The Solution to The Student Loan Crisis

The average college student now finishes school with nearly $40,000 in student loan debt. Those with advanced degrees, such as master’s, doctorates, or professional fields (medicine, law) often graduate with six figure debt.

Many articles have been written about the student loan crisis, and some have predicted that student loans will be the next “bubble” to burst. Others have argued that the student loan crisis is not a “real” crisis.

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If you’ve been following my blog for a while, you know that my husband and I started with a combined total of $117,000 of student loan debt that we are trying to pay off as quickly as possible. You can probably imagine how I feel when someone diminishes the struggles of millions of Americans by claiming that student loans aren’t that big of a deal.

People who think that the crisis is “exaggerated” typically say that the reason for this “exaggeration” is to encourage “free tuition” political policies. Student loans are a hot topic and a politically charged issue. On the far left, politicians advocate for student loan forgiveness and making college tuition free in the future. In contrast, those on the other end of the spectrum call for personal responsibility.

I’ve read quite a few of the comments on articles about the student loan crisis. Of course, it’s typically the people with the most extreme viewpoints who are the most vocal. Some say college is a “right” that should be provided for free.

Others say things like “No one put a gun to your head and forced you to take on student loan debt. You’re a f$@$#&! idiot for taking on that much debt for a useless major”. Then, the person typically boasts about how smart and financially successful they are because they didn’t go to college and didn’t take out student loans. Interestingly, these comments are often riddled with poor grammar and awful spelling.

Odd, right? How is it possible that people who can’t even construct a basic sentence are somehow making smarter financial choices than brilliant students who have earned doctorate degrees? Clearly, intelligence isn’t the issue here. So what is the issue? What differentiates those who succeed financially from those who end up buried in debt?

Financial Education

From my own observations, there is one factor that seems to determine, better than any other factor, whether or not someone will succeed financially. That factor is financial education.

Those who have avoided debt or have built wealth in their twenties often have one thing in common: their parents taught them how to manage money. It is a privilege to be raised by parents who encourage you to avoid student loans, to build an emergency fund, and to pay cash for everything.

Some parents teach their kids about money from a young age (with things such as Dave Ramsey’s class Financial Peace Junior), and these early money lessons typically stick.

For those who didn’t grow up with money-smart parents, financial education still plays an important role in determining their financial fate. As a personal finance blogger, I’ve read hundreds of PF blogs. For bloggers who started off in debt, the story is almost always the same.

Some type of financial education sparked an “aha” moment for them – it may have been reading PF blogs, discovering an inspiring book such as Dave Ramsey’s The Total Money Makeover, taking a personal finance class, or learning from a money-savvy friend. Whatever it may have been, there is usually some type of financial education that inspired the person to start getting out of debt and building wealth.

In our society, debt is normal, excessive consumerism is rampant, and the idea of paying cash for everything is practically taboo. Without any kind of financial education, we often do what society expects us to do.

We listen to our parents (who didn’t have student loan debt and have no idea what it’s like) – even if they’re terrible with money. We listen to our teachers and advisers who tell us that a four year degree is the only path to success.

We take out student loans for impractical majors. We don’t want to flip burgers for the rest of our lives (as if that’s the only way to avoid student loans). We do what we think is “normal”. We believe that our “investment” will pay off when we’re “successful”.

If we want to solve the student loan crisis, we need to stop doing what we’re doing. Relying on politicians to forgive our debt or to make college free probably won’t help. Calling people idiots (when they’re already buried in massive debt) definitely isn’t going to help.

We need to start educating high school students about student loan debt. Personal finance classes should be a requirement in high school. It’s time to stop teaching students that a 4 year degree is the ONLY path to success. For many, community college or vocational school may be a better (and more affordable) option.

We need to understand that being book smart without being money smart is a dangerous combination that often leads to mortgage-level student loan debt. In addition to teaching kids how to be book smart, we need to teach them how to manage money and avoid debt.