Q: Every time I make a student loan payment, I feel sick to my stomach. I don’t feel that way when paying credit card bills. What gives?
A: My job is to write about student loans. I think about them every day. I understand the value of my education. Yet I get that same knot in my stomach when I see my student loan bill hit my bank account.
This, it turns out, is the case for many people in our shoes. A December NerdWallet survey found that three-quarters of those who borrowed money to pay for school had regrets. The most common? Not applying for more scholarships, and choosing a school they couldn’t afford without taking out student loans.
How did we get here? Let’s start with the growing need to borrow. Between 1996-97 and 2016-17, the published in-state price of a public four-year college — including tuition, fees, and room and board — nearly doubled, the College Board says, even accounting for inflation. States have cut funding for public colleges and universities, according to the Center on Budget and Policy Priorities, forcing students and families to take on a larger share of the cost.
I’m not suggesting paying bills is one of life’s many joys. But there are real reasons many of us reserve a special brand of loathing for our student loans. Here’s how they differ from other debt:
We didn’t get something tangible in return
Student debt isn’t like a car loan, says Sandy Baum, a senior fellow at the Urban Institute. You don’t get a Prius that shuttles you to weekend hiking trips in exchange for your mammoth payment. But, Baum says, “just like you get in your car and drive it every day, you use your education every day.”
If the U.S. moved toward a policy of payroll withholding for student loans, as it does for taxes, Baum says, you probably wouldn’t miss the money as much.
“Not that anybody likes paying them,” she says, “but it’s a lot easier, because then you construct your budget without those dollars in it.”
We didn’t know what we were getting into
The financial aid system is so complex, students and families often struggle to untangle the snarl of funding options — let alone grasp their long-term financial consequences. For example, many borrowers don’t know about basic strategies that can ease their loan burden from the outset.
Katie Choma graduated with a bachelor’s degree and $161,000 in student debt. That debt burden translates to payments totaling about $1,500 a month. Choma’s balance is mostly in private student loans, which, unlike federal loans, generally don’t offer income-based repayment plans.
She wishes she and her parents had known to prioritize federal loans when she took on debt — and when she was choosing a school that she couldn’t have afforded without private loans.
We may not have gotten what we paid for
Thanks to her full-time job at a marketing company and a side business as a wedding planner, Choma is able to afford her bills on a 60-hour workweek. It wasn’t easy on a recent grad’s salary at first, she says. But at 26, she’s already seeing the earnings boost her bachelor’s degree affords her.
For some, though, there’s no degree to count on. Low-income borrowers, in particular, are at risk of dropping out, often due to the strain of paying for college without adequate financial aid, says Sara Goldrick-Rab, a professor of higher education policy and sociology at Temple University in Philadelphia.
Those borrowers who take on debt and don’t graduate have fewer employment opportunities and more limited earning potential, leaving less room in their budgets to make their loan payments. A 25- to 34-year-old with a bachelor’s degree earned $18,070 more in 2015 than someone with some college and no degree, according to the National Center for Education Statistics.
Goldrick-Rab says dropping the price of college would help more students graduate, which would also benefit the economy as a whole.
“I think we should price college as if it wasn’t so much a private good,” she says, “but it’s so much a public necessity.”
“Ask Brianna” is a Q&A column from NerdWallet for 20-somethings or anyone else starting out. Send your questions about postgrad life to email@example.com.
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