Some like to blame Millennials for a lack of preparation to pay back their student loans, saying that they would rather make memorable experiences than student loan payments. However, the truth is that generations Y and Z are dealing with the worst student loan crisis in history. Student loan debt has been steadily increasing for over twenty years now.
In 1994 the average student graduated with around $10,000 in debt, whereas currently, the average student is graduating with over $35,000 of debt. And that is only Bachelor’s degree students, those who re-specialize or go on to do Master’s degrees or PhDs accrue even more debt. As Time writes, the trajectory of this crisis say student loan debt exceed “credit card debt in 2010 and auto loans in 2011, and it passed the $1 trillion mark in 2012.”
A Millennial’s Student Loan Reality
A recent college graduate just starting in her career – let’s call her Jeanette – explains this dilemma to us quite clearly. Like many of the graduates in her position, Jeanette came from a low to middle income family that could not help her with school expenses, so she had to take out a student loan in order to finance her studies. Although she worked all the way through high school, her savings were only enough to buy the laptop that she needed for school, her books for her first year, and half of her first year tuition.
Within the four years of her bachelor’s degree she also spent free time applying for every possible bursary and scholarship, gaining $200 here and $300 there. She rented a small room in a house shared with 11 other girls nearby campus and never wasted money on campus food, choosing instead to cook at home. She then applied for multiple scholarships to pursue her Master’s degree, two of which she was approved for, but only one of which she could accept. It nevertheless payed for her entire Master’s degree. Throughout all of this effort to seek out alternatives to a student loan – doing just about everything right and thinking and planning ahead – she is still sitting on top of $32,000 of student loan debt.
After completing her Master’s degree, she struggled to find work in her field, even after already gaining experience in the field through internships, freelance work, guest blogging, and creating her own blog through a platform like this in order to establish herself in her industry. On top of accepting one internship after another that didn’t pay, she worked multiple low-income jobs, like retail sales, and was still not making enough to make the minimum payments on her student loan. Now four years later, she finally has a job that gives enough for her to pay back her minimum – which will see her reimbursing her loan in 15-20 years – but she still makes less than $20,000 a year after taxes, so the minimum is all that she can pay.
This is one story that applies to thousands of students in the exact same situation. It is a bit of a Catch 22, as they need the university degree to get a job, and then they need a job to be able to pay for the university degree, but the two don’t always work hand in hand. Often, students who are buckling under the strain of student loan repayments, are forced to look outside of their field and settle for a lower-paying position just to meet their loan payments.
Why It’s not an Us vs. Them Problem
This crisis needs to be seen as a larger social concern because rising student loan debt doesn’t just affect the students in question, but has crippling effects on the entire economy. Ultimately, these students in debt will see slower growth in their savings, pushing off things like buying a home, beginning their family, and starting a business or having available capital to put back into the economy.
Not only is this large demographic just entering the workforce unable to contribute some expendable income back into the economy, but the majority of these loans are federal and add to the overall national debt. Forbes writes that the current federal deficit in the U.S.A. is “$16.7 trillion,” and out of this overall national debt “student loan debts measure at 6%.” The significant burden that this portion of debt adds to the national whole will impact economic growth, slowing it down even further. A slow developing economy means a lack of available jobs and the ability to create new ones. And this lack of work results in the underemployment of college graduates and sometimes unemployment, forcing them into a situation where they have to default on their loan altogether.
If graduates do default on their loans, the burden comes back to the tax paying community to shoulder. Furthermore, as economic growth dwindles, interest rates rise, making even accessing this capital for a loan to begin with increasingly more difficult. It is a vicious cycle that none of us are exempt from.
So let’s stop blaming Millennials and calling them “financially irresponsible,” and let’s start a conversation instead of how to bring the student loan debt situation out of crisis. Telling students to buckle down and be more savings-savvy is merely attempting to treat the ailments without curing the disease. Moving forward to a future where students are no longer at risk of repaying student loans into their 50’s requires a re-thinking of our higher-education system and our social responsibility towards financing the education of the next generation.