Don't Be Like Me: How to Avoid the Suckery That Is Student Loan Debt
"The modern implement of imposing slavery is debt." - Ezra Pound
The Myth of Upward Mobility
Nobody bothered to tell any of us this a decade ago (although I guess ol' Ezra deserves credit for at least trying long before that), but the perceived importance of a modern formal college education may be the most coercive tactic ever designed to ensure the permanent voluntary obedience of the populace. The accepted fairy tale is that earning an undergraduate or advanced degree through years of hard work and intense academic instruction will translate into immediate dividends in the form of a well-paying position with ample opportunity for upward mobility. The truth is not quite as romantic or imaginative as a modern day Disney reboot, but it's still just as effective at championing mindless conformity as any of the original Grimm brothers' tales.
Unfortunately, millions of 20-somethings have uncovered the lie of education far too late. Having already bartered away their experiences in favor of education, their little heads are now chocked full of useless little information, while their little wallets are now tasked with a staggering bill, leaving their little souls crushed by big money capitalism. They calmly sit at their cubicles silently fretting about their past due bills, or, worse yet, they wander through the virtual portals of online job sites, unemployed and desperately yearning for a call back for even the most menial and low-paying jobs.
The youthful, idealistic students of yesterday have rapidly decayed into crotchety cogs in the wheel within just a few short years of graduation. Karl Marx said that religion is the opiate of the masses (well, he kind of said that anyway), but it appears that student loan debt has become the hangover of the party; it seemed like a good idea at the time, but now our temples are pounding with one massive communal headache.
Competence Matters Not
Hate to break it to ya kids, but a Bachelor's degree is the new high school diploma, which, in turn, makes a Master's the new Bachelor's, and so on and so forth. Therefore, the premium that you place on your educational accomplishments no longer squares with the perception of most employers, and that's just the reality in which we live. For instance, I have a good friend who recently graduated with an MA in English, who is, coincidentally, the smartest person I know. This brilliant young mind currently spends sporadic six-hour shifts behind the register at a Family Video just trying to pay his rent. His competency matters not in today's workforce, unless you consider movie rental suggestions a career skill.
The sad reality is that there's a hopelessly clogged bottleneck for jobs in the corporate marketplace. This is due to a number of factors, including massive state budget cuts throughout the country, outsourcing in the global market, technological advancements that eliminate the need for a human element, and my personal favorite, nepotism - an age old practice that is rumored to involve handshakes, golf, and martinis.
I'm assuming that, for Wealthy White Male America, student loans are literally the coolest thing ever. They ensure the stasis of the middle class, provide huge profits for banks and other lenders, and don't affect their own offspring at all. The $100,000 check that Uncle Steve can cut as a birthday gift for for his brat nephew to spend 4 years at Yale is chump change for the capitalist elite. So, for the rest of us, it looks like it's either brilliant entrepreneurial innovation or college and the inevitable student loans that come along with merely trying to level the competitive field.
Based on my personal track record, you'd think that I'd be the last person in the world that you would want giving you financial advice, but I've learned a lot from my hellish experiences with student loans, and I've packaged that empirical knowledge with an article I discovered on Yahoo! News this morning that had several great tips for managing student loan debt in order to pass on a few words of "old man been-there-done-that" wisdom.
Managing Your Potential Nightmare
The first piece of advice I would give would be to stray from student loans entirely. I realize this is an impossible task for most who want to pursue their education, but it can be achieved (at least partially) by recognizing the importance of academic performance in high school. It's extremely difficult for a teenager to realize the importance of taking a shower in the morning, much less having the foresight to recognize that the decisions they're making in the classroom could potentially affect their bank accounts for the rest of their lives. Stellar grades can lead to lucrative financial packages at state universities and private colleges, so the first step in managing student loan debt would be to avoid it entirely by hitting the books early and often before a student even begins applying for schools.
However, if you were like me and struggled to fit your head on straight as a young buck, here's the single most important thing to remember when applying for loans: There are two types, federal and private, and opting for the former rather than the latter could save you a lot of stress in the future. Federal loans can be either subsidized or unsubsidized, but they always have lower interest rates than their venomous counterparts. In addition to several federal relief programs, they also offer the benefit of deferment or forbearance if you're unable to find gainful employment upon graduation. In my experience, dealing with federal loan representatives has been much smoother than the vampires parading as account managers with private lending institutions. Also, most private loans have fluctuating interest rates that can be hiked drastically at their own discretion. So, unless you absolutely have to borrow from a private lender, it's best to stick with Uncle Sam (at least on this one).
If you do opt for student loans, keep in mind that every cent you borrow will have to be paid back in some fashion, usually with rising interest rates. It's a pretty awesome feeling to deposit the remainder of those loan checks into your once-staggering checking account, but don't get too carried away. Remember that the money should be reserved for living expenses such as rent, groceries, car payments, etc. It's not a crime to order the occasional pizza with your loan money, but it's best to avoid buying shots at the bar for classmates whose parents are likely paying for their wasted semesters or splurging for those herbal studying supplements that I've heard so many college kids like to smoke.
Not everyone is lucky enough to land their dream job the day after they graduate, but there do exist safeguards to protect you from defaulting on your federal loan if you struggle to find the perfect job for a bit. Aside from deferment and forbearance options, federal loans offer something called Income-Based Repayment (IBR). This allows for the borrower to set their repayments at 15% of their annual income, provided they are dealing with "a partial financial hardship." This means that the amount owed is greater than 15% of your income. Furthermore, if you remain in the program, the remainder of your loan will be forgiven after 25 years of scheduled payments. Better yet, President Obama's "Pay As You Earn" program seeks to cap payments at 10% of your income and could forgive all the remaining balance after 20 years of payments. This may not seem like a probability now, but you never know what the future may bring, and, for many, this program has been a godsend.
In some cases, the profession that you choose could go along way toward lessening the impact of your student loans. For instance, there are dozens of public sector professions that use loan repayment forgiveness as a motivation to enter specific industries. For most of these, an employee is required to make 120 payments (or 10 years' worth) on their loans, at which time, the remaining balance will be forgiven. Participation in one of the Public Service Loan Forgiveness programs is usually limited to individuals working for a government agency or a non-profit organization such as the military or public education system. Therefore, if you know early on in your academic career that you want to major in education, criminal justice, or some other form of civil service, make sure to ask your financial aid advisor which loans will be most beneficial to you in both the present and the long term.
Pursue Knowledge, Not a Paycheck
As Socrates said, "Education is the filling of a flame, not the filling of a vessel." If it's facts you're interested in, I'd say that you can learn more from an episode of Teen Jeopardy than any anthropology or history course. However, if you value the pursuit of knowledge for the sake of understanding processes and stoking your creative fire, then you probably already have what it takes to be one of the true leaders of tomorrow; your education will only serve to get you in the door. And while many of our great leaders have historically been wealthy men and women, riches are by no means a prerequisite to making a lasting impact on the world.
Be careful in choosing what you really want to do with your life, and make sure to plan ahead for the financial hell that is student loans, but don't ever let something as meaningless as money keep you from pursuing your dreams - even if that means having to pretend to believe in the fairy tale that a formal education is the means to achieving a better way of life for four measly years. As you go about earning your degree, remember that learning truly is its own reward. If you forget that, the money you will have borrowed to realize your goals will truly have been spent in vain.