$100,000 later, it's time to start over.
Since Dave Ramsey’s show has become a regular part of my life, I’ve started to listen to podcasts from other personalities in the Ramsey Group, including Anthony O’Neal. Anthony has been promoting his new book, Debt Free Degree, a book I likely never would have actually read had I been gifted it in high school, but still wish it would have existed in case I came upon a smarter friend’s summary.
Along with this book, the group just released a new podcast mini-series about the student loan crisis called Borrowed Future. Each episode features various perspectives from thought leaders, like Seth Godin and Mark Cuban, on the impact that student loans are having on Gen X, Millennials, and Gen Z - and the greater American economy.
The depressing data:
44 million students in our country have student loan debt, racking up a total of 1.5 trillion.
The average college student graduates with $35,000 of debt with a $393 average monthly loan payment.
Every 28 seconds, someone goes into default because they can’t pay their student loan.
4 out of 10 people don’t think that student loans are debt.
99% of Student Loan Forgiveness program applicants have been denied as of last month.
What is the economic ripple from all of this? The podcast name, Borrowed Future, is sadly fitting for most of us as we continue to delay big life events like getting married, buying houses, and traveling as our earnings and future earnings are being consumed by student loan payment plans (and in turn delaying 401k contributions and the compound interest that I should have started a decade ago). We took out debt with hopes that it would help us get ahead, but now we’re all just really fucking behind.
Even worse, there's no solution in sight so that future generations aren't burdened with this same problem. As much as I want to support calls for loan forgiveness on all current loans, funded by billionaires, even that solution isn't getting to the root of this issue. Why forgive old loans when we continue to hand out billions of new ones?
On the bright side, Sallie Mae is thriving as a result of all of our bad choices and even flew out more than 100 employees to a resort in Hawaii to celebrate $5 billion in student loans issued. Way to go, Sallie Mae! We’re all just thrilled about your predatory success.
My career started out in higher education, working as an administrator on the student services side of things - then going to graduate school for a degree in College Student Services Administration (Go Beavs!). My academic and professional expertise lie in higher education, so there’s a strange duality I feel about despising the fraudulent student loan industry as a whole (and how financial aid offices continue to work within this scammy system), while recognizing the value of a university education and all of its potential benefits and effects on a young person’s life.
Throughout the Borrowed Future podcast, they interview college prep high school students, recent college grads, and adults who’ve been paying on their loans for 20+ years. The host asked the college prep students if they were going to go to college (all said yes) and why they made that choice. Responses included the promise of finding a good job and securing a better future, making more money, and proving themselves to their college educated family. Just as popular of a response was “for the experience.” They wanted to get a change of scenery away from home, “enjoy a pretty campus,” and take part in extracurricular activities like football games.
Mark Cuban said, “College is where you go to learn how to learn.” But, for the average student who takes out $35,000 and pays $400/month upon graduation, is the price tag of learning how to learn (or standing in the student section of Saturday afternoon football games) really worth it?
Seth Godin wondered what would happen if we would fill the world with more creative and generous people instead of obedient ones who do everything they’re told to do. What kind of worldly, educational, transformative out-of-classroom experiences could young adults have with 100k?
What if I had worked on an organic farm in New Zealand through the WWOOF program or taught English to kiddos in El Salvador for five years? Instead, young people are doing everything they were told to do, including earning the good grades, getting into a reputable university, and taking on “good debt” to do it.
It’s been 16 years since I left my small town in Wisconsin (pop. 10,213) to go off to college at the University of Minnesota - Twin Cities (pop. 52,000) and a lot has even changed since then. My mom got pregnant with my older brother during her senior year of high school and my dad became a police officer, so there wasn’t a lot of pressure from either of them for me to pursue advanced education. However, as an overachieving, type A and straight-A student for my entire life, I knew that college was in my future, but didn’t really have anyone beyond my English teacher helping me prepare for it, financially or otherwise.
