Free college is an idea with a lot of obvious appeal and merit, and probably not a snowball’s chance in hell of making it to reality in the current political climate. Still, as a cornerstone of a progressive agenda, it’s …
From 2004 to 2014, the average debt for graduating college seniors who took out loans rose at twice the rate of inflation. Meanwhile, the real value of workers' wages is 6.5 percent lower today than it was in 2006, and recent college graduates are more likely to be unemployed or underemployed than they were prior to the recession. It's not unreasonable to look at the data and ask, "Is going to college a good investment for today's young workers?"
College may be more expensive than ever before, but the cost of not going to college is pretty steep, as well. For the most part, college graduates earn more, have lower unemployment rates, and are less likely to live in poverty than their less-educated peers. But that doesn't mean that it's easy to pay student loans with a recent graduate's salary (or potential lack thereof, depending on the job market upon graduation). In fact, PayScale's College ROI Report shows that the highest college loans are likely to be held by the borrowers with the lowest income.
Student loan debt in the U.S. has reached staggering new heights in recent years, and it's had a huge impact on recent graduates and their families, many of whom are helping to see their children through the trying financial situation they've landed in post-graduation. Student loan debt is now greater than credit card debt in this country, a fact that serves as an excellent reality check about the severity of this problem. The folks shouldering these loans don't need any reminders, though. They are aware every day of the pressure this debt is putting on them financially and otherwise.
Despite the difficulties they faced entering the job market during the worst recession in decades, millennials have found their way into the workplace, even teaching older generations a thing or two about new ways to work along the way. But, financially, it's been a rough decade or so for the youngest generation of workers.
Over 67 percent of college seniors had taken out student loans as of the 2011-12 academic year, according to The National Center for Education Statistics. That same year, the student loan default rate reached 10 percent. Obviously, no one enters school planning on defaulting on their student loans – defaulting can ruin your credit, impacting everything from your ability to get a mortgage or a car loan to getting hired for your dream job. PayScale's College Salary Report shows how college choice affects ability to earn enough to pay back loans; to help students avoid common mistakes when taking out their first loans, we spoke via email with Anne Del Plato, Regional Director for U-fi Student Loans.
When it comes to personal finances, everything is relative. What seems expensive to one person is cheap to another, depending on their income stream, debt, and attitudes about money; this is true when we're talking about pocket money, but it's even truer when the subject is student loan debt. The tendency is to talk about debt as if borrowing less is always better. This makes sense at first glance – who would want to borrow more, if they could avoid it? But as Susan Dynarski points outs at The Upshot, borrowing less money isn't necessarily a recipe for career success – or even avoiding default.
The class of 2015 is the most indebted to date, with student loan debt adding up to almost $68 billion total, including federal and private loans. The average graduate will have to pay back $35,000, according to data analysis by Edvisors, and the student loan default rate hovers around 13 to 14 percent. While politicians debate the best way to combat student loan debt, or mitigate its crippling effects, individual students must decide the best way to minimize their debt load. A recent WalletHub report reminds us that where students live can be an important factor in determining how much money they owe – and how quickly they're able to pay it off.
We think of debt as a negative thing, and in many cases it is. But, not all debt is created equal. Some debt can even be productive. Student loan debt, for example, can still turn out to be a worthwhile investment in some cases. (Check out PayScale's College ROI Report for more specific information.) Owning a home and paying a mortgage builds equity.
There's a joke going around: If you had a nickel for every time you heard someone from the older generation make fun of the younger generation, you'd have enough money to buy a house in the economy they ruined.