Average Student Loan Debt Is At A Record High – Where’s The Crisis?

Student loan debt is at a record high at about $1.8 trillion. In a January 2023 report, the analysis showed that the average debt per borrower was over $37,000 for federal student loans and nearly $55,000 for private loans. But is it really a big deal when incomes are at record highs and the unemployment rate is at a record low? Probably not.

During my New York trip, I stopped by Princeton, New Jersey to attend a college friend's wedding. We were Spanish House housemates who used to flip on CNBC before class and dream of one day making it on Wall Street. This was back in 1998 when working in finance was all the rage.

Although he never made it into finance, he did something better. He became a cardiologist and married an opthalmologist. In terms of finances, their household is set for life. After all those years of training, I wouldn't expect anything less.

According to the Association of American Medical Colleges, 84% of all 2014 medical students graduate with debt, and the median debt level is $180,000. That is a ton of money to be paying back. Or is it? Let's look at why the “student loan crisis” the media harps on and on about is overblown. 

Student Loan Debt Is Relative To Income

Let's say my friend the cardiologist graduated with $180,000 in student loans. Is that really so bad if the median salary for a non-invasive cardiologist is $250,000, and $400,000 for an invasive cardiologist? I don't think so, especially given the high certainty for lifetime employment for doctors. There just aren't enough.

After a 30% effective tax rate, $250K and $400K equals roughly $175K and $280K. Breaking the numbers down even further, $175K is about $14,583 a month, while $280K is about $23,333 a month in income. Let's say my friend goes through an aggressive 10 year student loan repayment plan at a conservatively high 5% interest rate, his monthly payments would be $1,909.18 or just 8-13% of his after tax salary.

If he were to refinance his student loan with Credible, I'm sure he could get lower than 5% because he went to William & Mary, Columbia for his Master's in Public Health, Yale for Medical School, and Cornell for his residency!

Fintech firms are addressing the vastly underserved demographic of recent graduates with a tremendous amount of earnings potential, but not a lot of money just yet.

OK, I understand not everybody has the intelligence or grit to become medical doctors. I certainly don't. I just used the highest student loan debt figures cited by the media and match it with a common example to show how affordable student loan debt may actually be.

Average Student Loan Debt In America

Now let's talk about people who go to college and don't go on to get a graduate degree. The following chart shows the average student loan debt per borrower. We're at record highs at ~$40,500 for the latest class of college graduates of 2022.

Average college debt per borrower per year

Although graduating with $35,000 in student debt sounds like a lot, to gain some perspective, let's compare this debt to median income.

According to the Labor Department, the median weekly salary for those with at least a bachelor’s degree is around $1,193. Let's say the median person works 49 weeks a year. That's an annual salary of $58,457. To be more conservative, let's round down the figure to $55,000.

If we plug $35,000 of median debt into a student loan repayment calculator using a 10-year payoff term and a 5% interest rate, we get a monthly principal and interest payment of $371.23. Let's continue to stay conservative and use a 30% effective tax rate on a $55,000 income. We get $38,500 a year net, and $3,208 net a month.

A $371.23 monthly student loan payment is only 11.5% of a graduate's monthly net income. With over $2,800 a month to live life and save for retirement, unless the person is completely fiscally irresponsible, is his/her student debt really so burdensome?  I don't think so.

How much student loan debt do you have?

View Results

Loading ... Loading ...

What About Private School Tuition?

While I was at Princeton, I spoke to some Princeton students and Princeton employees at the admissions office about the cost to attend. Here is the official breakdown of Princeton's tuition and expenses for 2022-2023:

The cost of attendance for 2022-23 is $79,540 and includes:

  • Tuition: $57,410.
  • Room charge: $10,960.
  • Board rate: $7,670.
  • Estimated miscellaneous expenses: $3,500.

Damn, Gina! That's a ridiculous amount of money for college. $79,540 means one has to spend 100% of a $100,000 gross income after tax. With the median household income around $75,000, who can afford that?

RICH PEOPLE Are Paying Full Tuition

Private schools have a disproportionate amount of higher income earning households than state schools. That's common sense. I have literally talked to thousands of private school students and now parents during my time working in finance and through this website.

Not everybody can be as rich as Democratic Socialist AOC and attend expensive private universities like Boston University. Most people are not rich enough to pay so much in tuition to encourage socialism.

But let's not assume private schools only consist of kids whose parents make six figures or more. If your child is smart enough to get in, but comes from a middle class-to-lower income household, then attending college might be free or at least highly subsidized!

historical average federal student loan debt

Private University Tuition Subsidies By School

Check out the subsidies given by the following 10 private schools assembled by Bloomberg. Tuition rates are about 20% higher for 2023-2024.

1. Princeton

Tuition for 2015-16: $43,450
Acceptance rate for the Class of 2019: 6.99 percent
Policy: Families making less than $54,000 a year don't pay tuition, room, or board, and families making less than $120,000 a year don't pay tuition.

2. Brown

Tuition for 2015-16: $48,272
Acceptance rate for the Class of 2019: 8.5 percent
Policy: Families making less than $60,000 don't pay tuition, room, or board.

3. Cornell

Tuition for 2015-16: $48,880
Acceptance rate for the Class of 2019: 14.9 percent
Policy: Families making less than $60,000 don't pay tuition, room, or board.

4. Columbia

Tuition for 2014-15: $51,108
Acceptance rate for the Class of 2019: 6.1 percent
Policy: Families making less than $60,000 don't pay tuition, room, or board.

5. Duke

Tuition for 2015-16: $47,650
Acceptance rate for the Class of 2019: 11.3 percent
Policy: Families making less than $60,000 don't pay tuition, room, or board.

6. Harvard

Tuition for 2015-16: $45,278
Acceptance rate for the Class of 2019: 5.3 percent
Policy: Families making less than $65,000 a year don't pay tuition, room, or board.

7. Yale

Tuition for 2015-16: $47,600
Acceptance rate for the Class of 2019: 6.5 percent
Policy: Families making less than $65,000 a year don't pay tuition, room, or board.

8. Stanford

Tuition for 2015-16: $45,729
Acceptance rate for the Class of 2019: 5.05 percent
Policy: Families making less than $65,000 a year don't pay tuition, room, or board, and families making between $65,000 and $125,000 a year don't pay tuition.

9. MIT

Tuition for 2015-16: $46,704 (includes mandatory fees)
Acceptance rate for the Class of 2019: 8 percent
Policy: Families making less than $75,000 a year don't pay tuition.

10. Dartmouth

Tuition for 2015-16: $48,120
Acceptance rate for the Class of 2019: 10.3 percent
Policy: Families making less than $100,000 don't pay tuition.

Middle Class And Lower Households Don't Pay Full Tuition

As you can see from the data, a lot of middle class to lower income students don't pay the rack rate and that's a GOOD thing. Those students who make above the policy cutoffs will get prorated assistance as well.

There's this big uproar against soaring private school tuition costs. People feel it's unfair that only the rich can afford to send their kids to elite private schools.

Here's a post that shares how much certain rich folks would be willing to pay extra to get their kids in. We already know that rich people have advantages over the rest of us. And coming from a public school like William & Mary, I couldn't help but feel the same way as most.

But after speaking to people at Princeton and highlighting the subsidies in this post, we should actually want listed tuition prices to rise as high as possible!

With high tuition prices, colleges have more flexibility to smartly charge their richest students the highest prices to help subsidize those students with lower household incomes. Ah-ha! A silver lining.

For those curious, here's the median income earned by Ivy League graduates.

Student Loan Debt Is Manageable

Student Debt Crisis

So far I've demonstrated that student debt can be manageable for those who've taken out the most debt (doctors). I've also shown that student debt should be manageable for the median person who graduates from college.

I've even shown that the rack rate for private school tuition is not necessarily the amount a student actually pays. We haven't even touched upon how many people can save a ton of money going to a public school like I did or attend community college for two years and then transfer to a public school for even more savings.

The cost to attend college is directly proportional to a student's ability to pay. That a person is able to take on $100,000 in credit card debt is due to the fact that that person has a high enough income to afford it. No credit card company just gives that much credit to anybody just like how nobody pays $60,000 a year for college if they can't afford it.

Rational people research the graduation rates, job placement rates, the median salaries of graduates, the school's rankings in the various polls, internship opportunities, the most popular employers, and so forth because college is expensive and takes years to complete.

The same goes for how plenty of rational investors who want to maximize returns develop a system to allocate capital.

Only Few Students Get Snowed Under By Student Loans

Acceptance rates at Goldman Sachs, Harvard, Yale, and Princeton
Getting any job is like winning the lottery

Although every student hopes the perfect job is waiting upon graduation, few students are so delusional as to think employment is guaranteed. Few people would not run a cost/benefit analysis of college or graduate school before spending years of their lives and tens of thousands of dollars. There is no sure thing except for how hard one can work.

Even with the national unemployment rate at ~5%, and the unemployment rate for college graduates at ~2.7%, there will always be students who graduate with debt, and because they haven't found a job or the ideal job, some will have difficulty meeting their loan repayment obligations. Many might even have to move back in with mom and dad, the wealthiest generation in the history of the world.

However, if college graduates want to work, it's not like they'll stay unemployed forever. While searching for an opportunity, there are plenty of low wage jobs to take. You can also apply to work for the state, federal, local or tribal governments, nonprofit organizations with a 501(c)(3) tax-exempt status, AmeriCorps or the Peace Corps to take advantage of the Public Service Loan Forgiveness program as well.  Nobody is too proud to work.

So for all those people who think the $1.8 trillion student loan bubble is the next to burst, relax. We've got fintech lending companies making student loan repayment much more manageable since big banks are too inflexible to change.

The rack rate tuition highlighted by colleges is only paid by those families who can afford to pay. And the sharing economy has created a plethora of freelance opportunities to help people make ends meet. Where's the crisis folks?

