The Toxic Truth About Student Debt

Has Student Loan Debt Reached a “Tipping Point?”

Higher education was once one of the surest paths to a well-paying job and achieving the “American Dream.” However, much has changed about a college degree in America, including the cost. Despite the rising costs of a degree, college is still regarded as one of the ideal post-high-school paths. Yet, this is a costly decision for many new adults to make. 

There are dozens of options that young adults have to either ease the cost of college, or build their own career, and yet student loans remain one of the most widely used forms of assistance. However, many young adults have a limited scope of what they’re really signing when they agree to a loan and get saddled with mountains of high-interest debt.

Debt by the Numbers

While loans can be a great way to fund a highly-desired degree, and build the means to pursue an education, not all students have a full understanding of their loans. Upon graduation, many adults are experiencing mortgage-level debts. This can be a heavy burden for those who haven’t really entered the workforce fully. 

As you can see below, the average student debt by state is only about $38,000 or less. However, more than 3 million borrowers have debt higher than $100,000 and 800,000 of those borrowers have more than $200,000 of debt.

Source: TICAS

This is a significant debt obligation, and not something a student can simply work off over a summer like many used to be able to do. Many students will spend over a decade paying for school. This can stunt graduates’ abilities to make other important financial moves early on in life. 

Based on 2019 Q3 Fed information and U.S. Dept. of Education data:

  • $1.56 trillion: Total amount of US student loans.
  • $122.9 billion: Total direct loans in forbearance. This represents 2.8 million debtors.
  • $119.8 billion: Value of the direct loans that have defaulted. This represents 5.5 million debtors.
  • 45 million: Total number of US student loan borrowers.
  • $32,731: Average student loan balance. 
  • $17,000: Student loan balance (median amount). 
  • $393: Average monthly payment for student loans.
  • $222: Median student loan monthly payment.
  • 10.8%: Delinquency rate after 90-days without a payment.

Costs Aren’t Slowing Down

Rising college costs will continue to rise, which means debt obligations will only continue to go up. Finaid acknowledges borrowing is now almost inevitable. “Few students can afford to pay for college without some form of education financing.”

Although college may possibly improve one’s lifetime earnings, student loan indebtedness can present greater financial dilemmas. These unique financial obligations and their negative financial impact can last a lifetime. Of the $1.6 trillion in total debt, $1.37 trillion is money owed to the federal government. What’s additionally concerning is every 26-seconds, a student defers on their loans.

Source: Federal Student Aid

Most student loan debt is secure debt through the federal government. It’s almost impossible to erase it even with a bankruptcy filing (there are ways to reduce it, which we’ll explore further below). As College Scholarships says on its website: “Student loans are rarely forgiven since they are guaranteed government funds dispersed with low interest to all kinds of people with no credit history. You don’t expect the IRS to forgive you on all taxes that are owed, so expect the same treatment with your student loan.”

Regular Payments Don’t Always Amount to Much

These sizable and long-term obligations represent indenture for many Americans. Without loan forgiveness in bankruptcy proceedings, except in extenuating circumstances, the escalating debts can continue to stick around even in dire straights. It’s a toxic debt contract that can even extend beyond retirement. Based on Consumer Protection Financial Bureau data, seniors age 60 and older owe more than $86 billion in student loan debt.

So What Are the Options?

Despite talks in the current political environment, it’s unlikely that student debt will be replaced entirely, or that education will be free. Nor should we “plan” for that to be the case. Because as we all know, plans can change. And if things don’t swing that way, you or your loved ones don’t want to be caught unprepared. 

It’s an even better idea to look toward the future with a mind for preparation in a variety of scenarios, so that you can thrive no matter what. 

If you have a student getting ready for college, here are some things to consider:

  • Taking a gap year to work and save, especially if your student doesn’t know what they want to do with their degree. 
  • Investing in a business idea or entrepreneurial pursuit. 
  • Seeking a trade school. 
  • Earning credits for general education courses using CLEP exams.
  • Pursuing an Associate’s degree at Community College first.

Conclusion: Education Great; Debt Bad; Preparation Essential.

No one is arguing that gaining knowledge and improving skills aren’t valuable. What’s troubling is the data seems to show that the benefits aren’t improving even though costs are increasing. The critical distinction here is that college is no longer a universally wise decision. Some people are more entrepreneurially-minded, and we now live in a technological age that supports that. Other people can thrive in trades, and earn a great wage without debt. And some people just don’t know what they want, and college is an expensive way to find yourself.

Choosing to go to college is a major financial decision. It should not be a “given” in today’s world, and with today’s costs. There are many, many alternatives that can suit individuals with different desires and objectives.

Where Will You Save for Education?

When strategizing for college, there’s a lot to consider. Waiting to create a strategy limits your choices, as well as that of your child. Helping your children grow up with a strong sense of self, as well as a good work ethic can go a long way. In other words, you may find out that your child is either a good match for school or a good match for some other path. A good work ethic, on the other hand, can go a long way in facilitating scholarships. 

Saving now, and saving in a way that remains flexible despite what your child decides to do, is an essential step in saving for school and reducing future government debt. Whole life insurance is both flexible and liquid and can be a great option. We’d love to help you discuss options so that you’re prepared for any future scenario and you don’t have to “hope for the best.” Feel free to contact us or email us at

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