It's a TRAP!!! The Dangers of Student Loans

I heard a call this morning on the Dave Ramsey Show that so clearly illustrated the unseen danger of student loans. In fact, I heard another one (for the second time) that drove this point home even farther. In the first call, a couple was doing their debt-free scream on the show. As part of that, they tell the audience a bit about their background and their journey into and out of debt. This couple had taken out $355,000 dollars’ worth of student loans. You saw that correctly, and no, I did not mistakenly put any extra zeros on there. A house, a nice house in large parts of this country,

worth of student loans. He was a doctor, she was an Occupational Therapist, and both felt during their schooling that student loans were just the normal way you go to school. Now, getting out of school, they both have quite good incomes, but with a HUGE caveat: You both must be working to get those two amazing incomes. Shortly after graduation, they had their first child, and mom wanted to stay home part-time with the new little one. A completely normal, reasonable desire for a new mom. Only one problem, and it’s a big one: They had a massive student loan payment. You see, that option to stay at home was taken off the table because of the student loans they had racked up.

The second story is eerily similar, but even more heart-wrenching. This one starts basically the same. The numbers are a bit lower, only $50,000 or so in student loans for her degree. Shortly after graduating, the woman and her husband had their first child. But this child had medical issues. Again, in a normal reaction she wanted to stay home with her child who has these extra needs. And again, that option was taken away from her because she had student loan payments that must be made.

Two similar, heart-breaking stories, and I wish I could say these were rare occurrences. The reality is that this is happening every day all over America. To some degree, it may even be happening in your house. How common is it to hear someone complain about their job only to find out their stuck in that job because they need the income to make their payments? Debt is thief! The irony is that so many people think and use debt like it is a freedom. They think debt enables them to have the things they want. It doesn’t seem like a thief; it seems like a provider. But debt steals your freedom by chaining you to the things you had to have. It takes decisions away from you, limiting the choices you might have. How different a situation would either of those mothers be in had they been debt-free? One of them was. After being frustrated by her inability to stay home with her new child, husband and wife really started attacking their student loans. After a lot of hard work and sacrifice, they paid them all off. Then, because they now had no payments hanging over their heads, they could live comfortably on a single income.

All debt is like that, making you a slave to your own desires, chaining you to payments that rob you of your freedom. But student loans are a particularly dangerous type of debt. Why? There are a few key reasons: 1) Cultural influence, 2) Target Audience, and 3) Empty Promises. Let’s look closer at each of these.

1. In America today, education is this amazing, magical thing that has been elevated onto a pedestal from which it cannot be attacked. It is the almighty force that is magically going to transform your life. Or so our culture would have you believe. And because American culture is so obsessed with debt, it is entirely normal, even expected that you will go into debt to pay for your education. It is common to hear college students use phrases like, “You can’t go to college without student loans.” So, as a culture, we have normalized the practice of going deeply into debt to pay for a piece of paper. On top of this, because education is seen as the magical bridge between poverty and wealth, our society and our government have mandated that student loans be available to anyone for basically any degree. No checks are done to ensure a person’s future ability to pay back this money. At least when you get a mortgage, they (in theory) make sure that you can actually make enough money to make the payments. No such boundaries exist in the student loan world.

2. The target market for this “product” is young adults, people our legal system has deemed too immature to handle the effects of alcohol. But, apparently they are mature enough to sign up for tens of thousands of dollars in student loans. These are people who largely have no real experience with finance, especially as finance classes are not taught in many high schools throughout the nation. So, what do we expect to happen when they’re offered a check for $10,000? For many of them, the fact that they will have to pay this back doesn’t even sink in. The idea that it might take them 30 years to do so is certainly not a thought in their head. Even if it is, many 18-year-olds have a very underdeveloped ability to measure value. Our culture has put such a high value on just generally having a degree (without any regard for what type of degree it is) that most soon-to-be college freshmen may not even be able to measure the degree’s value versus its cost. And what about Parent Plus loans? At least we’re targeting adults here, but again cultural influence plays a massive role. The (inflated) importance of education coupled often with guilt about not having saved for their children’s college drives many parents to sign up for the loans.

3. College admission offices thrive on the overinflated importance of education, convincing young adults (and their parents) that a piece of paper will make their lives better. Now, let me be clear: Education is valuable, but the value of a college degree lies in the knowledge gained from that degree program, not the slip of paper itself. Too often, simply having a degree is expected to result in future success. Statistics have often been used to push this idea. Actually, one statistic in particular. If you haven’t heard it, you must live in a cave. “People with college degrees on average make x% more than people without.” The number changes as new research is done, but the idea is still the same. People hear that as, “A college degree guarantees I’m going to make more money.” And I hate to burst the bubble, but it just doesn’t work that way. Education is an investment, and like any other investment, the cost needs to be weighed against the future returns. In recent years, a startlingly high number of young people have finished their degrees only to struggle to find jobs. When they do, too often those jobs are low-paying, entry-level positions (if they’re lucky enough to even get a job in their field). Six months after graduating, Navient comes and slaps them upside the head with a big minimum payment for the student loans they took out, and many are left wondering how in the world they’ll make ends meet. They struggle to make the minimum p

ayments (if they even can), all while tens of thousands of dollars sits there earning interest every day. In some cases, the balances on the loans continue to increase even though they are making the minimum payment because the minimum payment is less than the interest that accrues (very common with income-driven repayment plans). All because of the lie we’ve come to believe that a degree is worth any cost.

At then end of the day, the saddest irony of the entire situation is this: The very thing that should enable our freedom, freedom to think critically, freedom to move up the economic ladder, is the very thing chaining so many people down.

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