The problem is, there is a war on meritocracy now. This is leading to a lot more angst and anxiety from parents and students alike. It's hard to get free money through grants and scholarships, even if you are brilliant.

Summary For Student Debt Sufferers

1) Refinance your debt. Check out Credible, a student loan marketplace that has qualified lenders competing for your business. Credible provides real rates for you to compare so you can lower your interest rate and save. Getting a quote is easy and free. Take advantage of our low interest rate environment today!

2) Side hustle. Do not be too proud to take on a minimum wage job, or non ideal job while you search for your ideal job. Getting your ideal job is like winning the lottery. Often times, it takes a lot of paying your dues and a couple job hops before you get there. There's a massive sharing economy that lets you contract your services at $10 – $30/hour. Do that 40 hours extra a month, and you've got an extra $400 – $1,200 right there.

3) Cut expenses to the max. News flash. You are poor! Do not be too proud to live at home with your parents, share an apartment, share a room, take the bus, ride a bike, walk, and wear old clothes. If you are poor, don't act rich. Act poor! The biggest problem is folks expecting to get rich immediately.

4) Do not drop out. The worst thing you can do is go to college, incur a ton of student debt, and then drop out without getting your degree. If you are unsure of college, go to Community College for a year or two and test the waters. CC is an inexpensive option that allows you to transfer credits over to a four year school if you so choose.

Is there a student loan crisis?

View Results

Loading ... Loading ...

Wealth Planning Recommendation

College tuition is now prohibitively expensive if your child doesn't get any grants or scholarships. Therefore, it's important to save and plan for your child's future. Check out Empower's new Planning feature, a free financial tool that allows you to run various financial scenarios to make sure your retirement and child's college savings is on track. They use your real income and expenses to help ensure the scenarios are as realistic as possible.

Personal Capital College Planning Feature

Once you're done inputting your planned saving and timeline, Empower with run thousands of algorithms to suggest what's the best financial path for you. You can then compare two financial scenarios (old one vs. new one) to get a clearer picture. Just link up your accounts.

There's no rewind button in life. Therefore, it's best to plan for your financial future as meticulously as possible. End up with a little too much, than too little! I've been using their free tools since 2012 to analyze my investments and I've seen my net worth skyrocket since.

Personal Capital Retirement Planning Comparison Chart

More Recommendations

Buy This, Not That is an instant Wall Street Journal bestseller. The book helps you make more optimal investing decisions using a risk-appropriate framework by age and work experience. Arm yourself with the knowledge you need so your money will work harder for you. 

Join 60,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

About The Author

151 thoughts on “Average Student Loan Debt Is At A Record High – Where’s The Crisis?”

  1. Emiko Natsume

    I read your blog often with my morning coffee, and I really enjoy your input. Although, looking at this post I feel that it should be relevant to me. But at the same time I almost laugh because it seems like such a small amount of debt for a student. I am currently a veterinary medical student and am going to be graduating with a lot more than $135k. The average vet school is around $50-60k per year, and government loans are at 6.7% interest rate. At this rate, on top of the cost of living and assuming I can pay off my loan in ten years post-grad, I am looking at a final tally of $427k. That means I will have to pay a little less than $4000/month for the next ten years on a salary of around $100k. I have been wracking my brains to try to figure out how I am going to pay it off and still afford to buy a home (hopefully before I turn 30). If you have any insight, I would be enlightened.

  2. I have been sitting and reading your blog posts for a few hours now, as it is snowing and I can’t leave my apartment…

    You, as a Princeton graduate, I am assuming have a very high level of intelligence. YOU are not taking into consideration at all the number of people who are dealing with these issues who do not have the same level of intellect, problem solving abilities, emotional strength, so on. This IS a big deal. Maybe just not for you.

    How many people graduate from engineering+medical school+plus law school in comparison to EVERY OTHER PROFESSION? Again, we are talking about people that have an above average IQ that will make enough money to pay it off in a reasonable amount of time, if they are responsible enough.

    What about the impact it has on people delaying marriage, buying homes, and starting a family? Not only psychological, but on the economy?

    How can you say that it is so easy to pay off significant amounts of debt just starting out in life. Many people are not able to work throughout school enough to put a dent in costs. Through half of undergrad and ALL through my two years of graduate school (summers included). I worked 40+ hours a week, required by my program, for free at externships (not only did I work for free but I paid credits for these rotations) and attended night class everyday. Not to mention the service learning class I had to take for two semesters where again, I PAID to volunteer my time. That left me Saturday and Sunday to work (oh yeah, and study?).

    Which brings me to another issue…

    How many business students I knew who got paid 20+ dollars an hour for externships, and in the health field as well as many others you have to pay for credits to WORK BILLABLE HOURS. Nurses, occupational therapists, speech therapists, physical therapists, physicians assistants, and teachers as well (the people really making the big bucks ;) ). I PAID TO WORK IN COLLEGE.

    I feel like the majority of your posts are extremely ignorant, pompous and insensitive. Have you ever worked with the general public for an extended period of time?

    Try not to fall off your soapbox, it seems quite tall.

    1. Several things:

      1) I went to William & Mary, a public school because I wanted to pay for my own tuition and I didn’t want to to be a financial burden on my middle class parents whom I knew didn’t make that much as government employees. Me going to W&M is in the post but I will make it more clear by bolding the sentence. Read Public School Or Private School? Depends On Your Fear And Guilt Tolerance.

      2) I’ve had craptastic jobs growing up making $3.65 an hour. Read Three Craptastic Jobs That Will One Day Make You Rich

      3) I’ve driven for Uber for the past seven months. Read What’s It Like Driving For Uber? Mixed Feelings Of Hope And Sadness

      4) To gain perspective, and to encourage others to gain perspective I wrote, Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult

      5) I grew up in emerging markets such as Malaysia and Taiwan in the 80s and was born in Zambia. I’ve gone back to India and China many times in the 90s and early 2000s. I’ve seen tremendous amount of poverty and feel we are truly blessed to live in America.

      I’m sorry if you are going through rough times. I don’t mind if you want to take it out on me. Unfortunately, I won’t be the one paying your student loans. Everybody must own up to the responsibility of paying back debt they incurred. Otherwise, another financial crisis will result.

      Just know that hard work takes no skill. Stick at something long enough, and I believe you will find the progress you are looking for. Let me go and clarify in this post that I was in Princeton for my friend’s wedding and happened to visit the campus.


  3. Anonymously Anonymous

    – Parents sent me to boarding school at 15. Graduated at 17. Was told I had to go to college and I had to get a scholarship to pay for it because I wasn’t going to get any help myself. Was told I wasn’t allowed to take a year off to figure it out because “if I didn’t go now, I never would go.” Couldn’t go to CC and transfer because then I would lose my scholarship. Parents terrible with money. One BK, one just financed a gigantic piece of useless property, so now will die in debt. Even with grants, scholarship, and financial aid, still came up short. Went to an out of state private tech school because ignorance. Didn’t have enough money, lost scholarship anyway, resorted to borrowing. Well into six figure territory. Good news is I at least picked something lucrative (Engineering) over something I actually enjoy or find interesting, so I can service the debt that I accrued getting the degree I never wanted in the first place.

    This problem affects people of all kinds.

  4. I think the crisis is three-fold

    1) 50% of students drop out of college so those students have similar payments without the commiserate increase in compensation.
    2) In prior generations, the same increase in compensation came without massive student loan baggage. This means the 10% of income going towards student loans for 10-20 years after school will massively reduce discretionary spending for 20-40 year olds compared to prior generations. This will have a lot of ramifications for the overall economy – and none very good (except probably rental units).

    The ironic thing is that information is cheaper today than ever in the history of man (your website is proof) yet higher education has never been more expensive. Obviously something is not right.

    3) The big money shot though is that over 1 in 4 student loans currently in repayment are behind at least 30 days or more. This is a HUGE amount compared to other loan types, especially when you consider all of the available forbearance options and extended monthly payment options available. Considering these loans have fees rise substantially upon default and follow you to the grave, that’s not a good thing.

    1. Rob, those are all good points. On point 1, hopefully those who drop out aren’t dropping out in the 4th year, but in their 1st or 2nd year, thereby having less loans than if one went through 4+ years.

      I’ve been writing about free education via the internet for years. And it’s not just my website, but MOOCS, Kahn Academy, and the millions of other sites out there. It makes no sense to pay up for free education.

  5. Few comments

    1) You are absolutely right about the doctors ability to pay their debt although I’d probably use closer to 40% tax rate for them and closer to 20% for the other example of $55k (remember personal exemption and standard deduction are disproportionate to lower incomes)
    2) A bit less than half of college students drop out so you’d want to probably take the $55k income * 55% + $30k * 45% to get an average entering college student’s expected median salary in 6 years.
    3) The cost of school should always be compared with its costs (including foregone income / work experience) and not just if you can afford it. An MBA from a T10 program or the doctors in your example will absolutely pay for themselves. A sociology degree at $40k/year in expense and a median salary of $35-40k/year post graduation (vs $30k with no degree) will never pay for themselves – especially if you have to rack up debt.
    4) The default rate for student loans is 12% – which is crazy high considering all of the deferment, graduated income payment plans, and general willingness to work with you
    5) Even without the higher defaults, that debt load means less spending in other areas of the economy. For example, 25 year olds will probably defer housing purchases or buy much smaller than they would have in the past.

    1. Dropping out after incurring debt is the biggest problem for sure. I’m not sure how to help solve this problem. CC for the first two years sounds like a great idea to test out in as cheap a way possible to see if college is right for the individual first.

  6. This is a topic that has absorbed a great portion of the last couple years for me. I graduated in December of 2011 (supposed to be 2010) at 23.

    After the interest accumulated my out of pocket cost was $110,000 for a Biomedical Science Degree at a Texas public university (meaning student loans galore). I was dumb, dumb, more dumb……did I mention I was dumb?

