The Unexpected Problem of Federal Student Loans
This week I am going to talk about something I find highly embarrassing, but which too many of us deal with to ignore. Student Loans. *runs for cover, hides in the bushes, pushes out Spicer, who is fed on by ravenous FedLoan servicers*
What is so embarrassing about something 44.2 million Americans are struggling with every month? We aren't supposed to talk about this $1.31 trillion dollars of debt we collectively have, but we're also not supposed to demand socialized higher education (which would allow everyone in society to pay for higher education in smaller amounts over their lifetimes and have equal opportunity to achieve their academic and career dreams). Instead, we suffer under interest rates and complicated repayment plans, most of which must include a side savings account to pay the outrageous taxes on "income" from federal loan forgiveness when you finally get the monkey off your back. Yet, this is not the only problem arising from our school loan system. I recently discovered that there is another, perhaps just as dangerous side effect to our privatized education payment system.
Allow me to set the scene: You are a college student, facing your semester, quarter, or yearly tuition bill. You have already done everything right: Filled out your FAFSA, applied for all the scholarships you could, and accepted just the right amount of federal subsidized and subsidized loans through your school. Perhaps it is summer or winter break, where you have just spent a lot of your money on a vacation, study abroad opportunity, eating out with your friends, or presents for holidays. You have already used up all of your school loan money from the previous semester and are running on fumes, maybe even using your credit card to make ends meet. Your school sends you a notification that your tuition bill is due and even though it is HUGE, probably bigger than last time, you take a deep breath and assure yourself that you planned well and your scholarships and federal loans will kick in right on schedule, allowing you to go back to school and continue getting your education, no worries. As the last of your financial resources stretch and you have to perhaps quit whatever job you took up over the break because you are now going back to school full time and can't follow your boss's demanding time requirements, you begin watching your dwindling bank account for that all-important refund check. Everything leftover from your scholarships and loans which did not go towards tuition and school fees. Everything that will sustain you through the next few months of eating, living, and paying rent until you get your next job, scholarship, or loan. Your bank account is almost empty, and then POOF!! Thousands of dollars flood in and you quickly start organizing what you need for your budget until the next big payout.
What is the problem with this picture?
It is all too familiar for far too many of us, I am afraid. Though we do not talk about it, this is how many of us lived all throughout college, when we were first learning how to "live on our own" and "budget" our lives.
Only, this isn't budgeting.
This scenario is plain and simple spending. Spending, spending, spending until a big fat wad of cash shows up in your account, meant to last for another half a year. As anyone in the full-time job market knows, this is generally not how your employer would like to pay you. Instead, we are paid biweekly, or twice per month. We are paid hourly, or by tips. We are paid in bits and pieces and our bills take chunks out almost at the same, gnawing rate so that it looks like you're never getting ahead and may in fact be slowly, oh-so-slowly falling behind. Month by month of rent checks, car insurance, grocery store visits, and a night or two out with friends, and all of a sudden you're in that same place you were at the end of your semester in college, funds dwindling down to double and single digits. Only, there isn't going to be a big paycheck this time. There's just you. And your debt. And your sudden realization that you never learned how to do this at all.
The unexpected problem of having loans to pay your way and keep you afloat while you learn and prepare for the real world, is that once you get there, you know nothing else besides spend-spend-spend and a big relief check. I think this tendency, this habit, this learned behavior has far-reaching effects throughout society. From the people who spend too much money on a wedding or a house, to those who find no issue with going out to eat for lunch and dinner every day of a week and meeting up with friends for drinks after work and fun events over the weekend to boot. It's what we did in college, after all, when we did not have kitchens to cook in or time to set aside for cheaper behavior. We learned to live fast and spend our money quick to show we had it. We learned that we could spend more now because next month we're not going somewhere for Spring Break, so it'll all even out over the course of the semester. Perhaps we didn't even learn how to pay rent or bills on time, because these were covered in school housing costs or taken care of by our parents, who wanted most importantly for us to concentrate on our schoolwork and succeed.
I don't believe anyone did anything particularly wrong in this situation. Choosing to live like you're already in a month-to-month society while in school, or being forced to by financial circumstances, may teach you better how to handle your finances in the real world, but chances are that your academics are also going to take a hit--so then what was the point of earning all that money to spend on tuition for a detrimental GPA? Our parents did the best they could by us, making sure that we had the ability to concentrate on getting that A. They took out PLUS loans to help us eat and not live in squalor and enjoy the "best four years" of our lives. We, young and naive as we were, did not know any better. Perhaps we even thought we were learning the right skills the whole time--we were budgeting and getting as many scholarships and cheap financing options as we could, after all.
I blame is the system we have in place that makes it okay, acceptable, and expected for students to borrow money from their government to pay for an education which will allow them to be high-functioning and supportive members of society. I blame the process wherein we are not taught financial intuitiveness before we leave our parents house, learn in a Pavlov-conditioning way that it is okay to spend money beyond our means because a loan is going to come in to save us at a set time, and end up with mountains of debt we have neither the capability or knowledge to handle. Exactly who is winning from this situation? I certainly know it isn't us.
What are your thoughts on socialized higher education? What are some strategies you have used to budget your life after school in an entry-level position? Share your stories with others and let's stop pretending that this is a taboo, embarrassing problem. There are 1.31 trillion reasons why we need to be talking about the future of higher education financing and you, as a writer, can be the one to make a difference in that conversation.