Throughout their schooling years, most kids have big dreams about their career. Maybe they want to follow in their parent’s footsteps or branch out into adventures of their own. Either way, from the moment they start high school, the prep for college begins. It’s almost expected, but not many teens are prepared for student loan debt.
Going to college is an automatic decision many families make. But do they really sit around and plan a budget? Not really. Many parents even co-sign without realizing what they’re getting themselves into. You would think that once the student graduates, a good paying job will be there to cover student loan debt payments.
That’s not always the case. All you have to do is look at the crazy numbers associated with student loan debt. Many students even graduate and begin to regret taking the path they did. They didn’t prepare or plan for what comes next after college. They just assumed that everything will be fine.
Scary Student Loan Debt Statistics
In the United States, there are over 44 million people suffering under the burden of student loan debt. Collectively, they owe over $1.53 trillion dollars, a number that continues to climb with each passing year. The average amount of debt each student has is around $37,000. This is a lot of debt to be carrying around at the prime of someone’s life.
That’s why 20% of the average millennial’s income is spent on their student loan debt payments. That’s a huge chunk of money that is causing them to miss out on a lot of other milestones. Reports are being released regularly now showing the economic impact student loan debt is having on this generation.
Millennials are waiting longer to get married, have kids, buy a home, and more. Even worse is the fact that they’re not saving money for retirement or buying health insurance. Their student loan debt is sapping any available money from their purses and wallets. That can put them in a dangerous position.
Student loan debt can wreck their credit and stick with them for decades after they graduate. This type of debt shackles itself to the student and won’t let go until it’s completely paid off. You can’t just declare bankruptcy or wait for it to fall off your credit report. This is definitely a sticking point every parent should discuss with their teen.
Teach them About Smart Financial Choices
The worst thing a parent can do is assume that getting into student loan debt is the best option for paying for college. It’s not. Plan for college ahead of time by applying for as many scholarships as possible. Get a part-time job and start saving money years ahead of time. Help them understand the type of commitment a student loan requires.
Federal loans are the best to take out because they’re protected. The government also offers loan forgiveness for public service workers and repayment plans. The problem with federal loans is there is a cap on how much you can take out. This is why a plan needs to be created before they graduate high school.
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One great strategy is deciding to start paying back the loan while still in college. That’s four years you can get ahead of it. Don’t push it off until after you graduate. Any little bit you can pay ahead of time will benefit you greatly. Another strategy is not using every dime you receive. Perhaps stay close to home and save big on housing costs.
Your teenager may also assume that you’ll be helping them pay for college. Perhaps you will, but a lot of the slack will fall on their shoulders. If you co-sign and they don’t pay, it will leave you in a lot of trouble. You’ll be responsible for the loan. In the end, preparing for this massive undertaking ahead of time will make it much easier to deal with after graduation.