    Coming from a family where education has the most importance regardless of how to obtain the degree I lacked the financial sense and intelligence to realize the impact it would have in my life.

    It took me 4 months to get a job after applying for about 120 jobs (I was unable to even secure a job working at retails stores, banks, and the list can go on).

    My goal was to move back in with a single parent in order to 1) focus one paying back the massive debt 2) being home to help make sure my aging parent was no longer by herself.

    I found a job with a healthcare staffing company 500 miles away from home starting at 35K in May of 2012. While I was working I would take very inexpensive community college courses for about a 1 year in order to help defer paying all the loans at one time. This meant on top of typically working 10-12 hour days I would be study late night at the office.

    This allowed me to focus the amount I was paying toward a specific loan so I was not just paying interest.

    Fast forward 3 years: 12 hour days are the norm, my salary has increased a little bit more than double with no PTO during this time period (salary plus commission).

    Having paid down 40,000 dollars in student loans thus far, I could only imagine how my life would be different because I would be able to save and invest.


    I count down the days, hours, minutes, and seconds I will be free of my student loans (and I WILL BE FREE SOON!).

    The lesson I have learned will with no doubt impact the result of my life in terms of how I want to live.

  7. Steve Adams

    For the folks that read this blog the debt may not be an issue. There are a lot of students that will have issues. When 30%-60% don’t graduate they don’t the $50+ median salary. Plus salaries from the bottom half of colleges are well below those averages. All driven by the all students must go to college b.s.

  8. I am somewhat on the disagreement train with this article.
    Sure everyone should pay back what they borrow, but that does not mean everyone can afford to.
    Some people (like me) get lucky and get scholarships based on merit for a few years, finish community college for free, start working for a semi-decent salary that’s more than minimum wage (due to connections some people don’t have) and finish school part time without needing loans and then are able to line up a real job because they racked up 3+ years experience while working the semi-decent entry job. But honestly it’s all about luck and who you know.

    My sister got lucky like that and was able to work summers in retail to pay off some of her loans as she took them out, but she had merit scholarships to cover much of her tuition, and once fasfa stopped counting my parent’s income she was able to get grants to cover 100% of her last semester. She also was able to get an internship and a job lined up for the day she graduations. She will graduate with 10k in student loans but a 55k per year job and easily pay back her loans.

    Other people aren’t so lucky. Especially if only certain schools offer your desired major.
    My BF went to engineering school out of state, got some measly 5k per year for 2 years scholarship help (for tuition that was at least 25k per year, not including the room and board because he couldn’t live home and attend this school due to distance). The curriculum was so intense he couldn’t work during school, and he wasn’t home long enough on breaks to work even retail on breaks (can’t interview in person when you’re 4 hours away). So he racked up almost 200k in student debt.
    Engineering jobs seems to require 5yrs+ experience. So with 2 years in internship and college, he’s SOL finding a real job, and stuck using a government program to reduce payment amounts on his loans, living with his parents while he works for 10 dollars an hour doing data entry because no one is hiring entry level materials engineers.
    Move to an area that is hiring? Sure he could move out to cali for a 55k per year salary job, and somehow also pay 2k in loans per month? Sorry he’d barely survive anywhere on that after loan payments. So he’s trapped at home in an area that isn’t hiring entry level and he can’t move to where the jobs are because the loans are too high to repay even on a decent salary (which he isn’t making).

    All these companies want experience that college grads dont have. It seems like a “its who you know not what you know” scenario all over, unless you get lucky that your state school offers your particular major (and is reputable in that major) that you can line up a job right after college.

    I have too many friends in debt working minimum wage because no one wants the just out of school college grads. They want free slave interns (which college grads can’t apply for because they wouldn’t be able to pay their loans on “experience opportunities”) but not entry level employees. So they are all trapped in this space of minimum wage jobs and unable to apply many places because they are tied to their parents’ homes just to make ends meet.
    There really is a college debt crisis, its causing 20somethings to be late bloomers, buy houses later, start families later and slow down the housing market for it.
    College prices need to get under control because right now only the rich, extremely poor, or well connected lucky people have a chance to succeed.

    1. Great comment CH and a very compelling real-world example of how excessive college debt can create massive problems post-graduation. I feel a lot of sympathy for recent college grads entering a job market where you need experience to get more experience. The truism of “It’s not what you know, it’s who you know” is incredibly true – connections can open doors that will otherwise stay closed. Networking events, social media networking, and volunteering all help put you in a place where getting to know the right people can help open doors. I sincerely hope your BF can find a job in his field!

    2. With you and your sister lucky, do you think most people are not as lucky? Most people I know are like you guys with some scholarship help and jobs after college. Ever wonder why everybody here is commenting they are lucky, while others are not?

      Isn’t your boyfriend lucky to have you to help pay for his debt if he gets in trouble? You wouldn’t abandon him right? Of course not! Therefore, he is lucky too.

      He can’t get into $200,000 in debt without having the financial means or the basic understanding of what he’s doing. Look into his family’s wealth to find out more. Would you lend $200,000 to someone doesn’t have the financial means? No. And I don’t think you are saying your boyfriend is dumb either, otherwise, you wouldn’t go out with him.

      There is more to your bf’s family’s financial background. Let us know once you do some deeper digging!

  9. I *almost* completely agree with you on this. I can’t find the article, but the NYT ran an article that showed that even the whole $35k average is really misleading: 68% of students who attend college wind up with $10k in debt or less (partly because 43% wind up with no debt). https://www.nytimes.com/2015/06/12/upshot/student-loans-the-facts.html Moreover, it’s the people with the smallest amount in loans (1-5k or 5k-10k) that are most likely to default! Why? Because the people with small loans tend to be people who started college but did not finish. That’s the real crisis–not the fact that some people borrow or even that a small percentage are borrowing a big chunk but that lots of students aren’t graduating so they then have to try to pay back even small loans with nothing in the way of the increased earnings that a diploma allows.

    1. Great call highlighting the debt people take on who don’t finish college and therefore don’t get that post college job bump.

      That makes a ton of sense. Read a NYU student who left junior or senior year after 100k in debt bc she couldn’t afford it anymore. This is a tragedy!

  10. My situation is a little different, though I would preface it that I am not struggling or denied anything necessary due to my student loans. This was not true for the first two years in practice where I had difficulty sleeping and was constantly stressed after the realization of the enormity of my debt burden. That led to a deep learning expedition in finance, which has been awesome, only wish I did it sooner.

    I grew up very poor, put myself through college and med school. Unfortunately growing up poor (aka, welfare, food stamps, food banks and lots of boys and girls club time), doesnt make one the smartest financially, and my choice of careers didnt help either. “dont worry”, etc..etc…take out loans, was just pushed to no end, not to mention your residency programs encouraging home buying, another terrible idea.

    I went to a private med school, and there was no gifting of tuition just because of my income level (if there was and I missed it, that would suck). I think my total debt was around 300k all told after graduation. However, due to limits on residency pay (started at 40, end at 52) and the time 6 years, 7 with fellowship, this sum was 496 at the end. Unfortunately, working 80-100 hours a week and the natural aversion of attention from such a scary large number meant I had a mess on my hands…hence the stress when starting out. My only real issue is that americans seem financially less savvy overall, and this is taken advantage of by the system. The other two big gripes for medical folks is the government enforced low level of pay where you cannot reasonably pay on your loans during training, yet they are allowed to compound during that time, seems overly onerous. It seems strange to limit the amount one can make and simultaneously compound interest when they cant pay due to the first issue. The last thing is they should be tax deductible so that people can pay them off without the penalty of a high effective rate (nice problem of course). They would be debt free and consuming faster, which in the end would work out for all involved since the point of student loans is an educated work force that makes more, pays more, and can consume more.

    No, I am not suffering, but it is definitely scary to have a million dollar mansion loan payment every month at first, and you certainly must pay attention to finances, which is a good thing. I have refinanced half with SoFi and now Earnest to where I will get a lot paid off shortly now, which is awesome. I pay more than 10% of my gross income in student loans, but this is not forever, and Im still contributing to my retirement fully. Just takes planning and learning of what honestly should have been known decades beforehand.

    1. I could pay much more than 10%/year btw. However, after running the calculations and thinking about it in a net worth, tax benefits, FV perspective I decided to just invest heavily instead. The net worth ends up the same at the same period of time I just end up keeping a lot more of the money.

      My main concern was the way debt is structurally handled in the US. Theres no reason it couldnt be tax deductible 100%, this would encourage pay offs and decrease defaults and would not be permanent. The psychological boost would be huge but pale in comparison to economical effect of having confident well paid consumers forming households and supporting the economy.

      We have to remember the point of student loans in this conversation and ask if the government is achieving their goals with the current regime. I am going to assume they did not want to create a generation of uber frugal, low consuming early retirees that abhor higher education. They should do everything in their power to get people out there working, paying taxes, and consuming. The overall macro benefit to the economy is huge compared to just thinking of dollars of debt to be repaid, thats missing the point.

      I do think that colleges have reached a point where they need to be able to justify their costs and they cannot have so much inflation forever, and thats a good thing, the last thing we need in america is more anti education zeitgeist.

    2. A million dollar mansion payment every month is like having a $1,000,000 student loan debt. That’s not happening. Even doctors who don’t pay/defer for years have at max $500,000 in student loan debt I’ve ever heard of. The median is much lower than that.

      1. There’s doctors coming out of school with $250,000 in student loans at 6.8% ($17k/yr interest). Compare that to a $400,000 mortgage at 3.5% ($14k/yr interest). You’d be paying more in student loan interest than mortgage interest. And that’s not even taking into account the mortgage interest deduction.


        1. Good thing is that if you’re smart enough to be a doctor, you’re smart enough to realize that paying 6.8% in student interest is a ripoff and you would refinance that immediately to 4% or less.

