Student Debt Isn’t Ruining Your Life
Student debt is the ultimate buzzkill. We worked hard in school and we found a decent job. And that means we should live the good life, without student debt hanging over our head. Americans owe over $1 trillion in student loan debt today, which is more than they owe on credit cards. It’s outta control, right?!
Well not according to Marsha Barnes, personal finance expert and Founder of The Finance Bar. Based in Charlotte, N.C., Marsha travels around the United States in the coolest school bus you’ll ever see to educate students on personal finance. She has a lot of experience, and a whole lot of thought-provoking insight.
When I asked Marsha about the problem of student debt, she quickly responded saying that student debt isn’t the problem. Wait, student debt isn’t the problem? Yup, I was surprised too. But as I continued to listen, it made tons of sense. Marsha says the real problem is our tendency to overspend when we get our first job.
Why Student Debt Is Our Scapegoat
Does the following scenario sound familiar? We see a salary for the first time and it looks like a lot of money. And as a college grad, we feel there’s a perceived societal expectation we need to fulfill. We get acronym anxiety, i.e. YOLO and FOMO, and becoming #instafamous finally seems attainable. So we buy a new wardrobe, purchase a hot car, eat at all the trendy restaurants and rent a luxury apartment we really can’t afford. Or instead of renting an apartment, we decide to pursue the so-called American dream of owning property and we decide to buy a big house.
And then things start to go downhill. We find a house we like, but then we find out the mortgage is $200,000. It’s as much as our student debt?! Then to top things off, we get our less than pretty credit card statement. We feel frustrated and defeated. So we pick student debt as the debt to blame. If it wasn’t for all the student debt, we could afford the lifestyle we deserve!
So, How Is Student Debt Not to Blame?
Now let’s unpack all this. How can Marsha say student debt is not to blame? She agrees it’s a lot of money. And she fully supports lower cost for college. But she still thinks we can be financially healthy even with the expense of student debt today. Student debt may be our largest debt, but it can be manageable when we don’t exacerbate the burden with other poor financial decisions.
First, Marsha says we have to expect that anything of value, such as good education, is going to have an associated cost. Second, we have to recognize that college is a business that has to stay profitable in order to keep giving value. Third, both students and their parents need better financial education and understanding of the true cost of college, particularly before choosing a school and also right before students leave college. And fourth, once recent graduates get that first job, they have to understand what their real take-home pay is after taxes.
How to Live the Good Life Even with Student Debt
Maintaining financial health doesn’t always mean depriving ourselves of things we want. Sometimes it just means making better decisions that save us money for those things we want. As an example, Marsha proudly described the decision of a high school student she counsels in North Carolina who was bright enough to go wherever she wanted for school. Instead this student decided to attend community college for a couple years so she could save money on tuition and then transfer her credits to her dream 4-year university.
We can reduce our student debt load in other ways too. Certain industries like government and nonprofits have student debt forgiveness programs. Also, some corporations help pay for school tuition and in some cases even student debt. However, Marsha cautions that some of these programs can be a double-edged sword. In cases where students receive the funds directly, it can lead to further mismanagement of their money.
Of course self-discipline is hard. Who wants to fly coach when your credit card can cover first-class? But self-discipline is a virtue that will help us and the generations after us sustain our desired lifestyles for the long-term. While student debt is certainly expensive, Marsha believes lack of solid financial education and living beyond our means are the real culprits. So, keep educating yourself and give your credit card a rest. Your future self will thank you, along with many others!
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