In 2008, undergraduate college students were graduating with an average of $21,000 in student loan debt and $4,138 in credit card debt.
Guest Blogger: Alexis Bonari offers her point of view on student debt as a former student who attended the largest public university in the nation from 2003 - 2009.
While the amount of student loan debt has hovered around the $20,000 mark for the past decade, the level of credit card debt has more than doubled. Graduate students rank in even more debt thanks to the increasing costs of books and general amenities coupled with stagnating stipends.
While personal responsibility necessarily plays some part in the choices made by students to go into debt, why are we seeing such a huge increase in the amount of debt taken on by college students?
The answer breaks down something like this:
Predatory Lending Practices
From 2003-2009, I attended the largest public university in the nation. To this day I can still remember walking across the giant campus on the first day of class. I was propositioned by not one, but five credit card companies hoping to get me to sign up for credit through their institution.They offered me food, tee shirts, and one even offered me a heavily discounted IPod. Luckily, I knew better than to arbitrarily sign up for a credit card. Most of my contemporaries didn't.
While there's nothing wrong with marketing to college students, the lenders don't provide any information with the cards they essentially hand out on orientation day. Further, private student loan companies, another college campus staple, rarely distribute a sample payment schedule with their loan application forms. Most 18 year-old college students simply don't register that a 12% interest rate on $10,000 will mean payments of over $150/month
after graduation.
Lack of education concerning personal finance.
Personal finance courses are optional in high school. That needs to change. Health and sexual education courses are offered so that ignorant teens and young adults won't make mistakes that forever change the course of their lives. Does that sound familiar? Taking out too much debt at too high of an interest rate can change your life more than an unexpected pregnancy. Every graduating high school senior needs to know about the fiscal facts of life.
I knew people in college who couldn't balance a checkbook. That simply shouldn't happen.
Tuition rates that have quickly outpaced the minimum wage.
Private universities have become massive money making machines. Most of the choices made concerning university finances are made in the hopes of drawing in more students. Essentially, that boils down to building more flashy buildings and providing more "free" services. Student tuition funds these building projects. Since most of the student body is going into debt to attend college, the University is in a position to raise tuition indefinitely. Most students won't realize that they've been shafted until graduation, and by then it's too late to protest.
In years past, a motivated student could take on a full-time job over the summer and save up enough money to cover their tuition for the coming year. Those days are long gone.
Unrealistic expectations about entry-level salary.
Since universities are completely numbers-based, they tend to oversell the benefits of their service. University guidance counselors quote numbers in the range of $50,000.00 for a starting salary in a technology related field and $35,000-$40,000 for a liberal arts related field. While these kinds of entry-level jobs do exist, they are few and far between. Many college graduates are struggling to find a job in their field, let alone one that pays well and has benefits. If students have a more realistic image of what their future earnings will be like, they will be less likely to take on excessive amounts of debt.
Personal responsibility, education, and responsible lending practices are all necessary to enable the younger generation to create good credit practices. Current trends destroy young peoples' futures before they even start their first real job.
By Guest Blogger: Alexis Bonari,
A blogger who spends much of her days blogging about Education and CollegeScholarships.
Guest Blogger: Alexis Bonari offers her point of view on student debt as a former student who attended the largest public university in the nation from 2003 - 2009.
While the amount of student loan debt has hovered around the $20,000 mark for the past decade, the level of credit card debt has more than doubled. Graduate students rank in even more debt thanks to the increasing costs of books and general amenities coupled with stagnating stipends.
While personal responsibility necessarily plays some part in the choices made by students to go into debt, why are we seeing such a huge increase in the amount of debt taken on by college students?
The answer breaks down something like this:
Predatory Lending Practices
From 2003-2009, I attended the largest public university in the nation. To this day I can still remember walking across the giant campus on the first day of class. I was propositioned by not one, but five credit card companies hoping to get me to sign up for credit through their institution.They offered me food, tee shirts, and one even offered me a heavily discounted IPod. Luckily, I knew better than to arbitrarily sign up for a credit card. Most of my contemporaries didn't.
While there's nothing wrong with marketing to college students, the lenders don't provide any information with the cards they essentially hand out on orientation day. Further, private student loan companies, another college campus staple, rarely distribute a sample payment schedule with their loan application forms. Most 18 year-old college students simply don't register that a 12% interest rate on $10,000 will mean payments of over $150/month
after graduation.
Lack of education concerning personal finance.
Personal finance courses are optional in high school. That needs to change. Health and sexual education courses are offered so that ignorant teens and young adults won't make mistakes that forever change the course of their lives. Does that sound familiar? Taking out too much debt at too high of an interest rate can change your life more than an unexpected pregnancy. Every graduating high school senior needs to know about the fiscal facts of life.
I knew people in college who couldn't balance a checkbook. That simply shouldn't happen.
Tuition rates that have quickly outpaced the minimum wage.
Private universities have become massive money making machines. Most of the choices made concerning university finances are made in the hopes of drawing in more students. Essentially, that boils down to building more flashy buildings and providing more "free" services. Student tuition funds these building projects. Since most of the student body is going into debt to attend college, the University is in a position to raise tuition indefinitely. Most students won't realize that they've been shafted until graduation, and by then it's too late to protest.
In years past, a motivated student could take on a full-time job over the summer and save up enough money to cover their tuition for the coming year. Those days are long gone.
Unrealistic expectations about entry-level salary.
Since universities are completely numbers-based, they tend to oversell the benefits of their service. University guidance counselors quote numbers in the range of $50,000.00 for a starting salary in a technology related field and $35,000-$40,000 for a liberal arts related field. While these kinds of entry-level jobs do exist, they are few and far between. Many college graduates are struggling to find a job in their field, let alone one that pays well and has benefits. If students have a more realistic image of what their future earnings will be like, they will be less likely to take on excessive amounts of debt.
Personal responsibility, education, and responsible lending practices are all necessary to enable the younger generation to create good credit practices. Current trends destroy young peoples' futures before they even start their first real job.
By Guest Blogger: Alexis Bonari,
A blogger who spends much of her days blogging about Education and CollegeScholarships.
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