  11. I haven’t seen anyone discuss the real source of the problem. We make these student loans readily available to anyone which in itself isn’t a bad thing. However, this provides colleges with a worry free perpetual influx of money. This has led to systemic glut (e.g. sky high salaries for professors, tenure, students financing majors that are notoriously difficult to repay). Until we turn off the tap for theses colleges, they will have little to no incentive to dial down costs, and students are the ones who will be saddled with the bill.

  12. The bigger issue is what else people are walking away with: minimal work ethic, an anti-intellectual disposition (ironic, eh), and a short-sighted understanding of how to apply their education to their life… or, in other words, a lack of creativity.

    It’s sad, but you can often graduate with a very small amount of effort. A really interesting book on the subject: Academically Adrift.

    From the description:
    “… are undergraduates really learning anything once they get there?

    For a large proportion of students, Richard Arum and Josipa Roksa’s answer to that question is a definitive no. Their extensive research draws on survey responses, transcript data, and, for the first time, the state-of-the-art Collegiate Learning Assessment, a standardized test administered to students in their first semester and then again at the end of their second year. According to their analysis of more than 2,300 undergraduates at 24 institutions, 45 percent of these students demonstrate no significant improvement in a range of skills—including critical thinking, complex reasoning, and writing—during their first two years of college. As troubling as their findings are, Arum and Roksa argue that for many faculty and administrators they will come as no surprise—instead, they are the expected result of a student body distracted by socializing or working and an institutional culture that puts undergraduate learning close to the bottom of the priority list.”

    The “working” part of the last line makes it a bit more complicated, but I think the “socializing” is the major problem (I worked around 30 hours a week for my undergraduate years, in addition to school). If you are focused on partying every weekend instead of developing your intellect and your self, what the hell should any of us expect? The authors document, to the extent that they can, how this is different from decades past.

    And this is far too often reflected in most media representations and popular figures of my Millennial peers.

  13. There is a entitlement crisis, as you say. People can pay of the loans they knowing took out. They are just complaining why they should.

    Stop whining everybody!

  14. I normally agree with your articles Sam, but you’re way off the mark on this one. There’s been some great comments posted here, and I don’t have time to write a novel, but my basic point is this: your financial discipline, and particular situation, is *very* rare. You know that, right? So when you shrug your shoulders and say “Why can’t someone save 11.5% of every paycheque to pay off their debt? I saved 50% of mine, so what’s the big deal?”, it’s like a 7 foot tall basketball player asking why a five year old kid can’t dunk like he can. :-)

    You’re not putting yourself in the shoes of an average college student: financially clueless because their parents didn’t teach them anything about money (and they didn’t make the choice to learn themselves) stumbling through college racking up debt and 4-5 years later (if they’re lucky) emerging out the other side and coming to the realization they may have ruined the next decade or two of their life with debt. Financial success is 80% behaviour and 20% numbers.

    I’ve lost track of the number of people I work with and know – grown adults with kids and 10+ years our of college – that still have their student loans. COULD they have paid them off sooner? Yes, if they had the financial skills and mentality to make the necessary sacrifices. But they don’t. They’re not in the same place where you and others here are.

    It’s like having an eight-pack set of abs and asking the rest of the country why they aren’t in similar shape: unless you “get it”, you don’t “get it”. Sure, we can all agree that everyone should eat right and get exercise, but does our agreement change that most of the country is slowly getting diabetes? Student loans are no different. It’s become hideously expensive to go to school; tuition is out of control. Sam, have you watched the documentary Ivory Tower? Please do – you’ll find it very interesting.

    Many of the comments here are in the same vein – the people reading this blog have a financial mentality outside the norm. Looks at the stats: most people in the USA have very little saved for retirement, and many people live paycheque to paycheque. These are not financially healthy people who will quickly pay off $35K in debt. And let’s not forget odds are high they’ll have another $10-$20K in credit card debt, plus a car payment…

    I personally never had any student debt because my parents had saved for my college education, and I also worked while going to school. But when I went to school it was vastly cheaper; today the rates for college can be so expensive there’s no way I’d be able to duplicate what I did back then (even adjusting for inflation).

    I didn’t intend to write a novel, but looking at the poll, 70% of so of people are in agreement that there is a serious student debt problem.

    1. I like your analogies, but I don’t think they are correct. For one thing, no matter how hard one tries they will never be able to grow taller once they stop growing. But for knowledge, or gaining knowledge, that quest is endless.

      I have talked to thousands of private school graduates and parents over the years. I kid you not. And I just visited Princeton University for this post and talk to students and admissions counselors. The rack rate is only paid for those who can afford to pay. It does not get that much more complicated than that. If the person who can afford to pay messes up their life for whatever reason, they are OK because they can still afford to pay.

      Of course there are exceptions where people are really unlucky, feel really entitled, or just had some type of accident. But math is not lie, nor do the thousands and thousands of people who are paying their debt as they should.

      Isn’t it funny that everybody here who say is there is a student debt crisis have no problems paying their student debts them cells? Why do you think this is? Could it be that there really is no crisis?

      1. Respectfully Sam, I think you’re missing the point a bit – regardless of “rack rate”, a few trends seem very clear regardless of any anecdotal stories you or I can tell:

        1) Large student loans are crazy easy to get for many
        2) Most students lack the financial understanding to grasp what they’re doing to their future selves by maxing out their student loans
        3) Colleges know both points #1 and #2, and have both dramatically increased tuition and lavish school benefits (free laundry, free food, $100 million stadiums, etc.) to lure in these artificially flush students
        4) Not all students graduating are able to start paying back their loans

        As of July 2015, there’s been a 6% increase in delinquency on loan repayment, which is 400,000 more people not paying their loans compared to a year ago:


        That’s really not a good sign.

        Please, please, please watch Ivory Tower and let’s talk about it in another blog post. :-)

        1. Are you suffering from student loans? If so, in what way?

          I’ll check out Ivory Tower! Maybe I can watch it in between rides when I’m hustling from 11pm – 1am every Saturday night. I’m sure everybody else with student loan debt is equally hustling extra hours a week or taking on second jobs to earn money since they are the ones who need it most!

          1. No, I am not suffering from student loans. I went to school back when it was much less expensive, and my parents had education savings that helped me out – I had to pay very little out of pocket. My perspective comes from the many adults I know who still have student loans, and based on the many comments I’m reading here, the common sentiment of “Wow, I took out way too much in student loans!” seems pretty common.

            I can’t tell if you’re being sarcastic about the side hustles…it would be interesting to know how many people with student loan debt are doing side hustles to pay it off faster. I’d guess it would be a single-digit number. It takes a very motivated, energetic person to do side hustles. I don’t know a single person in real life that has a side job! For the rest of us, our jobs/marriage/kids take up a lot of extra time and energy…

            1. Not being sarcastic at all. Because I believe in the human spirit, I also believe that people with debt are doing everything possible to get out of debt e.g. driving for Uber, serving at a bar after hours, etc.

              The reason why you don’t know a single person in real life with a side job is because you probably have well to do friends who don’t need the money and have very manageable debt.

              Look at what people DO, not what people say.

              There is NOBODY who is suffering financially who isn’t willing to work to reduce their suffering. That would be illogical.

            2. I too believe in the power of the human spirit, and debt can be overcome if people truly want to do it, but saying “There is NOBODY who is suffering financially who isn’t willing to work to reduce their suffering. That would be illogical” is an naive statement. Since when are human beings all logical? That’s never been the default human condition.

              Take any one of these:

              …our health: the US is the #11th fattest country in the world and diabetes is a rising epidemic, but how healthy is the average person? I’m personally not very healthy. Logically I know I should eat better, work out, etc. but I don’t. Completely illogical, right?

              …our environment: global warming is changing the planet for the worse, but the vast majority of us still consume resources the same way we did 10 years ago. I didn’t buy an electric car because they’re too expensive and there are a lack of attractive options. But if I truly was being logical, I’d buy an electric car regardless, or take the bus, bike, etc. But I don’t.

              …our money: consumers are $11.85 trillion in debt (an increase of 1.7% from last year), $890.9 billion in credit card debt, $1.19 trillion in student loans (an increase of 7.1% from last year). The only way debt can be logical is if it leads to a repayment of that debt + more income. Someone buying a 70″ TV isn’t going to make money with it.

              Sam, the majority of people wallow in their debt because they’re paralyzed psychologically by it. They’re overwhelmed by it, and most people don’t know where to start. Most people aren’t out hustling a second job (or if they are it’s because they can’t scrape by on the first job); they instead accept that debt is living paycheck to paycheck is “normal”. 26% of adults have ZERO savings set aside for emergencies, 36% have zero retirement savings, adults under 35 years old have a -2% savings rate (student loan debt plays a big part here). There’s NOTHING logical about those numbers.

              I really admire what you’ve built here, and like I said I agree with most of what you write, but I’m really surprised that you have a perspective like this about the reality of human psychology and their finances. The rare breed of people who read your site, or, hell, even THINK about their finances on a regular basis in a proactive way, is vanishingly small…

              I believe you could help even more people with this site if you understood most people are not like you. :-)

              1. Jason,

                I don’t think you are giving the American people, or ever day folks credit. Let’s just look at your one example:

                “our health: the US is the #11th fattest country in the world and diabetes is a rising epidemic, but how healthy is the average person? I’m personally not very healthy. Logically I know I should eat better, work out, etc. but I don’t. Completely illogical, right?”

                WRONG! Totally logical. It is much easier to not work out and to eat incredible yummy, but unhealthy food than to work out for an hour a day, run several miles a day, and just eat salads and other bland food.

                Many people would much rather be out of shape and lead a more relaxing lifestyle, than be extremely fit, but really cut down on the joy of eating and doing sedentary things. And for those who would rather look amazing, they logically sacrifice the cheeseburgers and TV marathons to work out and eat right.

