The Next Financial Crisis?
$1.52 Trillion - the total amount of student loan debt outstanding
45 million - total number of student loan borrowers in the system
$27,975 - average student loan balance for ages 20 - 30
$351 - average monthly payment for student loans, ages 20 - 30
1 in 6 - the number of college graduates with student loans greater than their annual income
I just finished reading Ready Player One by Ernest Cline on this current family trip to Pennsylvania. Without giving away too much of the story, there is a point in the book where Wade Watts, the main character, allows himself to be taken prisoner by IOI, an evil corporation and the antagonist of the novel. His crime? Not being able to pay back a $20,000 debt on his credit card.
For his punishment, he is put into indentured servitude and forced to work as a tech support representative and "reside" at corporate headquarters at IOI to repay his debts. His wages are garnished for living expenses such as food and rent for his cell. After interest and penalties are added back to the balance, it becomes impossible to ever pay the debt back for most of the indentured servants and they will spend the rest of their lives as involuntary employees in a job they despise.
The similarities to our own student loan crisis in the United States are eerily similar.
The stats above come courtesy of this piece by Jeff Gitlin of LendEDU.com and Capstone College Partners.
To put the numbers in more perspective, student loan debt in our country is now larger than any other form of borrowing with the exception of mortgages.
Just 10 years ago, the total amount of student loan debt stood at $600 Billion - still a very large number at the time and one that had numerous financial experts on edge. That number has grown in a very short amount of time by almost $1 Trillion. Try saying that number with your best Doctor Evil voice.
"But the amount students borrow is also growing. Rising college costs and stagnant wages combined with state and federal disinvestment in higher education have made students and families more reliant on debt to fund a college education, Kantrowitz said. 'It’s shifting the burden of paying for college from the government to the families,' he said." ~ Jillian Berman from her article at MarketWatch
(emphasis added to the above paragraph by me)
If that sounds familiar, it should. Shifting the burden for paying for college away from the government and to the students and their families is almost identical to what corporations have done with the 401(k) and the shifting of the retirement burden away from pensions and to the individual worker.
So what can you do? Personal finance is not easy and nobody is going to do it for you. You should educate yourself to the best of your ability or hire a professional that you trust to give you independent, conflict-free advice. It's much more than just picking investments now.
No doubt, college is expensive. But that doesn't decrease its demand in the slightest. More students apply for and attend college now than ever before and our college and university system in this country knows just how good their product is. Going to college is still worth it, for now.
Go be great this week, and be kind to someone who needs it most.