans are more than 6% interest. Unsubsidized federal loans I believe.

So, college is $30,000 a year. Okay, so freshman, so how much is this loan going to cost you?

4 years X 30,000= $120,000 120,000 X 6% = 7200 worth of interest.

And this doesn’t even talk about—-

Accrued interest Compounding Interest Debt to Income Ratio Building Credit Co-signing Refinancing Amortization schedule Grants, Scholarships and how they’d subtract from total amount Subsidized and Unsubsidized loans Credit Utilization Credit Cards

If there are any educators in this thread, I think they should incorporate this into their curriculum. Not to freshmen, to seniors in terms they understand. They need to see these numbers sooner rather than later.

The standards for filling out the promissory note need to be more detailed apparently, because so many people say “I didn’t know it’d cost this much.”

If you don’t understand a contract, you don’t sign it and yet so many people did and say their parents can’t teach them because they themselves don’t have a bachelors degree.

We know this is a problem and obviously it needs to be addressed if we have so many people who say they have crushing student loan debt and their parents didn’t guide them.

Before getting a federal loan...you have to electronically sign a promissory note, which puts you and your co-signer on the hook for the loan and interest and making your payments.

This is a responsibility that is not being addressed by schools or parents- and it is crippling future generations before they even know what the consequences are. Those of us who wished we’d have done more or learned more or have been taught more—should not continue to let future generations learn lessons the hard way like so many of us do.

Also- we need to talk about community colleges and their benefits instead of making them seem like they are a last chance. In my area, snarky well off kids and parents would call it “last chance community college.” We need to erase that stigma.

[u/rhymeswithmama → u/Csherman92]

I teach high school, and it appears that Gen Z has learned from the mistakes of the Millennials - maybe a little too well. I actually have to convince students that some kinds of higher education are worth the cost, and that they have to look carefully at what career opportunities that education can provide them and compare that to the cost. I also talk to them about the difference between grants and loans. I teach at a career and technical high school and there are several schools that offer grants many of my students are eligible for.

Granted, the population I teach is a bit different than at a regular high school - I know there are still plenty of parents out there insisting their little angel needs to go to college. But I was completely caught off guard when I heard student after student insist they would never attend any kind of higher education because they didn't want to go into debt. I actually enjoy presenting them with options for continuing their education while finding a way to have it paid for by someone else!

[u/Csherman92 → u/rhymeswithmama]

I think that’s great! And they’re down to earth, because they’re learning from us millennials, that a college education does not get you a job. Or a good one.

There are jobs worth going to college for. But there also shouldn’t be a push to go to college undeclared at 18.

Take a year or 5, work. See what you like, what you don’t and if the jobs or company your with provides growth. If it doesn’t, go to college so you don’t have to do that anymore. But there are plenty of people who get lucky and don’t go to college and walk into a good place and still grow with the organization. And there are plenty who go to college to make $10 an hour. So work smarter—not harder!