                To your second point. You didn’t buy an EV b/c you really don’t care about global warming. If you knew your EV could actually make a difference, and not kill a relatively from radiation or poisoning, you would. But as of now, you don’t believe you can make a difference, so why bother. Totally logical.

                Nobody purposefully pokes their eyes with needles unless they are a masochist. Believe in rationality. People might make mistakes with taking out too much debt, but they will do things to make their debt better.

  15. Great post. It would be ideal if most college and grad students run a financial analysis before making a career choice but obvious it doesn’t happen.

    Even in the healthcare profession or any high income profession people still run into the same problems, albeit with just bigger numbers. The range of income even within a given specialty can be huge–it really is up to where in the country you decide to work and how much you decide/are able to save. I know of procedural cardiologists in the Bay Area still making the low $200,000’s and eye doctors in the low-mid $100,000’s. Ouch indeed.

    1. Here’s the thing though, even if you never crunched any numbers at all, based on the graduation rates, employment rates, and income levels, everybody will be fine. OK, not everybody but most people.

  16. Of course there is a crisis. Its a system exploiting the financial illiteracy of kids by selling them on the necessity of a undergrad degree at all costs. I don’t recall at any time the school or FAFSA saying, you know, make sure you stay to degrees like Engineering/Acct/Finance and away from Drama/English/Art. Loads of students end up in debt with little to no job prospects that has any correlation to their studies.

    The readers of this site are not the ones getting crushed- its the millions of other people out there with no financial IQ. Is it possible to get out from thousands of debt? Yes. But that doesn’t justify being in the position to begin with. I had no idea what I was doing through college coming from a lower, middle class family with no financial education. I will take responsibility for blindly maxing loans, however, it’s unfair to expect financially illiterate 17/18 year old kids to understand the financial impact of their decisions.

    1. I don’t think you give the American people much credit if you are saying millions of people out there have no financial IQ. People are much smarter and much more rational than that. Furthermore, the unemployment rate for people with college degrees is at 2.5% with the latest reading. That is practically full employment.

      Coming from a lower/middle class family w/ no financial education, I’d love to know how YOU are doing with your student loan situation. Thanks!

      1. Saying no financial IQ may sound harsh, but I would argue that most people have no idea how to manage money. I had no idea until I met my now wife and she slapped me silly and talked some sense into me. Not a single person in my peer group, prior to meeting my wife, had a semblance of a financial education. So in a way, this is where I lay blame- college is just taking advantage of this situation.

        As for me, graduated 12 years ago with $55k of debt and now down to $11k. I worked throughout undergrad to help pay, however, I know in hindsight I could have spent way less by trimming frivolous spending and/or going to a cheaper school. It sounds like a weak excuse, but I seriously had no idea what I was doing.

        1. Here’s the thing. Even though you had no idea what you were doing, you are doing OK now right? The reason is that the math is in your favor. You had debt, but you got a job that more than covers your ability to pay off your debt.

          The mass media has gone way to the extreme here.

    2. I don’t recall the schools or FAFSA ever helping to guide students. I thought that was the high school counselor’s job, as well as the students parents? Plus, I think the “crisis” is being perpetuated by the media and not really a crisis. Students, just like the rest of the country, should try living within their means. Then there really wouldn’t be a “crisis”. IMO.

      1. This whole things reminds me of the housing crisis- before I bought a house, I was in the mindset that people were idiotic for taking the loans they did. But after going through the process, you realize how easy it is for mortgage lenders / realtors / appraisers to get people into houses they shouldn’t be in. People got sold.

        With student loans it’s the same: they now say just borrow and you’ll be ok! Per Sam above, median loan debt is totally doable with the median salary and you’ll get a job no problem! Well like the housing crisis, student loans are trending into scary waters.

        1. I still think the housing crisis is the same as this….people don’t want to take responsibility for their loans. If you can’t afford it, don’t buy it. And I am sorry, but if you don’t know that you can’t afford a house, then you should not be buying one then either. This is the same thing. My parents, lower income, tried talking me into going to a school in the mid 1990’s that cost $25,000 a year. I knew that there was no way I wanted to come out of college with that much in loans. I am so happy I didn’t listen to my parents who never taught me anything about finances. I graduated from a state school with $16,000 in debt instead of $100,000. So much better off.

          1. I thought the same as you- responsibility falls squarely in the buyer. After buying a house and working in Sales, I no longer hold this belief. Sure, there are/were some reckless borrowers. But there is/was definitely a high degree of predatory lending. Lenders will make the numbers look attractive- that’s their job! College is now following suit.

            1. I’m an appraiser and while I agree that the lender’s job is to make the numbers look great, I think it is the responsibility of the borrower to ultimately make sure the numbers work for them. I have seen really terrible lenders, but I think those are few and far between.

      2. I agree that the media is perpetuating this crisis. Yes, FASA doesn’t help enough middle class folks, but people are getting jobs that can more than afford to pay back their loans. It seems like there is a crisis of not WANTING to pay back loans.

  17. I’m not sure why this is a problem. If you are stupid enough to pay absurd amounts of money for what is usually a trivial education and a piece of paper, then sleep in the bed you make.

    Tuition will eventually have to reach a price where a lot more people stop attending. And then a degree will actually be worth something, again.

    I mean, seriously, unless you’re a doctor or lawyer or a few other things, why the hell are you wasting a quarter of a million dollars and decades of debt on a college education? Plenty of us out here skipped the college degree and do very well for ourselves, because we cared about something and pursued it on our own (in many of our cases, college would have been a hurdle that only slowed us down).

    Aside from a few special fields, college tuition is just a “lazy and unambitious tax”. A tax you have to pay if you don’t care about anything enough to have already pursued it before college time. A tax you have to pay if you can’t pursue knowledge and resources on your own. A tax to pay if you just point to a top ten list of most popular/well-paying careers, randomly pick one, and then sit in classes for four years letting someone else info-dump into your brain so you can go partake in a career you give no shits about for the rest of your life, because you heard it was a top career to have.

  18. The Fire Guy

    I would disagree with the sentiment that “Few people would not run a cost/benefit analysis of college or graduate school before spending years of their lives and tens of thousands of dollars.” All I can go by is my friends and acquaintances, but from my experience this thought process was unfortunately not routine in families that are firmly middle class (the group that sometimes is caught in the middle between massive family wealth and generous tuition assistance). Definitely not 10 years ago, maybe a bit 5 years ago, and probably starting to creep into people’s thought processes in the last few years.

    I firmly believe, like most others here, that education is the key to opening new doors, and there should be systems in place to help the less fortunate with tuition assistance. But I am also adamant that the federal backing of student loans is compounding the problem. Unsecured debt to an 18 year old, no questions asked. Who thinks this is a good idea?

    So, of course, what do the banks do? They want to join in on the fun and get a piece of that student loan action with their private loan sharking ways. And, of course, what do universities & colleges do? They raise the price at astronomical rates to increase revenues. The government is backing it – so why not???

    Student loan debt is one of the biggest issues facing this country in the coming decades and I’m very interested to see how it will continue to affect demographic trends. We can already see the short-term impacts of so many millennials living at home, at least primarily due to student loans. But as one of my friends says, “people want nice things”. The idea of many people going into debt up to their eyeballs isn’t going to change in the consumer driven USA.

    I have to say, usually I’m a glass half-full kind of guy…

      1. No, my wife and I are blessed that we have good paying jobs, both had minimal student debt and eliminated it as quickly as possible. It’s just frustrating to see friends and family affected and have stunted financial growth. But I get your point that it’s not necessarily solely due to the student loan payments. It’s more likely a string of repeated questionable financial decisions (one of which may have been taking on boat loads of debt and not considering their likely earnings potential). It amazes me to have friends that literally live paycheck-to-paycheck, despite their greater than average income…

        1. I’m glad you guys are doing well in the student loan crisis! And with your help of spreading the word about fiscal responsibility and due diligence before spending so much time and money, less students will suffer.

  19. just to give some perspective:

    Prior to college I was a top HS student.. 4.0, captain of sports teams, etc. No one encouraged me to think about debt. Choosing a college was based on what school “felt right” and where you think you’d “fit in”. Choosing a major was about your “passion”. And you took out whatever loans were necessary. I didn’t have the life perspective to think about expected income vs debt load.

    Solution? Require a finance class in hs.

    Talk all you want about the info being available for free online, but like I said I was a “smart” kid and didn’t even think to look.

      1. I’m doing quite fine, but my concern is for others.

        The point I bring up is that the K-12 education system is failing its purpose of creating well-functioning members of society by not teaching basic personal finance. It is naive to think 17/18 year olds have the perspective to learn about finance on their own.

        1. But that’s the point. WE ARE OTHERS. Everybody says they are fine, and that there’s this crisis out there. Yet, how can it be if we are all doing fine?

          There’s no need to worry about others because people are rational, and lenders are rational if they want to stay in business.

          The cost to attend college is directly proportional to a student’s ability to pay.

          1. Anecdotal evidence from this site (and many of you relationships being that you’re well-off) doesn’t provide much… This site is going to attract higher income and money motivated individuals. This blog doesn’t cater to anyone that isn’t “above average” in regards to socioeconomics. You MUST realize this.

            1. I do understand that a site about money attracts people interested in money.

              I would say NOT to sell the American people short. We are much better off than the schafenfreude media and others make us out to be.

            2. I agree with this. There is a huge selection bias with the group of commenters on any financial website like this. The readers are people who understand finances, and typically are rather well off. The media probably does exaggerate the severity of the student loan problem to an extent; however, I think the number of people struggling to manage their student loan debt is sizable.

              While most people probably can find ways to handle it for now, I think it might pose greater challenges down the road when many people reach age 40 or 50 without a dollar in savings. Naturally this wouldn’t have been such an issue if the common man had any reasonable amount of financial literacy, but people don’t.

