why is student debt a problem? Simple fixes

Why Is Student Debt a Problem? Exploring the Consequences

Nov 11, 2023

Smart College Planning: Your Path to Financial Freedom

The modern narrative about college education has become dangerously misguided. While society pushes students toward prestigious private universities and normalizes crushing student debt, a smarter path exists – one that combines practical education choices with early investment strategies to build lasting wealth.

The Local Advantage

Consider this: A private university student often accumulates $200,000+ in debt over four years. Meanwhile, their peer at a state university living at home might spend under $30,000 for the same duration. This $170,000 difference isn’t just savings—it’s potential investment capital.

Let’s break down the smart approach:

State Universities vs. Private Institutions

The average state university tuition for in-state students ranges from $6,000 to $12,000 annually. Compare this to private universities charging $50,000+ per year. The education quality difference rarely justifies this massive cost gap. Many state universities offer excellent programs, particularly in practical fields like engineering, business, and computer science.

The Commuter Strategy

Living at home while attending college eliminates approximately $15,000-$20,000 in annual housing costs. While some may view this as sacrificing the “college experience,” they’re actually sacrificing their financial future for temporary lifestyle benefits. That saved $60,000-$80,000 over four years, properly invested, could grow to several hundred thousand dollars by retirement age.

Working Through College

A part-time job paying $15 per hour for 20 hours weekly generates about $15,000 annually before taxes. Over four years, that’s $60,000 in earnings. This income can cover tuition at many state schools, eliminating the need for student loans. Additionally, work experience during college often leads to better job prospects after graduation.

The Investment Opportunity

Here’s where this strategy becomes truly powerful. By avoiding student debt and working part-time, a student can begin investing during college years. Consider this scenario:

– Annual savings from choosing a state university: $25,000

– Annual savings from living at home: $15,000

– Part-time job earnings: $15,000

– Total annual potential for investment: $55,000

Market Crash Opportunities: Turning Chaos into Wealth

History is ruthless in its consistency: every 8 to 10 years, the markets experience an explosive crash. These crashes leave devastation—job losses, bankruptcies, and shattered dreams. Yet, for those with foresight and discipline, they also present unparalleled opportunities to amass life-changing wealth. The COVID-19 crash in 2020 is a perfect case in point. As panic gripped the globe, fear-stricken investors dumped their holdings en masse. Quality stocks plummeted, some losing more than 50% of their value in weeks. And then, just as history has repeatedly proven, the markets rebounded. Over the next year, many battered stocks doubled, tripled, or even quadrupled in value.

This cycle of fear and greed is as old as the markets themselves. The winners prepare while the losers scramble to pick up the pieces. The secret lies in capitalizing on these rare moments of chaos, which is only possible if you have cash ready to deploy. Students who choose to save diligently instead of succumbing to the pressures of reckless spending and unnecessary debt are uniquely positioned to seize these moments. They build a war chest to turn market carnage into personal fortune by consistently setting aside even modest amounts.

Imagine this: instead of sitting on the sidelines, watching others reap the rewards of recovery, you have $20,000, $50,000, or even $100,000 ready when the market crashes. That capital, deployed wisely during these downturns, doesn’t just grow—it explodes. These are not pipe dreams but historical facts, repeated time and again. Those who buy during crashes don’t just ride the wave of recovery; they position themselves miles ahead in the race for financial independence.

The Compounding Effect: A Tale of Two Graduates

Let’s juxtapose two very different 22-year-olds: one walks across the graduation stage debt-free with $100,000 invested, and the other steps into the real world with $100,000 in student loans. At first, the difference might seem merely numerical—one is ahead by $200,000. But throughout a lifetime, the disparity grows into a chasm so vast it’s almost unfathomable.

The graduate with $100,000 invested begins their journey with a powerful ally: compound growth. Assuming a conservative 7% annual return, that initial $100,000 balloons to over $2 million by age 65. And here’s the kicker: they didn’t need to do anything extraordinary. No risky bets. No sleepless nights chasing hot stock tips. Just the steady, relentless force of compounding over time.

Now, contrast this with the debt-laden graduate. Their journey starts in a hole, clawing out of a $100,000 deficit. Their income goes toward interest payments and chipping away at the principal for years. While the debt-free graduate watches their investments multiply, the indebted one struggles to reach zero net worth. Even if they eventually manage to invest, they’ve lost precious years when their money could have been compounding. By the time they finally get on track, the gap is insurmountable.

The numbers don’t lie, but they also don’t tell the full story. The psychological toll of debt can be crippling, robbing individuals of the freedom to take risks, pursue passions, or breathe easy. Meanwhile, the graduate with $100,000 invested doesn’t just have money—they have options. Options to weather storms, seize opportunities, and live life on their terms.

