Student Loan Debt: The Burden of Unproductive Degrees

Student Loan Debt: what's the true story

Editor: Vladimir Bajic | Tactical Investor

Unveiling the Reality of Student Loan Debt

Updated May 2023

This issue has persisted for years without significant change; it has worsened over the decades. Thus, we intend to employ historical context to depict this concern vividly. One of the primary problems is that people acquire loans to finance degrees that ultimately fail to yield lucrative employment opportunities. The secondary issue is the common belief that relocating from one’s hometown to another city is imperative.

The default rate for student loans is relatively low, with approximately 10% of borrowers defaulting on their loans. This rate has been declining for six consecutive years. Many borrowers who default on their student loans have relatively small amounts of debt, often less than $10,000. Sometimes, these borrowers have accumulated unmanageable debt, such as credit card debt, contributing to their financial difficulties.

The government has implemented several programs aimed at preventing student loan defaults. For instance, federal student loan borrowers, who make up the majority of new borrowers, have access to income-based repayment plans. These plans link monthly loan payments to the borrower’s household income rather than the total debt amount.

As a result, borrowers with significant loan balances but low incomes may only be required to make relatively affordable payments. For example, a borrower earning $40,000 per year with over $100,000 in loan debt might initially pay as little as $177 per month under the Pay as You Earn plan instead of the standard 10-year repayment amount of $1,208 monthly. The payment amount decreases as the borrower’s income declines. In some cases, individuals with incomes at or below $19,000 may not be required to make any payments under an income-based repayment plan.

 Debunking Misconceptions and Highlighting Student Debt Solutions

Contrary to assertions by certain politicians, the government currently implements various programs for cancelling student debt. One prevalent initiative permits borrowers to have their complete federal student loan debt pardoned after 20 to 25 years, even if they’ve made minimal or no payments within that timeframe. Furthermore, a widely embraced program offers loan forgiveness to individuals employed by nonprofit organizations or the government after 10 years of punctual, income-based repayments.

In this scenario, the amount of loan forgiveness for the borrower can be substantial, contingent on the initial loan balance and income. For instance, a borrower with a $100,000 starting loan balance, earning $40,000 annually, and working for a qualifying employer might become eligible for $149,550 in student debt forgiveness after 10 years of payments through the Pay as You Earn plan.

These preexisting government programs and income-driven repayment alternatives contribute to the infrequent occurrence of student loan defaults. These considerations are vital when evaluating the overall landscape of student loan debt.  Full Story

Student Loan Debt due to stupidity

The suggestion from the Treasury Department to mandate students to partake in financial literacy courses and the Department of Education’s strategy to improve financial literacy tools within the student aid application app demonstrates a growing acknowledgement of the importance of aiding students in comprehending their financial matters and effectively managing their loans. Educational institutions have been experimenting with different approaches to foster financial education, aiming to equip students with essential abilities to navigate their financial obligations during and after college.

This endeavour is commendable, empowering college students to make knowledgeable financial choices. Nevertheless, the emphasis on financial education sparks a broader discussion about student debt: its origins, repercussions, and potential resolutions. Experts and legislators frequently ponder whether individuals make unwise financial decisions or if their financial predicaments arise from insufficient funds. The reality probably involves a blend of these elements, yet determining the precise influence of financial literacy compared to financial constraints can be intricate.

Robert Kelchen, a professor specializing in higher education finance at Seton Hall University, suggests that financial literacy and financial resources contribute to the predicament. Pinpointing the exact equilibrium between these two factors is challenging.

To sum up, while enhancing financial literacy among college students is a commendable aspiration, it’s crucial to acknowledge that financial limitations and resource availability also wield substantial influence over the landscape of student debt. A comprehensive comprehension of the underlying causes will facilitate the development of effective strategies and solutions to tackle the challenges linked to student debt.  Full Story

How to Fix the Student Loan Debt Crisis

Common sense is the first that is needed.  If people lived within their means instead of trying to live the lives of kings on the salary of soldiers, we would not have a student debt crisis, to begin with. Secondly, if people choose degrees that make sense; sense in terms of being able to land a job that would help pay for the student loans taken out, there would be no student debt crisis. Instead, these jackasses take on massive loans to study subjects that, in most cases, are a total waste of time and one which any farm mouse could master.  Lastly, these same brain surgeons think they must attend the most expensive colleges to earn the most useless degrees.