  20. Two things: 1) FS noted that people might be confusing inflation with growing debt figures. The column chart by year shows nominal dollars, and the 2015 figure of $35,000 backs out inflation to $21,000 in 1993 dollars. 2) Taking on big debt and not getting it handled is a big character issue. Every statistic is made up of real people, with real stories. In my own experience, I’ve seen people under age 30 go on about their lives, get a job, get into a serious relationship, and when the subject of marriage comes up, WOW! The person with the debt (in one case, over $100,000 for a professional degree and license) expected the marriage partner to embrace it as a part of the “total package” and was surprised it wasn’t embraced like a longtime pet. It can be a deal-killer, and rightly so. In another case, a pal of mine married a recent graduate of dental school, paid off her $80,000 debt, and she divorced him two years later to go on with her debt-free and high-paying career.

      1. She is Asian, so that goes without saying. Slim tiny fingers makes her good at her job, too.

          1. Yes. It is a genetic advantage in the dental profession. Same concept as Mohawk high-steel workers, because for them every day is a good day to die. Russians make the best hit men because they are born without souls or the capacity for empathy. Etc.

  21. Taylor @ Freedom From Money

    Oh man, as someone currently paying off $13,000 of student loans in 11 months, I have so many student loan thoughts! So firstly, I don’t think student loans are “bad” or “good.” I do think that there isn’t enough education about them and that’s the biggest problem. Way bigger than the actual math or income or interest rate. People do not know what they are getting themselves into. And for some people, that’s entirely their fault. HOWEVER, at 17 or 18, you’re not necessarily ready or equipped to make decisions that cost $10,000’s (and years of your life).

    My loan situation was unique because the loan system that you talked about, totally failed me. My biological father earns a six-figure salary and filled out my FAFSA (and claimed me as a dependent) but in reality, he didn’t give me a single penny. I was completely on my own financially, and despite working three part-time jobs and living on less than $14,000/year in West Los Angeles, I still had to take loans and didn’t receive a financial aid package that reflected my situation because of my father’s high income that had been reported. There was nothing I could do about it for the first year he did this. The system is not equipped to handle parents who choose not to support their children or parents who suck and are selfish. There are so many other factors that come into play besides simply the math or mentality.

    1. I love your alma mater, UCLA! Favorite campus and lifestyle in the states.

      Here’s the thing, you are paying it off in 11 months! And you write you are saving half your paycheck. Therefore, you’re doing just fine. What’s the problem? You got a great education in return.

      1. Taylor @ Freedom From Money

        Yeah, UCLA is the best of the best :)

        It’s true, life is pretty good now. But the journey of getting to this point was BRUTAL And I honestly wouldn’t wish it upon anyone else. Looking at just the end result is only part of the equation. Love your approach and your advice for student debt sufferers though. (and your Bruin love ;) )

        1. So I had no help from my parents due to a similar situation but how can you call your parents selfish and say they suck for not helping?

          Mine gave me nothing and make 6 figures which screwed me over on FAFSA but here’s the deal… it’s THEIR money not MINE. It never was mine and it’s up to them if it ever will be mine. By them choosing how they want to spend it isn’t necessarily a bad thing… you learned financial responsibility from it.

          Sure, I wish my parents helped me out and gave me some money but at the end of the day I got it worked out and am doing just fine as it appears you are too. So your parents to choose how they want to spend their money should be no concern of yours… just be grateful if they did help. Sure FAFSA calculators sucks and have expected contributions from the parentals (I lost 20k+ in scholarships from them making too much after I had received the funds – very upsetting) but I will never be bitter for them keeping what they make and using it on themselves. That’s just my 2 cents though.

          1. Taylor @ Freedom From Money

            Hi Jon,

            I’m sorry to hear about the 20k. That’s a lot of money. The situation with my biological father is more complex than I could explain in a blog post. I don’t think parents owe it to their kids to fork over $10,000’s. But I do believe that parents owe it to their kids to communicate and not change course midstream with no explanation. I’m glad that you’re happy with your financial situation and the journey you had through college though :)

            1. Taylor @ Freedom From Money

              Haha, good detective skills Financial Samurai ;) definitely more to the story than merely finances. But the point I was trying to make is that the system is not perfect (as shown through my situation) and extensive loans can be a rough/stressful way to start your working life.

              But like I said, love the sentiment of the article and I definitely think that for the most part, people can bust through loans in no time if they set their mind to and make the necessary lifestyle “sacrifices” for a short period of time.

  22. If universities offer rebates to low-income families, that’s good news but it’s the job situation that makes student debt difficult to pay off. You showed us the math and it all looks good on paper, yet I wonder if $2,800 is enough for each month, considering that many of these debtors will carry the debt after they get married and start families – if they choose to delay these life choices, then they are missing out on life.

    But maybe that all is manageable, as you said. Let’s not forget that many of these citizens carry consumer debt at the same time too, so all of a sudden your salary (even if it is around $50,000 per annum) is insufficient to pay back the monthly installments of debt and once it starts accumulating thanks to the magic of compound interest rates, you’re in for a ride!

  23. I have a friend that took out loans for undergrad (psychology), grad (international business), and then law school. After a couple/few years of law school never finished. Finances wrecked.

      1. That’s the bad part. I’ve loaned him a lot of money over the years that I don’t ever expect to see back.

        Yes, they are wrecked. Though he is employed now. He spent a lot of years unemployed. We went to undergrad together and by my calculations at least 50 percent of the time he’s been unemployed.

  24. I am so happy to read this post. I went to a private college and got a BS and MS in engineering that left me in $88K of student loan debt upon graduating. This would have been more, but I was working multiple jobs throughout college to afford the $40K/yr price tag. Like some others have said, the FASFA really screwed over my family because it valued their house at an insane amount even though they had a substantial mortgage. I’m pretty sure it also looked at my parent’s retirement accounts as assets that could be liquidated, but that was not an option.

    Anyway, after graduating with $88K in debt, I continued to work 2, 3, 4, and even 5 jobs at a time to make as much money as possible. My first real job started at 50K but has risen to just over 100K in 6 years. Even though I am making this money now, I am still working side hustles to make extra money, and can easily make an extra $2-300 a week with minimal work from home, mostly through websites like fiverr, crowdsource, and other freelancing platforms. Sometimes I still help out at a friend’s restaurant waiting tables and can make $2-300 in a night!

    On top of this, I also went back to school while doing all this work and got a professional degree in an unrelated field that is going to allow me to open up my own business on the side. I’m hoping that this will net me around $10,000 extra each year.

    The thing that really resonates with me, though, is how few people are willing to put in the time, and to make smart life choices so that they can reach financial independence. With all this work, I was able to pay off my $88k in loans and finance a professional degree without taking out any new ones. I also bought a house and have a very reasonable / manageable mortgage payment. I save roughly 20% of my income for retirement when you count the employer match. AND, I still can go out for nice dinners, go to sporting events, go on a week or two of vacation each year, go to shows, have nice clothes for work and casual events, drive a decent car, and afford home improvement projects on my house.

    Every time I hear some sob story about people who are stuck in debt from student loans, I also hear stories about how they waste money on useless wants, go on extravagant vacations they cannot afford, eat out at fancy restaurants for every meal, and sleep-in every chance they get. They never tell as part of their story how they are working a second job, or how they are trying to save up for something. Instead, they are racking up credit card debt on top of student loan debt, complaining about it, and not thinking about the future at all.

    We really need people in college and recent graduates to be more responsible for their own decisions. I think that is where the solution begins.

    1. Love the hustle! But what if a student with debt just needs a fancy new car or their 6th pair of designer jeans? Shouldn’t they get some debt forgiveness from the government or their parents?

  25. a cardiologist has 6 years of residency making 50k a year working 80 hours a week before they see 250k+. how much can they pay off in those 6 years?

      1. And during those years of residency the loans are negatively amortized. Over a 3 year residency my husbands student loans went from 240k (20k undergrad + 200k med school + accrued interest) to 310k.

        FYI for anyone interested DRB will allow residents to refinance to a lower interest rate. Wish that was available 4 years ago! (And First Republic Bank has refinancing available as low as 1.9% for five year fixed once you graduate – we have that now for the 175k balance of the loan).

        Sorry if I sound like an ad for refinancing, but it’s saving us thousands!

        1. And how much is your husband and you making now? That is a lot of student loans, but sounds like you can afford it!

  26. It’s not the tier 1 or even the tier 2 private schools that are causing the “student loan crisis” but schools like the University of Phoenix, where students seem to take on proportionally large student loan debts for a bad investment in many cases. Or even the lets call it the tier 6 State School I’m currently attending where 50% of it’s student body that transferred in. (I’m considered a transfer even though I have a B.S. I’m just going into a completely different field). Where students are attending part time while working full time jobs and many are likely to quit before getting a degree. A good bulk of my transfer student orientation was information about financial aide and how you can only take our federal student loans for the first 6 years of a Bachelors degree. Where I can pay to take a class in Beginning Algebra, yes the one I took in 9th grade. (But the school offers the degree I want and more importantly is between my house and work with lots of night classes due to the student body composition.)

    1. Tier 6 State School? Please tell which are those!

      Yes, please do not waste money on University of Phoenix for your official degree. Better to learn about stuff you care about from the library, the internet, or buy some great books.

      1. It’s a local state school. I might be exaggerating about the tier 6, it’s an OK school but lets just say you go there because you can’t get into the University of Michigan, Michigan State, Central/Western/Eastern/Northern Michigan, etc. They are improving but they have a lot of students who frankly should be looking into going into a trade.

  27. The issue is financial illiteracy in this country. People don’t understand the basics of managing their finances, and who do they ask for help? I’d guess their friends and family. Then lets look at the fact that 74% of Americans live paycheck to paycheck and what do you know, they’re getting “great” advice from people who can’t even manage their finances themselves.

