A Wild Student Loan Payoff Plan

“I feel I kind of ruined my life by going to college; I can’t plan for an actual future.” Gazing forlornly out the window with her cat by her side (who has pets while under a mountain of debt?) Jackie Krowen, 32, of Portland, Oregon, discusses the student loan burden acquired in her education to become a nurse.

hitchhiking“Special Report: the Student Debt Crisis,” the latest front-page story in Consumer Reports magazine, attempts to paint a sobering and sympathetic picture of various students that have fallen victim to the conspiring powers benefiting from the billion dollar student loan industry. Several graduates are profiled, their current salaries contrasted with their remaining loan balances, with everyone’s predicament inevitably similar: a future shackled to debt with no end in sight. Young people in the article proclaim they’ll never get married, they can’t start a family, they can’t buy a house, they can’t start living. If only they’d known when they were 18 what they were getting into; if only the loan companies and the government didn’t make it so easy to get fast money, if only they hadn’t been talked into getting a degree that hasn’t paid off as readily as they thought.

But the ability to make decisions that affect the rest of your life at 18 is not the tragedy. For a very long time, kids have been able to marry, sign up for war (and be signed up), smoke, tattoo themselves, make large purchases, enter into debt of all kinds, and so much more tomfoolery at this young age.

The loan companies’ natural incentive to make gobs of money through high interest rates and extended payback plans is also not the tragedy.  Business is amoral, neither moral nor immoral. Consumers willingly engage in business with companies of their choice, on the companies’ terms. We have all make both wise and poor decisions with our money, sometimes with months’ or years’ worth of earnings, but that still does not put the consequences of these decisions on the shoulders of the businesses with which we exchanged money.

I think the tragedy is how we’re raising children to be children much longer than the time when crucial adult decisions start crashing in, making the years of discrepancy between legal adulthood and actual mental and social adulthood dangerous to the kids living in this uncomfortable gray area.

student behind bookAnd I say “kids” not as an insult to twenty-somethings, but simply as the most accurate term for this unstable and often unprofitable time in young Americans’ lives. It’ll always be fun to be young, but right now in our history, it’s also a time of deep uncertainty. When I was in high school and not too many years later when I taught high school, I recognized it everywhere among 16-20 somethings: shaky optimism at best and a sense of shame of having no idea what they were doing as they were thrust into the “real world.”

As the norm, they had often been both indulged and despised by adults and kept from the most meaningful experiences that would grow them into adulthood: hard work, manual work, personal enterprise, being outside, being among a variety of adults or anyone besides their matriculated age and grade, having others depend on them, learning to run a household cooperatively with their parents . . . the list goes on and does not stop.

AmishThis is a far cry from the Amish teenager who, despite lacking in modern cultural savvy, can run a household, run a farm, run a business, get married, care for various animals and plants, and successfully perform a plethora of tasks to support and maintain their real life.

Instead, most American kids from an early age are given technology pacifiers and subjected to all-day state-run daycare, aka public school, which is incapable of representing real life and which does not teach any semblance of real life skills or critical, independent thinking.  And public school shouldn’t be expected to, and it can’t, but that’s another post.

I graduated with honors from a top high school in my large city and obtained a full-ride university scholarship, but it boggles my mind what I still wasn’t able to do at age 18 (and many times, much later):

  • write a check
  • cook a decent meal
  • drive stick shift
  • understand the basics of investing and personal finance
  • understand the difference between a debit and credit card (yikes!)
  • book an airline flight
  • rent an apartment
  • apply for a job without making an idiot of myself because I brought a resume to a waitressing interview
  • talk to a boss
  • resolve problems at work
  • start a small business of any kind
  • advocate for myself in health care situations
  • get anything done involving the government, including where to go to register a vehicle, renew a license, get a passport, etc.
  • much less, buy a house, understand various types of debt, or make any kind of important life decisions such as whether to attend college, what to study, and how to pay for it.

This list is ridiculous and sad, but I suspect that so many others will have their own lists of basic functioning skills and knowledge that they didn’t have upon reaching adulthood. And at the end of the day, these deficiencies aren’t funny; they have real, life-changing consequences.

Oftentimes, older adults today seem baffled and annoyed at the younger adult generation. Why can’t they just suck it up, put their nose to the grindstone, and get things done? But these grizzled adults may not understand that the young bucks going through the reality shock of an adulthood they were never prepared for are many times desperately trying to catch up in skills and knowledge in order to “get things done” without even knowing where to start.  And college tends to be the magic bullet for kids grappling with an uncertain future who have the determination and work ethic but don’t know where or how to begin.  Enter student loans.

Banks, the government, private loan companies, universities themselves–everyone is vilified, supposedly on the behalf of indebted students, for the massive $1.3 trillion student loan debt burden carried by 42 million Americans. However, the incentive for young adults to succeed does not reside with these entities and should not artificially be forced to. The incentive for young adults to succeed resides only within each individual young adult.

Instead of pointing the finger and bemoaning that these different corporate entities are accurately following their interests, we should instead be:

1) mentoring young people about money, debt, investing, non-college options, and all other real life skills and knowledge;

2) diligently saving money in 529s for the college expenses of our children and grandchildren, showing we do value college and we put our money where our mouth is; and

3) shining the light on inspiring stories of the many students who have paid off their loan balances in full and have gone on to lead enriching, empowered lives.

There is no reason but lack of imagination or lack of will that the young nurse from above can’t pay off her $152,000 student loans in four years. With a salary of $62,000 and no one to support but herself (and the unwisely acquired cat), she could easily live comfortably on $2000/month, throw $38,000 a year at her debt and be done. Add a side hustle, get a roommate, trim some expensive habits, sell the car and start biking, and she could speed up that four year plan even further.  What’s more, this same nurse who now does believe she has a future could then go on to save and invest that same $38,000 a year, presuming no raise, windfall, or spouse’s income at all, in simple conservative, diverse index funds, and retire early, roughly 11 years after debt payoff (age 47 if she wakes up now).

wild jumpThe tragedy may begin when parents outsource their parenting to the state and refuse to acknowledge their children’s needs for a real world education.  But the tragedy continues when we as young adults get stuck in our childhood’s deficiencies and resign ourselves to the foolish decisions made in our childhood’s aftermath as our destiny.

“Never be lazy, but work hard and serve the Lord enthusiastically. Rejoice in our confident hope. Be patient in trouble, and keep on praying.”  Romans 12:11-12