If you are going to get a stupid degree, then go to a community college; a part-time job will more than help cover the cost of the degree. If you don’t have the money, then don’t go to an expensive college even if you are going to take a degree that might land you a good job; instead, head to one of the top state colleges in your area and make sure you earn the very best of grades.  The article below covers the issue in more detail:

The Unnecessary Burden: How Misguided Decisions Lead College Students into a Debt Quagmire

In pursuing higher education, many students find themselves entangled in a web of debt, a predicament often born out of ignorance and misguided decisions. The allure of prestigious institutions and the societal pressure to attend the best colleges money can buy often blind students to the financial realities of their choices. This issue is further exacerbated by a culture that encourages living beyond one’s means, leading to an escalating cycle of debt.

The crux of the problem lies not only with the students but also with their parents. There was a time when students attended colleges they could afford, often working part-time jobs to contribute to their tuition fees. However, this prudent approach has been overshadowed by a sense of entitlement, where the best education is demanded without a clear understanding of the financial implications.

This mindset extends beyond education. Despite being submerged in debt, many college graduates refuse to compromise on their lifestyle. Instead of adopting a frugal approach to managing their finances, they continue to indulge in luxuries, adding to their debt. When the financial strain becomes unbearable, they find themselves in a crisis that could have been avoided with better financial planning and understanding.

Understanding the Root Causes and Proposing Solutions to the Student Debt Crisis

The student loan crisis, often portrayed as an insurmountable problem, is often a result of poor financial decisions. However, it’s not too late to change the narrative. Financial literacy programs should be integrated into high school curriculums, equipping students with the knowledge to make informed decisions about their education and lifestyle choices. Parents, too, need to guide their children towards understanding the value of money and the implications of debt.

Moreover, students should be encouraged to explore affordable education options like community colleges, online courses, or state universities. Scholarships, grants, and work-study programs can also help alleviate the financial burden.

In conclusion, the student debt crisis is not merely a financial issue but a societal one that requires a shift in mindset and approach towards education and financial management. However, the main problem is the student.  Instead of tightening their belts, they continue to add to the deficit and then cry wolf when everything falls apart.  Unmasking Stupidity: Rethinking the Student Debt Crisis

Conclusion

Several key insights have emerged in the journey to dissect the complexities of the student debt crisis. Evidently, this crisis is not solely a result of financial struggles but rather a culmination of misguided decisions, societal influences, and a lack of comprehensive financial education.

The pursuit of higher education, once a noble endeavour, has become clouded by the allure of prestigious institutions and the pressure to conform to societal expectations. This has led many students to make financially unsustainable choices, accumulating debt that can burden them for years to come.

However, it’s not a situation without hope. The student debt crisis can be mitigated through proactive measures at an individual and societal level. Integrating financial literacy into high school curriculums can equip young minds with the tools to make informed decisions about education and finances. Parents also play a crucial role in steering their children towards a clearer understanding of money, its value, and the consequences of debt.

Exploring alternative education paths, such as community colleges, online courses, and state universities, can provide more affordable options. Scholarships, grants, and work-study programs offer avenues to alleviate financial burdens and promote responsible decision-making.

Ultimately, addressing the student debt crisis requires a holistic shift in perspective. It’s a call for young individuals to embrace financial responsibility, make informed choices about education and lifestyle, and not succumb to the allure of instant gratification. It’s a plea for parents, educators, and society to prioritize financial literacy and guide the younger generation towards a more sustainable future.

The student debt crisis is not an isolated issue but a reflection of a broader societal paradigm. By working collectively to reshape our attitudes towards education, finances, and personal responsibility, we can pave the way for a future where the burden of unnecessary debt is significantly reduced and the path to success is paved with informed decisions and empowered choices.

Originally published on May 13, 2016, and updated over the years. The latest update was conducted on May 2023

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