The Piggy Bank: Effects of Student Loan Debt
Today’s topic is something that is near to my heart. Student loan debt has had a significant effect on my life and the lives of many other Americans. In fact, “today, there is a student debt class like no other: about 42 million Americans bearing $1.3 trillion in student debt”, according to Consumer Reports, “that’s altering lives, relationships, and even retirement.” This is found especially true in our industry of home financing, Ryan Ramsey, one of Stockton Mortgage’s top Mortgage Bankers recounts, “I have had many conversations with college graduates, that due to student loan debt, it will be years or decades before they will be able to buy a home.” Obtaining loans to cover one’s education costs is often a decision made early in our adult lives and sadly, as mentioned several times in this series of blog posts, young people don’t have enough knowledge when it comes to their finances to make solid, confident decisions. So, we find that many end up in a situation far from what we imagined—what we trusted, our college education, to give us a better future than that of our parents, leaves us with a large monthly bill and fear of inability to pay. In fact, Consumer Reports shares that many do end up defaulting in their payments, “one in four borrowers are behind in their payments, according to the Consumer Financial Protection Bureau, with an estimated 7.6 million in default.”
This blog entry is not meant to highlight the doom and gloom of the student loan crisis, but we do want to highlight the importance for young adult children and their parents to understand the long term affects that student loan debt can have on a person’s life. By considering a few realities of real life college graduates who took out loans to finance their education, perhaps it will encourage those who are investigating options for financing to consider, more fully, the long term affects. Personally, when I graduated from a private university (first mistake because of its huge price tag), I expected to move into a management role, after all, I’d been working in my field of study for all four years while going to school. But that did not happen. Instead I continued making $11.00 an hour and now had a $700.00 monthly student loan payment. I ended up living with my parents most of my twenties and didn’t see any way of ever being able to afford to own a home. Gradually, as my income increased from promotions at work and I gained more knowledge about living on a budget, I could take control of my finances and start saving. However, I am still left with a student loan payment that is comparable to my mortgage… just think, I could own my home and a vacation home right now (well, maybe!).
In looking for other’s experiences in living with student loan debt to put together this blog post, I found an article entitled, “Faces of Student Loan Debt”, by Consumer Reports. In it you can find highlights of others’ real-life experiences to give you or your loved ones a true picture of what life after college could look like. Jackie Krowen was one of those stories who caught my attention. Krowen, who graduated as a nurse, states, “I feel I kind of ruined my life by going to college. I can’t plan for an actual future.” The article goes onto mimic the same sentiments shared by many, “Looking back, Krowen realizes she had no idea what she was doing when she took out her loans. Her parents, she says, encouraged her to borrow because the interest rate was low. Like many young borrowers, she didn’t know how much interest could accrue. “It didn’t make sense to me,” she says. Now she understands. Her balance is currently $24,000 more than what she borrowed. Buying a house isn’t’ an option, she says, and the idea of having a family seems financially impossible. She fears it will be that way for the rest of her life.”
Large financial decisions are very personal and need to be made with care and consideration of all the factors. In sharing a couple personal experiences, I hope that it has been encouraging for anyone contemplating the financing options for your education to consider the long-term effects of student loan debt. Ultimately, Stockton Mortgage, wants all to be able to achieve their dreams; their dreams of having a family and purchasing a home of their own. We don’t want misinformed financial decisions made in early adult years to hinder the achievement of your dreams. All this said, if you currently have student loan debt, it does not mean that you cannot be a homeowner; I can say this from personal experience. Mortgage bankers recognize that there are limitations in place when someone has a large amount of debt, however, Stockton’s mortgage bankers would like nothing more than to consider your options for home ownership if you find yourself in this situation. After all, they helped me! To find someone in your area, please visit our site, www.smcapproved.com