Daniel Murray http://www.toptenreviews.com 4m 972 #studentloan
The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
In today’s age of borrowing, one of the most popular topics regarding investment is the college education. Many young people are banking on education and in turn, borrowing against their future in order to finish college and take necessary steps toward soluble finances. However, with rising costs of tuition, higher percentage interest rates and a perceived decreasing value of the average college degree, student loan debt is higher than ever.
As millions of college students continue to take out loans, it’s been estimated that they account for ten percent of all Americans in debt. Students and post-graduates now owe more than credit card debtors — and at the end of 2013, student borrowers owed, on average, nearly $30,000. The current demographic of the average student debtor is composed of singles in their twenties making $25-$50,000 a year (before taxes) — that doesn’t leave much wiggle room for other investments or even necessary spending. Studies estimate that over half of recent graduates are jobless — many millennials are working in low-income positions and aren’t using their degree at all.
If a recent grad, owing around $30,000 paid the modest, do-able amount on their debt of $150 each month, it would take them 30 years to pay off — which includes interest totaling almost twice their original loan. Take a look at this infographic about America’s current standing with student loan debt and where it may be in the future.
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The Future of Student Loan Debt
PRESIDENT OBAMA JUST EXPANDED THE LAW THAT CAPS STUDENT LOAN REPAYMENTS AT 10% OF A STUDENT’S INCOME
But is it enough?
JUST HOW BAD IS THE STUDENT LOAN DEBT CRISIS IN AMERICA?
Over the past 30 years, college tuition has grown by almost 500%
In the previous school year, the top ten most expensive colleges had an average total cost of $55,000/year
HIGHEST TOTAL COST
Sarah Lawrence College
Currently 10% of students pass on their first-choice schools for a less expensive option.
60% of all college students borrow money or take out student loans.
THE BORROWED MONEY WILL BE
THE MOST GRADUATE STUDENTS WITH DEBT
78% SOUTH DAKOTA
THE LEAST GRADUATE STUDETNS WITH DEBT
At the end of 2013
The average student loan debt was $29,400
Total student loan debt in the United States surassed the natioanl credit card debt in 2010, when it reached $830 billion
2014: $1.3 trillion
*It continues to grow at 6% per year.
37 MILLION STUDENTS ARE NOW IN DEBT
that’s 1 out of every 10 Americans.
The default rate for
Federal Loans: 1 in 12
Private School Loans: 1 in 7
3 out of 10 Borrowers have payments at least 30 days past due.
Defaults can trigger reduction in socail security or retirement benefits.
Student loan holders cannot declare bankruptcy.
Education – Income – Age – Race – Marital Status – Job
SO WHAT DOES THE AVERAGE STUDENT DEBT HOLDER LOOK LIKE?
|Undergraduate degree 30%College 25%Post graduate degree 28%||20-29 y.o 40%30-39 y.o 30%40-49 y.o 19%50-59 y.o 12%60+ y.o 0.4%||$25k – $50k/yr 21%$25k/yr 20%$50k/yr – $100k/yr 20%|
> $100k/yr 18%
|African American 34%Hispanic 28%White 16%Asian 19%||Never married 28%Married 17%Cohabitating 27%Divorced / Separated 12%||Employed full-time 21%Part-time 20%Self-employed 20%Not employed 18%|
JUST HOW BAD COULD THE STUDENT LOAN CRISIS GET?
The majority of student debt holders may be employed, but for recent graduates, the job market is tougher than ever.
53% of recent college graduates are unemployed or jobless.
REAL-WAGE EARNERS ARE LOWER THAN THEY WERE THROUGHOUT THE 1990S.
A study of 4 million Facebook profiles showed that the biggest employers of twenty-somethings are:
HOW DOES THAT LOOK IN REAL LIFE?
If you are a student who cmopleted all four years of your undergraduate degree and are about to graduate with:
$29,400 IN DEBT
CURRENT FIXED STAFFORD LOAN INTEREST RATE OF 4.66%
TO PAY OFF YOUR LOAN IN
|10 YEARS||20 YEARS||30 YEARS|
|YOUR MONTHLY PAYMENTS WOULD BE…|
|$306.97 (0.8%)||$188.55 (0.4%)||$151.77 (0.2%)|
|YOUR TOTAL INTEREST PAYMENT WOULD BE…|
|$7,436 (20%)||$15,851 (35%)||$25,238 (46%)|
|AND YOUR TOTAL AMOUNT PAID WOULD BE…|
|$36,836 (100%)||$45,251 (100%)||$54,638 (100%)|
! … almost double what you originally started with!
AND THAT’S JUST IN TIME TO START SAVING YOUR OWN CHILD’S COLLEGE FUND, BECAUSE…
By 2030, based on current inflation rates (6.5%) tuition for PUBLIC institutions will be between $41,000 to $50,000
That’s more than most expensive private school is today!
4-YEAR OUT-OF-STATE PUBLIC SCHOOL
$71k – $85k
4 YEAR PRIVATE
$92k – $100k
A FULL FOUR YEARS COULD PUT YOU BACK AS MUCH AS $414,000!
SO START SAVING NOW!
To send your child to a state university, you’d have to be saving $812.10 to a 529 savings plan or other college fund every month for the next 20 years!
AND WHEN YOUR CHILD GRADUATES…
Assuming interest rates don’t increase (even though they definitely will), and that you have an average number of $326,000 in student loan debt…
TO PAY IT OFF IN 10 YEARS:
$3,410.81 Monthly Payments
$82,000 Total interest payments
$408,230 Total paid
THEY WILL NEED AN AVERAGE SALARY OF $222,154 TO SAFELY PAY OFF THIS DEBT…
Even though the average starting salary in 2030 is projected to be only $89,000.
AND THESE ARE JUST UNDERGRADUATE STATISTICS. GRADUATE SCHOOLS WOULD MEAN ADDITIONAL DEBT…
THESE NUMBERS ARE WHY MANY PEOPLE TODAY SAY COLLEGE IS NO LONGER WORTH IT
The increasing inequality gap means that on average, those with a college diploma now earn 98% more per hour than those without a degree.
HOW IS THAT POSSIBLE? THE AVERAGE MUST BE RAISED BY JUST THE WEALTHY 1%, RIGHT?
IN A STUDY BY MIT ECONOMISTS…
|If you took the INCOME of the 1%OVER the past 35 YEARSAnd redistributed it to everyone else in AmericaEach Household would have an extra $7,100 A YEAR||In the same, a college degree increasedPAYCHECKS an average of $28,000You redistribute THAT total increase to non-college workersX4Each worker would receive 4 TIMES the raise of the 1% redistribution*adjusted for inflation|
IS COLLEGE THE KEY TO FINANICAL SUCCESS? OR DO THE DEBTS OUTWEIGH THE BENEFITS? The next generation of parents and students will be theones to decide.
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