Millennials and student loans. The two thoughts are nearly inseparable, at least in the media narrative that has unfolded during the aftermath of the Great Recession. Student loans remain an enormous hurdle for college graduates, even those graduating in 2016, and the issue is primed to be a drag on the economy in upcoming decades. It has become a central talking point during the current election cycle. Some candidates offer hope of relief for those weighed down by student debt, while others promise to leave them to fend for themselves. Whatever the fate of those who currently carry thousands in student loans, it’s important to question how educated students are when they enter college, about the cost of higher education relative to its eventual value.
The average student carries $37,000 in debt upon graduation from college. That’s a lot for any young person of normal means. For lots of college graduates, that’s more money than they’ll make in their first year post graduation. To get out from under this amount of debt, students have to live well beneath their means, earn a lot more money, or (probably) both. Any personal finance blog would tell students to prepare for this reality, but are high school seniors getting the message? That’s questionable. For students to really be prepared for the financial realities of college and post-college, here are some things high school students need to think about before applying to colleges.
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- What Does Debt Do? Most high schoolers have an abstract understanding of debt. Sure, they know it’s money you need to pay back, but do they know what debt does to the rest of your financial life? Student debt makes it very difficult to save, buy a car, invest in any significant way, start a family, travel, and all the other good stuff you want to do. It can weigh down a credit score, which, in turn, can make it harder to get good jobs, apply for important loans like mortgages, and lots of other stuff. In short, unless you’re prepared to deal with it, debt can be dead weight on a financial life. Here is an essential guide that young people considering college would do well to read.
- What Will Your Degree Do? Most college freshman aren’t completely sold on what major they want, much less what they want to do with their degree upon graduation. It’s important for college students to understand the income they are likely to have based on qualifications they receive in college. If it all doesn’t add up, maybe now is not the time to go to college! College is great, and pays off in non-monetary ways. But if you’re pinned under five figures of debt, with no plan to quickly pay it off, college’s peripheral benefits will not be worth it in the long term.
Just by understanding the ways that these two questions touch every corner of the college financial experience, and beyond, will make college students much better prepared for the debt they must take on. The question is, are they thinking about this stuff?