$150,000 in Student Debt and No Job

www.learnprosper.com is designed to give readers like you the information you can use for to prosper in your future. The key words are your and future. Unfortunately many of the headlines about higher education today are crafted to grab your attention and appeal to your emotions.

Buzz TodaySource: Daily Finance: Stories of Student Debt. William: “In just a few months I’m going to turn 62 years old”, says Williams who took out $44,000 in private loans to study psychology. He still has nearly $130,000 to pay off. Paul: Paul sunk more than $120,000 into undergraduate and graduate studies in visual arts, but he has yet to find a job in his field. He owes $150,000 today.Mark: “I wish I hadn’t gone to school,” says Mark, who graduated in 2005 with degrees in psychology and music and $875 monthly payments on $80,000 worth of student loans.

As a nation, student debt totals over $1 trillion dollars. The average student debt of college graduates is around $25,000. This means that there are millions of college graduates with debt that is manageable. What this also means, is that William, Paul and Mark are the exception, not the rule.

Nonetheless, it is valuable to examine the $150,000 and no job case to see what you can learn. The three men in BUZZ Today show us some important lessons.

The ROI that you can expect by earning a degree depends on two things. The first is the amount you pay for your education or the I in the ROI calculation. This you can reduce through a number of important ways that I explain in detail in Your Future is Calling.

The second factor in the ROI calculation is the R, or the Return you can expect to earn in a job. Here BUZZ Today provides some clues. Let’s turn to William, Paul and Mark. Go to O*NET and look up the pay and number of jobs for the identified areas of study: psychology, music and visual arts. The O*NET data speaks for itself.

Headlines about high student debt and no jobs grabs our attention. But it ‘s the lessons to be learned that are most important to you. It’s important to your future that you make key investment and return decisions before you enroll in any degree program. Your choices need to match who you are.

In a recent radio interview I was asked what advice I would give to a young person with $150,000 in student debt and no job. My answer was: “I have no advice to give them. I do not know of any good options once you have arrived at that outcome.” To impact this sad result you have to make better decisions before you begin your learning.

What we see in BUZZ Today, is that merely getting a degree – any degree at any cost, can actually be a very bad decision. The learning that impacts your future begins here.

There’s Debt Then There’s Debt

Student debt gets a lot of attention these days and rightfully so. As a country the total bill is over a trillion dollars and growing. Buzz TodaySource: The Wall Street Journal “Young people are racking up larger amounts of student debt than ever before”

The debt is real and a serious issue for both the borrowers and our nation. Here is why.

Under current law, our federal government only has so much money it can lend to college students. I know this seems counter intuitive in our world where the federal government just keeps on borrowing and borrowing as though the bank account is without end. It’s not. In the case of student loans it is easy to see the problem.

A college student can borrow only a specified total amount of loans. When those have all been used, there is no more to borrow. This defines a total amount that the government can lend in total. Over a trillion dollars of that lending capacity has been used. There is a trillion less that can be loaned in the future.

We have already looked at why this is a serious issue for the borrower in the earlier post titled “Debt”. But though we have talked about one aspect of the issue, let’s return to look at it from another perspective. You can reduce the amount of debt needed to earn your degree in the first place.

When you buy a house, you consciously take action to manage the amount of debt you take on with the purchase. In the case of the house purchase you have professional help. The bank is looking over your shoulder. They will not allow you to take on too much debt. They do this by looking at your credit score which tells them about your repayment history. This is to help them determine if you are a good risk which means they have data that shows them you are likely to repay your loan back.

In the case of the home loan, the bank also looks at your personal income. This is to give them (and you) data on how likely you are to have the money to repay the loan. This protects them… and it protects you. It does so by protecting you from your temptation to take out more debt than you can handle.

No such factors exist when it comes to student loans. You are on your own.

Beware, the temptation to take on more debt than is manageable is real. Millions have already fallen into the trap.

So, when it comes to debt, not all debt is equal. Beware. Look hard before you leap into student loans. They can bite like no other.