SALLIE MAE:
Principal: $9,000
Interest Rate: 11%
Capitalized Interest Accrued: $2,854
Interest Accrued Since 12/11: $92
Monthly Payment: $137.87
Hey Guys! Check Out this Revolution We Started
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| en route to Wells Fargo |
Though still less than outstanding home mortgages, student loans debt has eclipsed both auto loans and credit card debt and is hovering somewhere in the neighborhood of $1 trillion dollars.
From a student's perspective, money was available and everybody thought it was a great idea to take a lot of it. And, in an effort to keep them moving out of the house, their parents were willing to cosign.
Widespread borrowing to pay for college wasn’t always a nearly ubiquitous experience. At one time, student loans were reserved for students who insisted on going to elite graduate programs or those who enrolled in for-profit programs. Today when mortar boards are tossed 66% of students have taken on debt in order to pay for college. This is compared with 45% in the ‘92-93 school year. The amount of debt is also higher; on average students have $23,300 outstanding and 10% carry more than $50,000. The top 3% of graduates are sitting on more than $100,000, as reported by the Federal Reserve Bank of New York.
But hey, we, as a generation, probably deserve it.
We skipped class. We partied too much. We spent the time we were in class Facebooking about our partying. Then we ended up studying Political Science but have no intention of slaving away in a campaign and, in all honesty, never gave a single thought to the job prospects and potential tax bracket we would enter upon exiting the Ivory Tower.
In fact, unless someone was studying medicine or engineering, it was rare for students to talk much about their potential job prospects after graduation. People would talk about what they were going to do, but it was always a nebulous someday when they were going to do this.
Huge oversight.
But 18 year olds can flighty and aren't usually expected to make too many firm decisions about their future, right?
And, in our defense, a good school on a breathtaking campus in a big city is a slam dunk of a product and had motived salespeople. The kind trying to keep their jobs.They told us to “study what we love” and the opportunities will come flooding in because we had studied. In addition to these pitches, the level of competition to enter certain majors once students have been enrolled in the university is at an all time high. Good majors, like engineering and computer science, are designed to vet out most applicants.
Why?
No reason.
Even with far more students attending a university, our country also seems to have a talent deficit.
A real life example of this is Kelsey Griffith, a comrade in arms from Ohio who racked up $120k in debt studying marketing during her four year stint at Ohio Northern “was won over by faculty and admissions staff members who urge students to pursue their dreams rather than obsess on the sticker price.”
The Aftermath of a Very Distracted Celebration
But that sticker price was important, especially in an economy that is rife short term scam positions, contract work and menial labor instead of companies clamoring from fresh talent. Ms. Griffith, for example, works at a pair of restaurants. And marketing should be one of the “good” ones.
This makes what should be a momentous occasion, graduation, was actually the culmination of six months of getting drunk and lamenting the future. College graduates today are terrified of the future and many are completely immobile and weighed down in debt. In a mechanizing economy that is being streamlined by machines and stratified by powerful corporate jobs, many have no job, no prospects, lots of debt that and angry cosigners.
And now our support system is under pressure as well, most parents students took on debt as a cosigner and now have to plan for the worst: that someday they might have to shoulder $900 in monthly payments. Many parents, like Kelsey’s mom Marlene, are now taking out life insurance policy on their graduates.
“if anything ever happened [to Kelsey], God forbid that is my debt also”
- Marlene Griffith
To be fair, paying off that debt is going to take forever.
The Interest and the Aftermath: Welcome to the World of Eating Cabbage
This mounting debt means far more than graduates will fail to buy a home of their own and will return to live in their parents house instead. In addition to returning home to work in the local Red Robin, for many it is the beginning of a lifetime of ruinous finances and dodging debt collectors. Currently, payments are made on only 38% of outstanding loans, for one reason or another.
In summation: student loan default is going to catch on faster than scabies in a house full of hippies house. It is going to have more staying power than Facebook.
It is going to happen pretty quickly. Currently 1 in 10 students who started paying back their loans in 2009 are watching their loans fall into default just 3 years later. Those who are making payments are doing so in a resigned and fearful manner in a stagnant economy. The scars left by long job hunts and being labeled a boomerang kid ensure that graduates will be afraid to ask for a raise and unlikely to ever leave their coveted position.
Things are bleak.
The only silver lining: No one is asking you for grandchildren.
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