In my previous life, I worked for a Boston-based financial literacy organization that primarily served Millennials. We offered financial education classes and appointments with financial planners to help individuals make sense of their money and start working toward their goals. Nine times out of 10, when someone came through the door, they needed help managing their student loan payments.
We often heard stories starting with:
“I want to travel, but I can’t afford to take even a long weekend away. I work three jobs--one full-time and two side hustles--to cover my student loan payments.”
“I don’t think I’ll ever be able to buy a house; my student loan bill every month makes saving impossible.”
"My loan balance is out of control. Is there any way I can request student loan forgiveness?"
“Retirement? What’s that? I’ll be paying these private student loans off well into ‘retirement’ age.”
Student loan debt--and all the delayed life choices resulting from it--are, unfortunately, all too common across the country. And in Rolling Stone’s new story, The Great College Loan Swindle, journalist Matt Taibbi goes one step further, arguing that student loan debt is America’s “next financial black hole.”
He parses the student loan debt crisis into three key areas:
Together, Taibbi notes, “everybody wins in this madness, except students.”
“It really feels like the housing bubble and crash of 2008, in so many ways,” says Kevin Gillis, a Massachusetts-based parent of four. Gillis has gone through the college application process twice already and recommends families take a cautionary, realistic approach when it comes to financial aid packages. “For the students, there are little to no credit checks. No income verification, no job verification, no savings verification, no credit score, nothing. It’s just ‘can you fog a mirror and sign your name?’ It’s predatory, it’s easy money, Congress is benefiting from it, banks are benefiting from it, colleges are absolutely benefiting from it. And students can and most do benefit, but borrower beware.If you’re [applying], it becomes a matter of making sure that you don’t get caught up in the system, leading to a 10- or 20-year mistake or one that impacts your younger children who may be attending college.”
So how do you protect your family’s assets, but still ensure a four-year college degree is attainable? It all starts with level-headed decision making when it comes to the college decision. Be proactive and understand the net price of each college being considered. Know your student loan servicers, including federal student loans options and private student lenders, and read all the fine print for every element of your financial aid package. Once you've chosen your lenders, track your student loan balances and always stay in the know. Look at the return on investment for the degree programs considered, including rates for graduation, hiring, and starting salaries.
It also means having some really tough conversations, early and often. “You want to do the right thing, and it’s hard to disappoint your kids,” says Gillis. “It’s tough to look them in the eye and say we can’t afford your dream school, even if the student’s dream school is based on spending two hours on the campus.”
But these conversations, while tough, are incredibly necessary. After all, what’s worse--having an uncomfortable conversation now that leads to a more informed and affordable college selection, or a head-in-the-sand approach resulting in unmanageable debt?
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