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It seems as if there are more and more articles and news organizations asking this question lately. I find the timing very interesting considering that colleges will usually see a boom during an economic downturn.
Higher education can be a financial disaster. Especially with the return on degrees down and student loan sharks on the prowl.
The proportion of students who graduate with more than $40,000 in debt jumped sixfold during that period, to 7.7% of the 1 million grads in 2004, or 77,500 people. Most will struggle for more than a decade to work it off, assuming relatively low 6.8% interest rates, the Project on Student Debt says.
For many, the terms are far worse. A decade ago nearly all student lending was of the low-cost, federally guaranteed variety, most of it with 6% to 8% interest kicking in only after a student left school. As costs outpaced such financing over the past decade, the share of student loans from “private” lenders rose from 7% to 23% of the market, or $20 billion in the 2007–08 academic year.
The rise of private student lending closely paralleled the subprime mortgage boom, which went from 8% of home loan originations in 2003 to 20% in 2006, before the housing meltdown sent that mortgage sector over a cliff. Private student loans resemble subprime mortgages in other ways, too. As banks and brokers did with subprime home loans, colleges and the lenders in cahoots with them commonly market private student loans alongside lower-cost alternatives, blurring the differences.
Read the rest of the Forbes article…
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Between the 2 of us, my wife and I spend nearly $500 a month on student loan payments. Our house payment is only $900. It could be much worse. Due to the timing of her consolidation, her interest rate is below 3% (I can't remember exactly what it is, somewhere in the high 2s). Mine's 6.75%. So even though she technically has more debt than me, my payments are higher. What a difference 2 years made, eh?
I'm trying to get through grad school without taking on more debt. So far that's working. But I'm driving a car that's ready for the scrap heap. We know we've got to replace it soon, but all our discretionary income is tied up in educational expenses. In another 6 months we'll have a bit more breathing room, assuming the economy doesn't get even worse. But I don't think we can wait that long. Taking on yet more debt may be the only option.
But I don't regret getting our degrees. We knew going in we were investing in ourselves and that's how we've treated it all along. Making those student loan payments on the salaries we can find fresh out of school is rough, but I honestly think it'll work out in the long run.
I cringe every time I read about the cost of education going up. The return on investment isn't what it used to be. And it's looking less attractive all the time.
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