Student loan debt is a big issue for Millennials. It is the most common way of funding your college and graduate school education – but doing so has become a ‘Game of Loans’.
But before you start to think that getting a student loan is like an alliance with the House of Lannister, understanding what you are getting into is an important first step.
In the U.S., the total outstanding student loan debt is around $1.2 trillion dollars with the average student debt for a grad being around $33.000 (2014 figures).
Come off of graduation day with $33,000 in debt that begins to require monthly payments shortly thereafter can definitely take the wind out of your sails – and prevent you from being able to purchase other things you might want, like a car or home.
Perhaps the biggest question you need to ask yourself is what is the return on my investment for the education you are financing. Will the degree you earned, ‘pay off’ in giving you enough income over your working life to afford paying off the loan it required -and- prove you with enough remaining $$$ to actually live the life you want.
As a general rule – try to avoid student loans as much as possible. Look for other monies, some of which is available for little cost to you in scholarships.
It’s sometimes daunting to understand all the facets of the ‘Game of Loans’ – but taking steps to understand the rules of the game will prevent you from ending up with the dragons.
From the NYTimes, some great advise for new students, from older students…
New supplies, new clothes, new start. Freshman year is a chance to redefine yourself, to challenge assumptions, to lay the foundation for the rest of your life. Gee whiz, you say, I’m just 18! So we asked for help, from those who have been there, done that. Below are words of wisdom from 25 upperclassmen and recent grads. See the comments section for additional reader submissions.
As an incoming freshman I wish I’d known I didn’t need to know everything! I was so wrapped up in the idea that I had to know my major, how to navigate campus and the social scene, even how to do laundry. Sometimes the beauty is in figuring these things out organically. To be a successful freshman, you just have to be willing to learn as you go. — Grace Carita, Bucknell University, ’18
The first day of college I was a ball of nerves and I remember walking into my first class and running to the first seat I found, thinking everyone would be staring at me. But nobody seemed to notice and then it hit me: The fact that nobody knew me meant nobody would judge, which, upon reflection, was what I was scared of the most. I told myself to let go. I began to force myself into situations that were uncomfortable for me — for example, auditioning for a dance piece — and the performance was a highlight of my freshman year. Challenge yourself to try something new, something you couldn’t have done in high school. — Ria Jagasia, Vanderbilt University, ’18
From the NYTimes – What will you be doing on this date 20 years from now? No, really. Try to answer that. Given what you know about your ever-changing self, and factoring in the breakneck pace of societal change, can you accurately predict what the future world around you will look like and what role you’ll play in it?
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Sometimes just being clever is the best way to save yourself money! From Good Morning America – Texas Man Builds Miniature House in Hopes of Avoiding College Debt!
Joel Weber said he’s determined to incur less college debt by living in the tiny, 145-square-foot house he built, rather than struggling to pay higher rent in his college town of Austin, Texas.
“I wanted a place to call home,” Weber told ABC News. “I wanted it to be affordable so I could be debt-free and let it be an investment to give back to the community — not just dumped into rent that I wouldn’t get any return on.”
Weber, who will begin his junior year at the University of Texas at Austin, said it can cost upwards of $800 a month to live in the area near his school.
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From Yahoo – Two years after leaving school, students default on their federal loans at a rate of 9.1%, according to a 2013 report by the New York Federal Reserve. That figure jumps to 13.4% at the three-year mark.
Pulitzer Prize-nominated author Lee Siegel wrote an op-ed article in The New York Times on Saturday in which he advised people to default on their student loans rather than remain stuck with crippling debt.
But what actually happens when you default?
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From the NYTimes – Once again, the headlines are filled with claims that student loans are bad. Several articles have highlighted results from a Gallup poll that shows that college graduates who borrow for college are less happy, healthy and wealthy than debt-free graduates. The Gallup report (which is cautious in its interpretation of the data) has been drawn into a rising chorus of news media reports on the negative consequences of borrowing: Student loans not only make you sick but also hamper homeownership and delay marriage.
Student loans need reform. But recent reports obscure the key benefit of borrowing for college: a college education.
The highlight of the Gallup report is a comparison of the well-being of college graduates who did not borrow and those who borrowed more than $50,000. As I discussed in this New York Times article in June, 43 percent of undergraduates borrow nothing, and 98 percent borrow less than $50,000. The report is therefore comparing the 43 percent of undergraduates who borrow nothing with those with the highest debt loads.
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From the Hamilton Project, here’s a great tool for calculating the costs of your student loan. It’s important to have an understanding on how much you are borrowing, what your monthly payments will be once you graduate, and how much of the money you owe is actually interest.
As yourself the question – How hard will it be to pay off my loan?
Click here for the calculator
From the NYTimes – At the corner of Seventh Avenue and 27th Street, Tenille Warren waited impatiently for the light to change. She swept under the purple welcome banner into the Fashion Institute of Technology’s industrial-looking building, raced upstairs to her class and slid into the front row beside a mannequin dressed in a Lululemon jacket. This was no time to be fashionably late.
Almost immediately, the professor gave a flash assignment: Sketch a garment for a sport of your choice. Ms. Warren quickly drew a plucky young black woman with Afro puffs in a racerback tennis dress with a flare skirt and white reflective trim.
“Make your garment look like it’s moving even though it’s standing still,” the professor, who had designed for Calvin Klein, instructed. Ms. Warren understood. In the rare moments she is standing still, she is still moving forward.
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From The Motley Fool – Think about this statement for a minute: Education can reduce student loan debt.
Though it might sound like a paradox – after all, isn’t it the pursuit of education that has ignited the college debt crisis? – the Hoosier state university system has proved that educating students about loan debt can alter their behavior in a positive way.
Last year, the seven colleges making up the Indiana University system sent letters to students giving them a sneak peek at their post-graduate monthly loan payments. The missives were a wake-up call for many, who decided against taking out additional loans, according to Bloomberg. Overall, the university system saw an 11% decline in the amount of federal Stafford loan disbursements, which fell by about $31 million over the course of the academic year.
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