We told our personal story with students loan before which you can read here. We wanted to take a second look at some of the reasons we think that this issue has gotten even more out of hand in the last 10 years. It is not just one thing, but multiple things that we think have contributed to the increase in college prices and student loan debt. We believe there is a strong correlation between one thing though. We are not here to judge anybody for past choices or any colleges either. What we think is happening here is happening in other industries too, it is just more of a national story with student loans and involves a much higher dollar amount. The short answer, and we will give our reasons below, is debt.
Debt makes college “seem” more affordable- Debt can make anything seem more affordable, but especially with a college degree it is easy to justify or not even think about how much money you are actually taking out. You are just so excited that you got into a school or you got into your dream college. Whatever the reason, most are not thinking of, this is a X amount loan that I have nothing saved for or very little saved for., how will I repay it when I graduate? What will the payments be? With college we have made the thinking that you “need” a degree and that whatever the cost is, you can justify it because of your future job prospects and returns.
Schools can, and are raising prices because of this- Should we let the schools off the hook? As much as we want to believe that schools have students best interests in mind, they are businesses and need money to continue competing against other colleges. When students are willing to take out more money, why would a school not look at that as an opportunity to “improve” their campus? Even if they do use all the money in the right way, it still is hurting the student borrower in the long run. We think that is why schools have not gotten much blame for the crisis because most students like their schools and think that debt is just a part of it. Just like comparing what new phone you might buy, schools are vying for your business and you should look at multiple options to see which one offers the best overall package for you.
Happening in other industries like car loans- Some people believe that this issue pertains to just student loans. We think this is happening in many other industries as well, but lets take a look at another big purchase people make, cars. Car loans and debt are approaching record levels and the monthly car payment is over $500. Why is this happening? Some may argue people are more strapped for money so they are taking more loans out and they maybe right. However you can also look at it as debt is just the easier and more accepted option to pay for a car. Leases are getting more popular too, but you don’t own anything after a lease and generally is more expensive than just actually buying the car. If car prices keep rising and car loan debt keeps rising, why would car manufacturers lower prices? Why would dealerships change their practices? Which leads us into our last point…
Very few think about the long term, instead they focus on short term monthly payments- Debt has become such a common thing in everyone’s lives and this has become such a prevalent mindset most take nowadays. Some still look at the total price, but there is a growing number who don’t even consider the total price, they just make sure they can afford the monthly payments. College is going to be one of the most expensive purchases you will ever make. You can not have this flawed thinking for a variety of reasons. We will just look at three.
- The first being you are putting all of the power in the company/person you are buying from (the school). We don’t believe everything has to be negotiated at Cents of Time, but we also don’t believe in coming to the table on our knees begging for whatever a company/person will offer us. This is what debt does to you.
- If you don’t consider the total price, you are paying top dollar for everything even if you can make the monthly payments. A $10,000 difference between schools is a lot money. If you go for the more expensive one, you need to know what your reasoning is for going that route.
- Lastly, although we could go on, is that just because you can make the monthly payments for something today, can you make them tomorrow? If an emergency happens (like what is going on now or any emergency for that matter), this is more that you will have to deal with and be stressed about. Student loans are rarely forgiven or excused and do not go away in bankruptcy. If you fully understand what you are getting into, at least you will know the consequences both good and bad.
As we stated before, colleges are like businesses so if we want to see a change quickly we need to take action ourselves and not go to schools that are overcharging or are more than we can afford. Free college is not the answer. It treats the symptom not the problem. No matter what you want to say about student loans, at the end of the day the borrower, aka student, had the choice to decide whether to take the loan or not. You can argue and justify that it was necessary, but if you are not happy in your current financial status in life with college debt, what could have your life looked like if you didn’t make that choice? Would you have been happier? Would you be in a worse or better financial situation? For all prospective students this is what you need to ask yourselves. Will your life be better or worse without a college degree and debt or could you take a different path? After all the time, money, and sacrifice that goes into getting a college degree, will your life be better or worse because of it?