via Moak: Millennials delay milestones due to student loans.
If you’re a parent trying to help your college student navigate the choppy waters of financing college, it can be daunting. The Federal Financial Aid form, known as FAFSA, is itself tricky and often infuriating because of the maze of online security you must navigate. And if you happen to be selected for random “verification” of your FAFSA data (as we were this year), that can add even more gray hairs to your head.
Unless your student is among the lofty few who cries when she gets anything lower than an “A” or if you’re either independently wealthy or below the poverty line, you might not be stressing out over it. Scholarships, savings and grants will usually fill the bill in those cases.
Some of us were smart enough to start putting money aside when they got their little bundles of joy home from the hospital. But for most middle-class families, paying for college usually requires an eclectic mix of scholarships, mason-jar funds, largesse from family and friends — and loans. Today’s average college graduate will have barely had time to unpack boxes in their new apartment (or their parents’ house) before they get their first bill from their student loans.
Increasingly, that debt is putting a substantial crimp in their plans. While they may be young and idealistic, they may have to put off saving the world for a while because they have to pay back those loans.
A new study released by Bankrate.com shines some light on this disturbing trend. More than half of millennials with current debt from student loans are reporting they have “delayed major life events” because of that debt. Those milestones include rites of passage such as buying their first home or car, starting a retirement nest egg or even getting married and having children. The trend is not just present among millennials; older Americans are also likely to be carrying student debt well into middle age, where it can potentially crash into retirement.
Economists and policy makers should worry about this, because the longer new graduates wait to enter the economy, the longer it takes them to start contributing, investing in the economy on a larger scale and paying taxes.
“Student debt is often portrayed strictly as a millennial issue, but the truth is that Americans of all ages have put their lives on hold due to student debt,” said Steve Pounds, Bankrate.com analyst. “Delaying major life milestones such as buying a home or saving for retirement doesn’t only affect the individual and his or her family; it also has ill effects on the overall economy.”
A key finding about the study is that many people with student debt never really received good information about the risks and responsibilities of student loans in the first place. As with any credit, responsible borrowing also carries with it the necessity of understanding just what you’re getting into. Deferral, (which allows students to defer making any payments until after graduation) can provide a false sense of security, and is really just kicking the can down the road. But eventually, the bills will come.
More than half of student loan borrowers in the Bankrate.com survey say they didn’t receive enough information or advice about the financial risks of taking on education loans. Sixty-six percent of millennials, more than any other age group, have this complaint.
A lot of people are in this boat, and it is getting a lot of attention. Famously, one man named Lee Siegel decided earlier this year he’d had enough after being hounded by bill collectors trying to collect on 40-year-old student loans. He announced in a New York Times op-ed that he was not going to pay any more, and urged others to do the same.
His stance garnered him near-universal (and justified, in my view) outrage from nearly all quarters, but does point to an increasing frustration with a system that encourages people to finance skyrocketing education costs with loans against their future earning potential. And the aforementioned study details some of the implications of encouraging young people to begin their careers in a financial hole.
The fact is, though, there are alternatives to financing your college education with unmanageable debt:
Make sure you exhaust all alternatives. Many sources of funding, such as grants and scholarships, don’t have to be paid back. You don’t necessarily have to be in the top tier of your class to qualify, and some programs are specifically to help students from a particular geographic area, course of study or other criterion.
A four-year college may not be necessary. Mississippi has one of the best community college systems in the country, many of which offer programs to qualify you for all types of careers — many of them lucrative. And community colleges can be more affordable than four-year institutions, and have exclusive financial aid offerings as well. Consider military programs as well — many of them will finance college for you in exchange for a specified commitment after graduation.
Shop wisely. If you are getting a loan, shop around. Some private lenders have programs that offer excellent interest rates and options.
Mississippians have an excellent program that helps link Mississippi families and students with information and advice about going to college. Get2college.org can be reached at (601) 321-5533, in central Mississippi; (228) 875-4441 in south Mississippi; and (662) 349-2789 in north Mississippi. It’s a must-visit for any family who is trying to navigate the college-financing maze, and is well worth your time.