Financial Friday: Educational Debt

Photo by Catastrophe and the Cure

Education

We chose education and it landed us in a very tight spot.  Our breadwinner has a $100k+ education that landed him an hourly wage job.  He is working in his field, loves what he does, has opportunity for advancement and generous benefits.  In his field he is doing above average, we are so thankful he has the opportunity to do something he loves, especially in this economy.

However, we now have more debt in student loans then he will make in his first 3 years of employment.  Ouch!

I have done a lot of research on paying off debt.  I have some favorite places I go for encouragement like The Simple Dollar and Get Rich Slowly.  I even read Dave Ramsey and Warren Buffet.  I was looking for success stories and quick “how to’s”  and although I came across those things none of them really related to where we were.

In all my research I did not find a person who conquered the amount of debt that we have.  I think it is wonderful that people choose to pay of ANY amount of debt before it is due.  I get even more excited for folks that have paid 10′s of thousands off.  But even $20,000 seems so small compared to what we have.

The Thought Process

For the age my husband and I are, we were told we would not get anywhere in this world without a college education. So, after some drifting, my husband found something he wanted to do and went and got a college education.

It’s funny how when you are focused on the bullseye you don’t really see the rings around the target.  We should have seen the bigger picture.

Every semester the academic counselor helped pick a schedule, sent us to the business office, we paid what we could and then we signed on the dotted line and *bing* we were off and running on another semester, fully funded.  (Quick Note:  We have never taken loan money for our cost of living, only strictly for education.  I worked while my husband went to school and we paid all our living expenses out of our own pocket.)

We should have done more research, taken less classes, drawn out the degree an extra year, applied for more scholarships.  Hindsight is 20/20 so let’s get back to the present!

Student loan money can be cheap if:
1) You have no other debt
2) Your student loan amount is small
3) Your student loan is at a low fixed rate.

Fixed rate student loans are anywhere from 2%-10% LOWER than a credit card.  So yes, it is cheap money in comparison to other debt you might get into with credit cards, car payments or mortgage loans.  BUT it is entirely unsecured.  You have nothing to sell, give back or bargin with.

You hope and pray when you get out of school you will get a good enough job to pay back what you have borrowed and in this economy, even that is a gamble.

As you might guess none of these applied to us.  We did have about $5000 in my student loan debt, the loan amount for my husband was huge and the only way we could obtain it was on a adjustable rate.

And Now…

As I sat down to think through this part of our story I have just finished reading this NYTimes article on student loan debt.  It reflects exactly where we find ourselves today.

At the center of the piece is Courtney Munna, a 26-year-old graduate of New York University with $100,000 in student loan debt. Mr. Lieber writes:

It is utterly depressing that there are so many people like her facing decades of payments, limited capacity to buy a home and a debt burden that can repel potential life partners. For starters, it’s a shared failure of parenting and loan underwriting.

But perhaps the biggest share lies with colleges and universities because they have the most knowledge of the financial aid process. And I would argue that they had an obligation to counsel students like Ms. Munna, who got in too far over their heads.

Good Thoughts Ahead…

I do not blame the university, our parents or the loan underwriters.  We made a decision that we thought was the best thing we could do for ourselves at the time. With age comes wisdom and we would do it differently now.  From where I sit there is no blame to be had only lessons to be learned.

But not to end today’s thoughts on a sour note!  My husband did graduate and does love his job!  There is good in all of this and that is the blessing of a job that he loves.  Not many people can say that about their chosen careers!

AND now we have a chance to work hard, grow our faith and encourage YOU through our financial journey.

Do you have educational debt?
Have you managed to pay off your educational debt?
What is helping or hindering you in the process?
Share your story with us in the comments!

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