Got a Student Loan? Don’t Drop Out of College!

Finance
Posted By Terri Williams on August 9, 2016 at 1:09 pm
Got a Student Loan? Don’t Drop Out of College!

The path to career success has narrowed considerably over the past few years.  Good jobs that don’t require a college degree are increasingly hard to find. Want evidence?  A recent report reveals that over the past five years, 37% of employers now want a college degree for jobs that previously required a high school diploma.

At the same time, the cost of pursuing a college degree is rising faster than the rate of inflation. Most full-time students can no longer devote the time needed to work their way through school, leading to an inevitable dependence on student loans.

But according to “Student Debt: Lives on Hold,” a recent excerpted study by Consumer Reports, student loans can wreak havoc on the more than 42 million people who owe $1.3 trillion in student loan debt—especially if they end up dropping out of college.

Student loan borrowers—five brief profiles

Some of the borrowers profiled in the study include the following:

  • A 32-year old nurse with a student loan balance of $152,000 who feels she “kinda ruined her life” by going to college
  • A 20-year old rifleman in the U.S. army who was once stationed in Afghanistan. After two years of school, he was $10,000 in debt and felt if he stayed in school he would have to borrow more money, so he enlisted, hoping the GI Bill would pay for him to go back to school.
  • A 28-year old with $90,000 in debt who earns $12 an hour calling delinquent student loan borrowers. Whether the borrowers were unemployed or their kids were terminally ill, it was her job to request payment. She used to think, “In a couple of years, this is going to be me?” and eventually quit that job.

It is estimated that 25% of borrowers are delinquent, and private companies contracted to handle debt collections can expect to make $2 billion in 2016.

  • One graphic designer says he got calls, as early as 5 a.m., from debt collectors screaming and hollering in his ear. He voiced his complaints to state regulators and then his loan company sued him for “immediate” payment of his $73,000 debt. He believes he was sued for complaining.
  • A retired professor was informed that her disability insurance benefits would be garnished to pay a student loan debt that was decades old. She says her attempts to get the lender to understand that she had fallen behind because she was sick were unsuccessful.

Do over?

Consumer Reports also found that 45% of people with student loan debt said it wasn’t worth the cost. Among this group:

% of respondents Reason debt wasn’t worth it
38% Didn’t graduate
69% Have had trouble making loan payments
78% Earn less than $50,000 per year
43% Didn’t get help from parents on financial aid decisions

 

In addition, 47% said if they could do it over, they would take out a smaller amount, even if they had to go to a cheaper school or find another way to pay for their education.

Degree vs. no degree

Even with a college degree, it’s not easy to find a job. However, according to the National Center for Education Statistics, the average young adult with a bachelor’s degree earns 66% more than the average young adult who only completes high school. This difference in income can significantly impact the ability to make student loan payments.

Experts cite problems with the student loan process

GoodCall asked two experts to weigh in on the report. Howard Dvorkin, CPA and chairman of Debt.com, believes there’s something inherently wrong with the student loan process. “You can still be a teenager and owe tens of thousands of dollars – that’s ridiculous; rental car agencies won’t let you drive off the lot until you’re 25 because they don’t trust you with their expensive vehicle,” he says.

But he says we don’t really provide options for teenagers who need to pay for college. “Take out hefty loans now and hope you graduate into a decent job that will support you, your family, and your monthly loan payments,” Dvorkin laments. But unless students major in a field that almost guarantees graduates a well-paying salary, the math doesn’t add up anymore, he concludes.

It’s a sentiment shared by Rachel Cruze, personal finance expert and author of the upcoming book Love Your Life, Not Theirs. “People justify student loans because they think they’ll get a great-paying job and be able to afford the loans, but that’s not always the case.”  Cruze says the class of 2016 graduated with an average of $37,000 in student loan debt – but she’s not suggesting that people shouldn’t attend college or even that they should forgo attending their dream school.

However, Cruze says it takes parents and students working together to determine the best way to pay for college. “It’s possible to be a student without a student loan; it just takes some hard work and sacrifice.”

The choice of school can make a significant difference. she advises, “Don’t count out going to an in-state school or community college for the first two years; this can save thousands in tuition dollars.” Cruze also says there are tens of thousands of available scholarships, but students have to be diligent to find and apply to them. And while working won’t cover the entire cost of pursuing a degree, Cruze says a good part-time job can help with expenses.

Terri Williams
Terri Williams graduated with a B.A. in English from the University of Alabama at Birmingham. Her education, career, and business articles have been featured on Yahoo! Education, U.S. News & World Report, The Houston Chronicle, and in the print edition of USA Today Special Edition. Terri is also a contributing author to "A Practical Guide to Digital Journalism Ethics," a book published by the Center for Digital Ethics and Policy at Loyola University Chicago.

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