Is college loan debt almost as inevitable as death and taxes? For some people it is. But the question that comes to my mind is, is it worth it? For many today, the answer is frustrating.
In a recent article I read, a woman named Kelli graduated in 2009 with a bachelor's degree in sociology with a whopping $200,000 college loan debt. Her $891 monthly payment was about to skyrocket to $1600 per month.
In the past decade, private lenders have just been handing out money to students. What's shocking now is that the student loan debt has recently passed credit card debt, for the first time. Does this trend sound familiar? (subprime mortgages)
How is she going to pay off $200,000? Can you imagine her debt to income ratio? Let's say that she's only earning $50,000 and that loan is accruing interest at 9%. Can she do it? A scarier question is, how long will it take her?
My wife and I incurred college loan debt. She earned a degree in Nursing and I in Management Information Systems. If we could do it all over again, having to incur debt, we would. It's brought us to where we are today. It's helped us become who we are today.
But, we wouldn't go back to school unless it was for something we are passionate about. In fact, during our engagement, my wife was going back for her Masters degree in Nursing but stopped pursuing it because she realized she didn't want to incur more college loan debt for something she wasn't passionate about.
If we were to go back to school to "earn more money", let's say we'd spend $80,000 each. That's $160,000 total into something we may not be passionate about. I think we could put that $160,000 towards something that can earn us more money and that we enjoy.
For some, they want that extra diploma on the wall, the credentials, or the prefixes and suffixes in front of and after their name. That's OK, but they'll have to pay for it.
Sometimes we need a fresh idea for an old problem. Here are some alternatives you may want to consider if you have college loan debt or are about to take it on.
In short though, if your 401k is losing money, doesn't it make sense to move that money to something that's charging you interest? Suspend your contributions and starting paying off your college loan debt.
Besides, you know how we feel about the decision to pay off your mortgage early. Put that equity to use!
You can pay off your loans, grow your retirement fund, and replenish your savings all at the same time.
When we decided to pay off my wife's college debt, we did it with one check. It was from my savings account that I accumulated when I was single.
A huge part of that decision was to break the shackles from her parents. Debt can be an emotional subject for many external reasons.
Would I do it again? I think I would. But, I would explore these other methods before undertaking such loans.
Getting knee deep into college debt can wreak havoc on your FICO score. You may not be able to get a car loan or a mortgage, and renting an aparment may be difficult.
Kelli may be wondering: Was it all worth it? How was she supposed to know how to pay off this debt when she started taking out loans at 18 years old? I feel for her and others out there because no one tells us when we're applying for those loans that we'll end up needing help with debt.
Now she's looking for a second job and regrets the path she took to get her degree.
Maybe we can learn something from Kelli's situation. Hopefully we can start a new trend here. Learn from past mistakes. Explore alternatives. Implement different strategies.
A college degree won't guarantee us success, but we can choose to be smarter with our money...and future.
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