Market crashes and the compounding effect are not abstract concepts but the bedrock of wealth creation. The choice is stark: prepare for the inevitable and harness these forces to your advantage, or squander your potential by falling into the trap of debt and complacency. History will not change, but your financial future can. The question is, will you be ready when the next crash comes? Will you harness the power of compounding, or will you waste your most valuable asset—time?

Practical Implementation

Choose a practical major at your state university
Live at home if possible
Work 15-20 hours per week
Save aggressively
Study investing while in college
Build an emergency fund first
Invest systematically, especially during market downturns

The Mindset Shift

The key is rejecting the societal pressure to attend prestigious private universities on borrowed money. Your college’s brand name doesn’t determine success in life – your skills, work ethic, and financial decisions determine it.

Student loans represent a fundamental misunderstanding of investment principles. Taking on massive debt for an education that may or may not lead to proportional income is financially irrational. It’s especially foolish when affordable alternatives exist.

The Future Advantage

Students who follow this path graduate with two massive advantages:

No debt burden limiting their career choices
Investment capital is already working for them

This approach requires maturity and delayed gratification. But the financial freedom it creates lasts a lifetime. Instead of spending their 20s and 30s paying off student loans, these graduates can focus on building wealth, starting businesses, or pursuing career opportunities without financial constraints.

Remember: The path to wealth isn’t just about earning money – it’s about making smart decisions early that compound over time. Avoiding student debt and investing young might not be the most exciting college strategy, but it’s the one that builds real wealth.

The choice is clear: You can follow the crowd into debt and spend decades recovering or take the intelligent path to financial independence. Your future self will thank you for choosing wisely.

The solution is straightforward.

The solution is brutally simple: Stop coddling entitled brats with handouts and let them earn their keep. Room and board? Translation: Get a job and pay for your own damn college.

Here’s the hard truth: Most people can work and cover their tuition if they stop expecting everything to be handed to them on a silver platter. Take New York, for instance. A state or city college costs about $6,500 a year. If your precious offspring stay close to home, they can dodge outrageous dorm fees and avoid renting overpriced shoebox apartments. By picking up a part-time job, they can easily cover $550 a month in tuition—and still have enough left over for pocket money.

If they start whining about how “All my friends are going to fancy colleges!” shut it down immediately: “Great, then tell their parents to bankroll your education while you tag along. Otherwise, welcome to reality.” You owe them a chance, not a free ride.

The Law of Balancing: Hard Truths You Need to Swallow

Here’s a life lesson most people ignore: The more you do for others, the less they’ll do for themselves. The law of balancing demands equilibrium. Overextend yourself—whether it’s footing someone’s bills or endlessly bailing them out—and you’ll get little to nothing in return. It’s not cynicism; it’s physics of the soul.

Consider this: Heroes often die young, martyrs rarely see gratitude, and good Samaritans burn out long before their time. Why? Because they tip the scales too far, overloading one side of the equation. Helping someone isn’t wrong—far from it—but offering unearned support to someone unwilling to put in the effort? That’s self-destruction masquerading as kindness.

The Exception: Young Children

The only acceptable exception to this rule is helping those who genuinely cannot help themselves—like young children. They deserve support because they lack the tools to navigate life independently. However, once someone is capable of taking responsibility, shielding them only stunts their growth.

Stop the handouts. Stop enabling mediocrity. And watch how quickly reality reshapes their perspective.

Debt’s Wicked Dance: A Sardonic Serenade

In halls of higher learning, behold the plight,
Where student debt casts shadows day and night.
A wicked game of loans, they surely knew,
They lured us in with dreams, then left us in a stew.

Oh, education’s golden key, they said,
But little did they mention the price ahead.
With textbooks priced like treasures, so absurd,
They robbed us blind, and our wallets left disturbed.

They sang sweet songs of degrees, so grand,
But failed to mention loans with a binding hand.
“Study what you love,” they urged, with glee,
But forgot to mention the interest fee.

Now we’re shackled with debt, a heavy chain,
While the bankers count their riches, without disdain.
Oh, the irony of knowledge in this wretched plot,
Where education’s pursuit becomes a tangled knot.

So let us raise our voices, filled with disdain,
And mock the system’s greed with a sarcastic refrain.
For in this land of learning, it’s crystal clear,
That student debt’s a problem we should all fear.

But fear not, fellow scholars, let’s stand tall,
And fight the battle, united, one and all.
With laughter as our armor, sarcasm our sword,
We’ll navigate this maze, oh, the tales we’ll hoard.

So, dear debt-laden comrades, take a stand,
And let our voices echo throughout the land.
For student debt’s a problem we can’t ignore,
And with wit and sarcasm, we’ll break down the door.