The American Nightmare: Student Loans

The American Dream has been defined as “the belief that with hard work and the freedom to pursue your destiny, you can achieve success and provide better opportunities for yourself and your children.” A 2014 USA Today article states that the price tag for the American dream is around $130,000/year.  What if we don’t make that sum of money?  Many Americans make up for the shortage with credit cards, personal loans, and most often student loans.

Many of us also work hard, earning a reasonable income. And if we do not think ourselves successful, we want to make sure that our children will be.  But how?

For many, the “better opportunities” for their children mean sending their children to college–and not just any college, but a well-known, four-year university.   While this sounds like a great deal for our children…

…this is where the American Nightmare begins: paying for education

You or your child is making an investment in their future.  You are purchasing a product when you buy education.  So what is the return on that investment (ROI).  Go here to see colleges’ ROIs.

Problems arise because colleges and universities have no incentive to reduce costs for attendance.  That, coupled with many high school seniors’ expectations that they will need to leave home to attend university, has made for a perfect storm.   And since their parents had that full four-year college experience when they were that age, they feel compelled to offer this to their children.  At an extreme cost.

Hence, student loans.

These perpetual debt burdens are especially heinous.  If a student majors in a field without job opportunities, he will find himself unable to find a job and unable to pay back the loans.  Even if a good job is found, there exists the real possibility that he could be downsized or injured/sick and out of work.  Though he can get a hardship deferral on his loans, they will always ALWAYS be there and with extra interest added in.  Student loans will be there through the tough times, even through bankruptcy filing. 

Student loans are not bankruptable.

What is the alternative?

We must think very long term when doing college planning and must ask ourselves as parents the following two questions:

  1. Is my child ready for college, or does he need to work for a while or attend trade school?
  2. Are the first two years of college worth $50,000 or more in student loan debt?

If you answer NO to either, consider an online college or junior college.  Either option can potentially save a family or student thousands upon thousands of dollars.   According to the CollegeBoard, the average annual cost of a 2-year junior college is less than $3,000, while the average university can cost upwards of 10 times as much.

Let’s be that generation who makes the change and makes the logical and wise choice, not pressured by society or by our children for that matter.

It’s time to wake up from this Nightmare.