It’s an Unfortunate Place We’re At, But the Reality is We’re Here
Today, parents fight the fight that our students should be able to go to any school they get accepted into, cost be damned. Many students feel this way too. Of course, cost always played into the conversation to some degree when we went to college. However, prices were relatively cheaper in the past.
We benefitted from a less expensive education no matter where we attended. And we passed on this notion to our students to feel like with their hard work, they could go to any school they choose to. Unfortunately, those days are past. The cost of an undergraduate education has risen so much that parents and students have to have hard conversations going forward.
The student’s hard work in high school now becomes more about establishing a strong work and financial ethic for the future at any college – even one they never intended on their list. That’s because the cost of college means we can’t just go anywhere if the future cost is so great that it undermines the student’s ability to save and build wealth.
And that’s what we are talking about here. We’re seeing students coming out of undergraduate college with large debt loads. And some of those students will go on to get advanced degrees and stack on even more debt.
We can run the numbers and look into the future to see what this will mean for the student. And for students borrowing large amounts of money, the future doesn’t look good. As soon as they step foot off campus with their degree, the student loan clock starts ticking. They’ll see what the total monthly payment is for the next ten years. If they’re lucky, they’ll land a job that pays enough to allow them to make the entire payment each month and still have money left over after all other bills. But for a number of these students, the high monthly payment means they will have no choice but to pull the trigger on a loan consolidation or refinancing and extend their term out from 10 years to 15 or even 20 years into the future.
And all during this time, they will wage a war in their minds as to whether it’s good to just make just the monthly payment and try to save separately or use all reserves to accelerate payoff of the loan. That assumes there is money left to save.
Budgeting will be critical if any student with high debt is to weather this period successfully and come out okay. Many students will likely take years to learn and implement the value of budgeting. In both circumstances, students will suffer from the fact that they can’t save at levels they really need to build for a healthy retirement until much later when they have to make up ground for years lost due to student loans.
As parents who care about our students, we have to help them see the hamster wheel in front of them and make choices that allow them to avoid stepping into it as much as possible. We need to help them to see that there is a smarter way. Unfortunately, it requires tradeoffs, some sacrifices and delayed gratification. We may not be able to save them from all of the pain but we can arm them with the perspectives they need to make decisions that lessen the adverse side of the college experience – paying greatly for it later.