    Now, lets also look at another underlying factor, the US government practically gives endless amounts of students loans to anyone who wants to go to school driving the cost of college up at insane rates! And what do you know, here we are with graduates graduating with approximately 35k in loans. With your scenario you forgot that the trend will only continue to rise, and many students aren’t getting degrees that pay that well! So the issue is the government getting involved has hurt many, the students not studying profitable majors is another issue for them, and the lack of planning on their part and their parents part (ie college funds). Then throw that in there with a lot of people not being studious and here we are!

    That being said, I’m in graduate school and am on the entirely other side of the spectrum here so I’ll give you my side of the story. So I am 22 years old doing my MSEE right now at a top 10 university in my field so I am an engineering major. I’m getting the entire degree paid for by my company, and they pay my salary too while I only do school – great gig! Then for undergrad I again got paid to go to school, full ride plus some! And the best part was I graduated undergrad with a 6 figure net worth! My parents didn’t pay 1 penny, didn’t give me a penny and I didn’t qualify for a single need based scholarship either due to parents income being too high yet they didn’t tell me – 100% of everything I did myself through hard work and here’s my story.

    So in high school I took 13 AP/honors course getting nearly straight A’s in hs, I was also a top national athlete. Somehow I was able to manage to do it all plus work! So I worked my butt off in hs doing 3-4 hard courses a year + the basic curriculum needed to graduate (language, gym, etc). I started out life-guarding and working construction and saved like a maniac! By 16 years old I had over 10k saved up which I was able to use to buy my first car a used BMW cash. So now I had my car out of the way and no car payment. Then I continued working (only summers besides senior year) saving my money, and senior year I was so far ahead in my credits that I actually was able to work 32 hours a week doing an internship at an engineering firm making approximately 10 an hour. Between 16-18 (when I started college) I was able to save approximately 30-40k just working, saving and investing. It’s actually super easy to save when you spend all your time working and studying as you don’t have time to go out and spend what you make! So of course now I’m 18 rocking a stellar transcript, top national athlete and I’m thinking I’m gold! But nope, wasn’t good enough for a full ride into MIT :( so I chose to attend my state school on academics which they paid 100% of everything plus a small book stipend (which equated me being able to make approximately 500 a semester). I stayed living at home since I was studying engineering and most of your time is spent studying (we’re talking 70-90 hour school weeks if you want around a 4.0 when you graduate) and why should I pay a lot to study somewhere else for my own place? I just need a desk… By then I quit my job to focus on school and just worked summers. I kept that up just like hs started working mad hours senior year around the clock as I was super far ahead in my credits (about finished my MBA in finance in addition to finishing my BSEE in 4 years all paid for). So senior year of undergrad I worked 30 hours a week and full time over breaks and freshman through junior year every summer. Over those times I was able to push my net worth over 100k (barely), through saving like crazy and investing the coin (and not even for good returns for most of it cause I was too cautious after the crash unfortunately – much smarter now).

    So then I got hired on as a EE where I worked at and they said they wanted me to get a MSEE (keep in mind BSEE I had a 3.9 so super high GPA – thus why they would pay) and that they would pay for it too and my salary and all and they wanted it to be a top 10 school! So now here I am going to school making a decent amount to study (“still” unfortunately – it’s getting old after 8+ years of doing it) but only 2 more semesters and MS is done! I will graduate with a very healthy nest egg to invest for the rest of my life and have a very nice engineering salary.

    From my experience the issue is lack of financial literacy in this country and the desire to live in the now (perhaps because they don’t understand finance). They choose to live get their own place, party hard every weekend and have tons of fun – but hey that’s super expensive! That being said I was in a fraternity, I still had a decent amount of fun… but at the pace of 1-2 times a month instead of 3-4 times a week (a lot cheaper). So if you live on your own and pay for that, pay food, and booze, car, phone etc in college that may run you 800-2k (depending on location you live) and that adds up! 1k*10 month school year * 4 years = 40k. You can save the majority of that living at home and just not going out as much or just doing cheaper activities or free ones! And then I had friends who were servers and bartenders so were able to work A LOT and made A LOT in undergrad… 500+ a weekend (2k+ a month mostly tax free and more during summers). Had they lived at home and saved most of that you could save maximum 2k * 10 * 4 + (5k*4 4 summer earnings)) = 100k I’d be willing to bet! So that would give you enough to pay your college, have lots of fun money and probably still save 50k or so (for those who don’t have parents or scholarships to pay)! It’s just about looking at the numbers and figuring it out! My friend was pretty in debt with student loans then he started talking to me and by the time he graduates this year (he’s a senior) he will be able to pay off his 20k+ loans at graduation (he told me he just wished he knew what I had taught him sooner so he could have all this money saved instead of having to use it for loan repayments). The point is ANYONE can graduate with TONS of money if they are willing to go the distance. Had I not been an engineering major I would have had even more time to work and I bet I could have graduated with north of 150k as I would have found a way to make more in the school years. So I don’t really buy peoples excuses. If you want to be rich it’s not hard. Save until it hurts no matter your income, and make sacrifices while you’re young so TVM really capitalizes before you’re older.

    My thinking has always been I’m suppose to be a poor college student – so why not live like one while the stereotype allows me the luxury and save my wealth? Because of this savings I will be purchasing 1-2 properties when I graduate graduate school and I have more time to manage it and then I will really be able to make a killing on passive income…

    My other feeling on this is pretty simple… if you want to be rich and be a millionaire, being in debt 35k shouldn’t intimidate you. Because if you can’t find a way to get 35k to get debt free how will you ever find a way to become a millionaire and get approximately 30x that?

    Just my 2 sense. I’ve actually been working on getting my finance site up and running because I want to try and inspire my generation and teach them that it isn’t hopeless and that through careful planning they can all do well for themselves no matter their income. I feel that’s probably the biggest way I can make an impact on the world today by hopefully helping others with my knowledge especially the ones I can relate to being a fellow millennial. What are your opinions Sam and everyone else?

    1. My opinion is that it would be fun to read more on your site!

      Clearly you have the work ethic to get ahead, which begs the question: why don’t folks just work more to get ahead? What is wrong with working an extra 10-20 hours a week to make extra money, especially if they need it?

      Is this really a financial literacy problem or an entitlement problem?

      1. Well I think a lot of people see Europe (and overlook their faults) and just want to live to work and don’t care about money (I call this ignorant since the world runs on it). I think it hurts them long term, and by live to work they just want to have fun and “party” and only work to pay for those activities. Most that I know don’t care about saving a penny, a house, cars etc. It’ll hit them eventually and I think most of them will have remorse for their decisions now.

        Thus why it is on us to educate them before they get in debt, don’t have savings for retirement etc! They just need some eye opening!

        Well I think those go together somewhat… We have a time where very few people are educated financially percentage wise (who in their right mind would carry CC debt – watch someone justify it now) but 74% is not right… even many who make 6 figures live paycheck to paycheck, this in turn tells them to overpay for things i.e. college, cars, houses etc. and they don’t really understand the issues when they are young so their inexperience in finances hurts them and cripples them early on financially (relatively).

        So they are in the hole 35k lets say… but to some if you start making 30-40k starting and take out taxes/deductions etc and then just small paychecks left. Recall most don’t try and save 50% of their take home pay so their left with mere hundreds if that to try and conquer loans and the credit card after a month of spending and fun… so I think it just gets overwhelming for them so they give up and like the idea they were mistreated and should have it easier thus free college, loan forgiveness, free medical etc. It’s them looking out for their best interests given their current situation – which to them doesn’t look very good. I personally think they just need to accept personal responsibility and figure out how to improve their current situation.

        But here’s the thing it’s easy to dig yourself out of that hole it just takes a little time and sacrifice. But as I once heard “with communism, at least everyone gets a job – capitalism is just damn ruthless”. So people are just trying to take care of themselves to the best of their ability because if you aren’t super brilliant or hardworking you might not be employed. If someone else knows they will never be able to make xxxxxx.xx that they want to make an entitlement system that will pay them the most they can make for their skills sounds appealing.

        The thing that becomes dangerous is when people don’t believe in themselves and that’s why settle for an entitlement pay rather than getting motivated and maximizing their pay. Because I think a lot of people would be surprised if they just focused on making money how much they’d get.

        Glad you like the idea of me doing my site! I’ve already started working on it… the issue is turning it into a bunch of stories… I’ve been writing it and I feel it would be easier to write a book full of information rather than shorter articles because each topic I have written on just has so much material to discuss that I feel chapters per article may be more convenient. One I’m working on is currently 4 pages and still not done… Props to you for being able to write these shorter length articles.

  28. Great post Sam, very logical breakdown of the value and affordability impact to the individual.

    What are your thoughts on government student loan forgiveness and the scale of default? What does that mean for the system i.e. Tax implications, government pull back on support and impact to universities and loanees etc…?

    1. I guess making someone payback their loans based on the percentage of their income for 10 years in a row is better than someone not paying them and causing other people to pick up the tab.

      There are inefficiencies like with all government programs.

      1. I agree, and I’m not sure this is a bubble ready to burst but maybe it is an unsustainable trend that causes collateral damage when it corrects. From what I can tell at a macro level size of loans and tuition costs are growing at a much faster rate than average wage. Government subsidies are racing to keep up and as a result defaults increase on a total dollar basis while at the same time increasing dependency on government for the cost of education (maybe good, maybe bad depending on personal philosophies). The increase in accumulated debt earlier in life potentially impacts spending behaviors or worse damages or depresses credit etc… Combine this with the fact that a lot of the money being spent by universities that cause this tuition inflation is on infrastructure and facilities and arguably not so much on advancing educational practices i.e. not increasing the value of your education as much as improving your aesthetic experience.

