The Catch 22 of College: How the Best 4 Years of Your Life = 21 years in debt.

It’s a golden promise we’re all told in high school — college guarantees us a top-notch education, endless opportunity, permanent friendships, and personal freedom to pursue the career of our dreams. But these days, it also means 21 years of financial struggle, equating to 1.5 years of post-grad salary and $51,960 decimated.

And, we’ve gotten used to this kind of headline. It is deafening how much attention the student debt crisis gets now. Google Trends data shows that searches containing ‘student debt’ have steadily risen far above ‘mortgage debt’, doubling its search footprint, over the past four years.

Student Debt Creeps into Search Terms

Source: Google Trends

This gradual trend is unlike the sudden subprime mortgage crisis that no one saw coming:

Source: Google Trends

That’s because the student loan crisis is entirely different than the sub-prime mortgage crisis. The sub-prime crisis was epitomized by a 778 point single-day slashing in the DOW Jones Industrial in late September 2008, followed by over 1,000 points dropped over the following 16 days. It was a violent financial panic, reflected in the spikes of the above ‘subprime loans’ search chart. Where the sub-prime crisis was immediate, the student loan crisis is long-term. Where bankruptcies flooded the market then, inescapable debt floods the market now.

Debt Continues to Outpace Annual Income

Recent data demonstrates this attitude of looming dread. One article’s shocking data shows the student debt crisis will outpace average annual income in 7 years. Maybe we’ll correct the negative course by then?

Here’s why we need to correct the trend now — the awful truth is that we already passed that mark, and recent grads already have to carve off an entire year’s salary to pay off their loans. Let me explain the math: since debt is generally defined as principal balances, many aren’t taking into consideration the interest payments. If you recalculate the average loan costs by taking the average loan term of 10 years, then costs are much worse over the life of the loan. Taking interest into consideration, lifetime loan costs crossed higher than average annual income in 2013.

Source: Pew Research Center, Brookings Institute. Average Interest: 6%.

What’s worse? It is actually closer to 1.5 years of salary that a graduate must pay over the loan’s life. The proof point — USNews in 2014 suggests that the average student loan pay-off is 21 years, not the average 10 year term. This means that more than 50% of student loan holders pay less than the recommended amount.

What does this really mean? What all this research shows is that the student loan crisis effectively dries up full years of a person’s income TODAY, and if the trend continues as others forecast, in seven years, much of recent grads’ consumer and savings power will vanish. In aggregate, millions of people that lose consumer power is a worrisome prospect for the largest consumer economy in the world. It means recessions. On top of that, it means that millions won’t be able to save for their family’s education or for retirement.

No Debt, Still Problems

And, there’s more bad news. Things look grim for people that don’t go to college. College has become the bare minimum for most entry level jobs, and loans have made college more achievable for many. These factors and the financial crises of the last 15 years have meant more competition for folks with only high school diplomas. People that don’t go to college have been on a downward spiral since 2000, losing 12% of their average annual income over the last 15 years.

Source: Pew Research Center

So, the catch 22 is obvious: don’t go to college and head towards the poverty line or go to college and be in debt until you’re 40. Pick your poison.

The Only Viable Solutions

The data says go to school, which is why the trend continues. But alternatives are sprouting up. The Peter Thiel foundation, featured this week on CBS’s Sunday Morning, makes the argument for dropping out and being an entrepreneur. Sounds great in theory, but in practice, it may only be achievable by a select few.

Additionally, there are a cadre of companies that are offering refinancing and fighting for changes in legislation so that employers can get tax benefits to help their employees pay off student debt. Some of us believe that the employer is the only practical partner to tackle this crisis and are crafting clever ways to partner with them and their employees independent of legislation.

What’s clear is that we don’t have 7 years to wait and see. This crisis is real now and we need to create real solutions.


Chris Moberg is the Founder & COO of TuitionSafe. ‘The 401k for Education’ helps employers attract and retain top talent through streamlined student loan refinancing, ongoing education, and college savings programs.

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