At lunch, I was fortunately surrounded by the smartest kids in our class, so was able to glean some of the more important details from them that I wasn’t getting at home. Two of them applied to the University of MN, which meant that I applied to the University of MN. I’d never been to the campus for a tour and all I knew was that I’d receive reciprocal WI-MN state tuition. I got accepted (which was good because it was the only school to which I applied) and saw the campus for the first time during new student orientation.
Even in 2003, it never felt like there was another respectable post-high school option other than college. Some of my classmates were joining the military or taking classes at the local community college, but in my social circles, the 4-year university was THE option.
So, I did what I thought was the right thing to do and took out nearly 100k in student loans to fund this expected experience because I truly had no idea what else I was supposed to do. The 34-year old me wishes that the 17 year-old me would have taken a gap year, but a gap year in my town would have involved making minimum wage at a garden themed gift shop, not a cross-cultural European adventure.
My dad signed on for $60,000 with a Parent Plus loan and I ended up with about $35k. This all added up pretty quickly after choosing International Studies as my major and deciding that I needed to study/work abroad in New Zealand, Spain, England, and Guatemala.
I did work throughout my five years of undergrad, but making $7.00/hour for part-time work in the study abroad office and a few weekend hours as a diner server wasn’t going to cut through $100,000. I saw these bi-weekly paychecks as purely spending money, not as income to be put toward my tuition or school expenses. If only I could go back and get a refund on all of those overpriced cab rides I took downtown to meet up with friends at dance clubs (and a refund on those bar tabs too). Oh, 21 year-old Courtney, you’ve really gone and stuck it to yourself.
While I’d like to blame high school Consumer Math for being what felt like a semester of mastering the art of cursive check writing, it was ultimately my responsibility to pay attention.
The thing is, I wasn’t paying attention because I didn’t know I was supposed to be.
I didn’t know how much we were taking out every semester, and even if I did, it wouldn’t have changed my behavior because I didn’t understand what this would add up to in monthly payments after graduation.
I didn’t know how much interest would accumulate over time or even what the interest rate was on my loans, and if that rate was low or high.
I didn’t know what my earning power would be upon graduation with a degree in International Studies.
I didn’t understand what the consequences would be of graduating in the middle of the 2008 economic recession.
I didn’t understand that salaries aren’t notoriously high for people with international studies liberal arts undergrad degrees.
I didn’t know what was considered a good, achievable salary in the first place.
I didn’t understand the true cost of living because the past five years’ living expenses had been funded with student loans and not a salary.
Yes, I was a first-generation college student with not a single clue, and yes, the student loan industry is predatory, and yes, the costs of a degree have absolutely gotten out of control, but like with every decision we make, we have the choice to fall prey and become a victim or accept it and take control of our next steps.
Now I sit here with nine years of college under my belt. For seven of the last 17 years, I took out student loans. For five, my loans were in deferral status. For the other five, I actually worked on paying down the balance (or likely, the accruing interest). Was U of M freshman Courtney dreaming about her future years of loan deferment and a $56,000 salary?
With Dave Ramsey in my ear buds an hour or two every day, I finally started listening to a voice of reason. Two months ago, I had $17,000 in my savings account and $20,000 left to pay on my student loan. I recently learned that my dad prematurely took out his retirement money, was heavily penalized, and then paid off the $60k Parent Plus loan with one check. When I told him this was crazy, he said, “It was worth every penny.” Was it though, was it really?
Are my earnings the main determiner of my professional success or my education’s value? Hard to say.
Even though I had money in savings, it never really felt like my money…probably because it wasn’t my money. If you’re indebted, whatever money you have isn’t actually yours, it’s your lender’s. I felt uncomfortable spending it on vacations or stuff I didn’t need because every trip and trinket would just result in another year of additional minimum payments hanging over my head. I wanted my money to be MY money and I was over the idea of it taking another decade to transpire.
So, I recently put everything but my $1,000 starter emergency fund toward my loan and have all but $2,990 paid off. Come January 1, 2020, I’ll be DEBT FREAKING FREE.
I never had Sallie Mae loans to be able to kick her out of my house, so instead I’ll say, the time is NOW Firstmark Services!!! It’s been a solid run, but it’s time to finally start putting that recurring auto-payment of $427.27 toward my future, not my past.
