$1,400,000,000,000 in the “Red” — where’s the data?

Author: Tom Smith, student loan data junkie, runs a blog on Quora

I don’t even want to count the number of times something to that effect has appeared in one of the headlines of major newspapers. Unfortunately I can’t help myself sometimes, and I went and figured it out anyways.

70 times in the last 24 hours, according to Google. That’s the number of times a news source or blog had an article with “Student Loan” in the title, and mention the $1.4 Trillion. Extrapolating out, that means we hear about this about 25,000 times a year. (I’m not even attempting to include Facebook, Twitter, or other social media mentions!)

This is not an article about the “big scary student loan monster”.

Talk is cheap. And it is very easy for a news station to regurgitate the big number to scare people.

My question: Where’s the data? More solutions. Less “crying wolf”.

I question the number anyways. Not because I don’t think there is an issue, but because it is too vague.

$1.4 TRILLION makes it seem like a big scary monster that won’t go away and will terrify us the rest of our lives. Much like the US Debt issue, it seems like it is too big to climb out of.

But that is just simply not true. If you listen to Dave Ramsey’s radio show, you know that there are people successfully paying off hundreds of thousands of dollars EVERY DAY.

The way to tackle it is to, as the old saying goes, “eat the elephant one bite at a time” — more specifically, we have to understand what part of the elephant we eat first. Are you an ear kind of person, or do you like to start near the tail?

For us, that means getting “into the weeds” on the debt situation, and understanding: (1) what is “bad debt”, and (2) what is “acceptable debt”.

Examples of “acceptable student loan debt” would be an undergraduate education in Molecular and Cellular Biology (MCB) from the University of Illinois at Urbana-Champaign, followed by pursuing an MD from Loyola in Chicago (or UC). At the end of that trail, the student may be $200K-$250K in debt, but guess what — average starting salary after residence will be upwards of $170,000.

According to my math, that would mean a rough “Payback Period” on the loan debt of 3–4 years, living on ~$3,000/month. And beyond that, the savings just hit the bank.

An example of bad debt would be a Hospitality degree from University of Illinois where the average salary is ~$35,000. They may only accumulate $50K to $60K worth of debt, but their rough “Payback Period” would be 20+ years, and they would live on less than $3,000/month.

How much of the $1.4 Trillion is “acceptable” and how much is not? I don’t know, but I sure am going to find out.


About the Author — Tom Smith is a data junkie, chemical engineer, entrepreneur with a passion for student loans. If you want more on student loan data that no one but Tom goes and finds, follow his blog on Quora here!

4 upvotes · Originally Appeared on Quora (Nov 8)

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