If you’re trying to avoid being in debt, you have probably made some not-so-easy decisions: cutting your credit cards, selling your car, making sacrifices in your budget. But according to a recent report from the Federal Reserve Bank of New York (FRBNY), student loan debt outweighs both credit and auto debt, which prompts the question: Is staying out of debt worth sacrificing your education?
Student Loan Debt, Now
The outstanding student loan balance, which now stands at $870 billion, is more than the total auto loan balance ($730 billion) and credit card balance ($693 billion). Of those in debt, almost 40% are under the age of 30. The average student loan balance per borrower stands at $23,000.
While an education and a college degree oftentimes serve as a gateway into a successful professional career, at the very least providing training and skills that will be of use in making a living, it is also, now, a gateway into debt. The first financial lesson college-aged kids are given about money isn’t just to borrow it. It is that they have to borrow it. And while this doesn’t have to be the case, the rising cost of tuition makes affordable education hard to find.
Will this Change?
Thankfully, people and institutions are paying attention to the growing concern. In an address in January, President Obama said he wants colleges to lower tuition; the President has also announced various policy changes to make managing student debt easier, mainly by allowing students to cap their (federal) loan payments at 10% of their discretionary income. Unfortunately these changes do not protect borrowers from private loans – ones distributed by the less sympathetic financial institutions throughout the country.
While changes may be coming, potentially aided by the Consumer Financial Protection Bureau’s student loan complaint forum, it’s hard to imagine a Utopian scenario in which everyone can afford to attend college and leave it debt-free. So, what’s worse: trying to make a living and a career without a college education, or graduating into a job market with an unemployment rate of 8.3% already $23,000 in debt?
The decision, of course, isn’t easy, and it’s one that teenagers and parents must make every year, every semester, every day. If you’re trying to decide how to pay for college – or whether to pay for it at all – there are many ways to approach the issue. Honestly consider your options and their consequences and decide what’s best for you and your family. And if you do take out a private student loan, make sure you pay your balance on time every month.
PerkStreeters, what do you think: Is it better to have both debt and a degree, or to have neither at all? Share why in our comments section below.