There are very few graduates today that would lump themselves in the “average” category.
Average debt, that is.
According to The Institute For College Affordability and Access student loan debt survey in 2014, the average debt load carried by an undergraduate was just shy of $30,000. Yet, when seemingly “average” recent graduates were asked, their debt loads were at least 1.5 times that if not more. (And that’s before taking into consideration the credit card debt many are carrying...)
In essence, they’re Broke From Go. From the time these young people graduate, they are far more cash strapped than any previous generation. Couple this situation with a difficult job market, a wildly fluctuating stock market, and a depressed housing economy -- it’s no wonder the next generation is bucking the status quo.
I had an intern named Brandon who recently said to me (after I had him investigating some statistics on student loan debt), “Can this be right? $200 a month payments for 10 years on $10,000 in student loans?”
He went on to discover that he’ll need a salary of $133,000 a year to “afford” his student loan payments once in repayment status.
Know of any companies looking to hire a recent Liberal Arts graduate for 6 figures?
I didn’t think so...
Such is the case with many students who’ve been sold a bill of goods as to the value of their degree. The fact of the matter is that many two year institutions are graduating 20 year olds with degrees in high demand like nursing, telecommunications, lasers, and welding. Many of whom are grabbing jobs paying in excess of $50,000 a year.
Which begs the questions:
Why are all of these people getting 4-year degrees?
What is the point of racking up high 5-figure debt loads?
When is our higher education system going to change?
Who else is seeing this problem and what are they doing to change it?
So, what are we to do about this cash-strapped generation?
First of all, encourage those who don’t know what they want to do to attend a two-year school and get their general requirements out of the way. It’s more economical and quite often, the classes are easier to get into than a larger institution. Considering 1 in 3 students will not finish their degree, a community college is the most economical way to get the first couple of years under their belt. It’s a relatively inexpensive way to dip your toe in the water of higher ed, so to speak.
Guide them in gaining experience through internships so they get a sense of what they really enjoy doing. At that point, see if it makes sense to pursue the four year degree.
More loans are not the answer.
Our administration thinks that making student loans more accessible is the answer to our problems. What we need less of right now are cash strapped twenty-somethings. This is one of the most entrepreneurial generations to have ever appeared on the scene and when they’re in debt, they aren’t as prone to start successful businesses.
The single best way to fix the problem is to educate those in the middle of it. It is up to the institutions, the families, and the individuals to seek out every educational opportunity to ensure students make wise and educated decisions when it comes to money.