        I think the point you have made clearly shows that loans today are largely affordable which means education is largely accessible at all levels to all people. We should certainly be greatful for this. However, I would say the answer to the broader question of whether or not there is a problem with the cost of education is still a bit open (maybe slightly different to whether or not there is currently a bubble but still intimately related). Based on my limited and admittedly not fully stat back view I think it’s worth arguing that we should at the very least question if the current trend is sustainable to ensure we don’t hit a big correction in the coming years.

        Love this site and love your story, thanks for the fantastic information!

  29. $21k in student loans was pretty hefty when I first graduated only making $12/hr with a bachelors. Fortunately I was thrifty living with a room mate, cooking meals at home and took some calculated job hopping risks to bump that to a salary @ 3.5x per hour by 28. With that said the median student loan debt is manageable if you play your cards right.

  30. I think the whoel thing is overblown. Students need to review earnings potential for their major when they are a freshman and make a decision then and there if it is worth it. Some may still choose a poetry degree, but know that life will be hard with a low income (or that they need to change fields or branch out from the degree after college).

    I don’t think $35k is too much given how different the pay scale is for college degree vs high school diploma. I see new grads in accounting making more the first year than someone with 10 years of experience in a non-degreed position.

  31. I applied to Princeton, thinking that I would get at least some scholarships, merit awards, etc. Boy was I wrong! I didn’t get a dime, and sadly, couldn’t afford it. Of course I could’ve taken out some outrageous loans for $200K but that was a noose I wasn’t willing to put around my neck. I went to an in-state school where I DID get many scholarships and ended up paying $22K for all four years, when the in-state tuition for that time period would’ve totaled over $100K.

  32. Romeo Jeremiah

    Of course there is a crisis. You’re assuming the crisis is “unmanageable student loan payments.” I assume that the crisis is in the amount of folks who take on the high amount of debt to “pay for school.” You should start another poll asking how people used their student loan refund checks as a living subsidy. Those loans are used for cars, clothes, entertainment, travel…you name it.
    For the most part, student loans are used as low interest credit cards, and as Yetisaurus stated above, mostly anyone can get approved for these loans regardless current income or the prospect of future income.

    Furthermore, students can no longer claim ignorance. Everyone must go through financial counseling as a requirement before taking on the loans. So, they at least have had some awareness. https://studentloans.gov/myDirectLoan/counselingInstructions.action

    1. Glad to hear counseling is required now. But Consumer Reports and others claim it is too perfunctory to be truly useful, which seems entirely plausible for a mere 30 minute session covering so many complex topics.

      When I went to college in antediluvian times, the phrase “starving college student” wasn’t just a cliche. Unless you were a rich kid, you were expected to live like a pauper. It was admired how well you could stretch a buck. The way some college students live now is amazing: nice cars, fancy gadgets, spring break in faraway places.

  33. Completely agree with Yetisaurus’ comment!

    It is an issue, and it begins with implementing education on fiscal responsibility in grade school.

    I took a year off after high school and my single mother was very eager for me to find my future career calling and attend college. The moment we found the school for me, it became all about the education and unfortunately little consideration was given for the impact of what would become a $100k loan. It was a technical school and I majored in Computer Animation, as you may know, these private, for profit schools are relentless to getting you in the door at all costs, they share no insight as to what many a naive 19 year olds like myself sign up for. I knew very little about money/debt. I took it in two phases, an Associates degree, and then later I applied for a “completer’s course” to get my B.S., since the program extension was created a couple months after I graduated (new trending tech at the time, 2005). When I was thinking about the money vs. its value, my Grandfather (another huge advocate for education) strongly recanted I get it and finish, get the Bachelor’s. So I did.

    Now at 31, I have such a sense for finances and am steady on my mission to be completely debt free. But it has taken its toll. I see friends enjoying the fruits of their labor by buying houses, traveling on vacations, saving for retirement, while I shelter myself in my mother’s house to save as much as possible to get out of this hole, not to mention a disillusionment for my career as most of the money goes to bills and “the mission”. And I get paid decently for what I do, but you said it, this isn’t a Doctor’s salary.

    Moral of my story, supplement high school education with some mandatory financial/fiscal responsibility courseware. Include a rigorous class that really drives home what many (not all) baby boomers didn’t properly teach their children, fiscal responsibility especially when it comes to borrowing, weighing in the pros/cons. Make it a social norm in schools (very much like “Go to college, Don’t do drugs, Be financially responsible”. Imagine that!

    I see too many folks saying, “I don’t understand the problem, these millennials are so irresponsible.” Some just weren’t guided/warned as well as others, that’s all. I just think back to ‘Rich Dad, Poor Dad’ and how relevant it is to this topic.

    Love the blog!

    1. Good job with the fight to paying off debt Angelo!

      I really get upset when I hear for profit colleges take students money and don’t do everything possible to place their graduates in commensurate jobs.

      The University of Phoenix founder’s son sold a $25 million mansion here in PAcific Heights a couple years ago. THAT is how profitable for profit education schools are.

      Folks, education is largely FREE now thanks to the internet. FREE. Please run the numbers.

    2. I agree with this and it too remind me of Rich Dad, Poor Dad. When I transitioned from financial illiterate to literate, I felt like I had just learned how David Copperfield does his magic! So obvious once you have the knowledge, but prior to that, it just seems impossible!

  34. I was fortunate enough to both have some family help (grandparents’ trust) in getting through undergrad, and to have been taught enough about frugality to make those trust funds last. I couldn’t have afforded private school with the amount of the trust I had, but it was enough to pay my tuition and books at a UC school, and to give minor assistance with living expenses (supplemented by my part-time work). For law school, I attended a private law school because the nearest public option was about 60 miles away, but I got HUGE academic scholarships and my parents helped a bit, too.

    The private law school is where I encountered people who were stuck in unbelievably high debt. Many of them went to private undergrad on student loans, and private law school on student loans, and some even did the joint JD/MBA program on student loans. The thing that is shocking is that they had no clue what they were doing to themselves. Virtually none of them were at the top of their class–if they were, they would have gotten the same huge academic scholarships that were given to me. Many of them had zero to very, very limited work experience during their school careers, which meant it was going to be that much harder for them to find jobs afterward.

    Plus, our private law school is a smaller/newer school, so only a very small proportion of grads went on to Big Firm jobs where they could easily tackle their debt. I would guess that the average starting salary after graduation was probably in the $60k-80k per year range.

    A huge part of the problem are the private lenders who will indiscriminately loan tons and tons of money to these kids, knowing that even if the kids later file for BK, the student loan debt is nondischargeable. Another part of the problem is that those kids didn’t get any mentoring at all about what their career prospects were looking like, or the amount of the loan payments that they were going to have to pay after graduation. Both of those are huge problems.

    1. This comment rings true to me. At my law school, the top 25% could get a big law job in a primary market making $160k starting salary and, if motivated, could get out of debt in 3-5 years. The bottom 25% could be working as a public defender making $35k starting salary. Whenever anyone asks me for advise on law school now, I encourage them to do a lot of research, understand where they need to be in their class at their particular school to get them a job that allows them to pay off their total outstanding student loan balance in 3-5 years, and if they can’t make that happen, save their money and do something else. Because so many lawyers are unhappy, you don’t want to risk “debt slavery” at a large firm for more then 3-5 years. I was lucky enough to graduate debt free, and I try to tell my parents as often as possible how grateful I am for this luxury of not having the emotional burden of six figure student loans, or the financial burden of starting my career with a negative net worth.

  35. fun in the sun

    The student loan debt issue is not about doctors. The issue is that in America, anyone can go to college. Other countries with more management college costs discriminate against those without good grades. Therefore those that graduate from college, are much more likely to get good jobs and afford to pay them back.

    There are students from poor to middle class backgrounds taking on huge debt for luxury degrees from average schools, unlikely to generate enough salary to pay them back. That is the student debt crisis. I define a luxury degree, as any degree that leads to a career which has an average salary of under $60k a year. Many fine rewarding careers fall into this category, however taking on large college debt to pay for them should be a luxury.

    1. Good thing this post highlights average student debt vs. average salaries in the post, subsidies for education, and more, and not just doctors in the intro. There’s even a handy dandy chart towards the end I created to include everybody.

  36. It is hard to feel like there is a student loan crisis when the average debt is $35,000 and the average new car purchase is $33,560 and Americans buy a new one every 5.8 years.

    It is about priorities.

  37. As you have pointed out, student loans are still manageable to repay. However, I think there is still other problems to consider. In my case, I am about to finish graduate school for accounting (have to love the 150 requirement for CPA) and did well enough in undergrad to receive full funding from my public school for the program. I still have ~$27,000 in debt of which I have already paid off about $10,000 from summer jobs/internships. My student loan payments are expected to be about $280/month using the standard 10-year repayment plan. With my salary of $55,000 following graduation, it will be manageable to max out my 401K and make my student loan payments every month. The part I am struggling with is I don’t have any money leftover to save for a house.

    So my student loans aren’t necessarily a problem, but many millennials today are putting off purchasing a home because of them. The student loans are just making me look at ways to either cut expenses or find other ways of earning extra income so I can set some money aside for a down payment. Maybe I could just put less in my 401K, but I have been taught by the Samurai this is not a wise decision. Guess I just won’t be purchasing my first home until my 30’s!

    1. Mike – You can’t have it all, immediately. What’s wrong with buying a home until your 30s? Also, you’ll be getting into more debt if you buy a home.

      GREAT job on paying down $10,000 in debt from summer jobs/internships. And if you wanted to bust your balls and take on some sharing economy job for another 10 hours a week, then you can pay down your debt even faster.

      I don’t think your $55K salary will stay stagnant over time, do you? Financials tend to get better over time.

      And who knows, you might meet another CPA who makes what you do, and therefore, you could buy your desire sooner than expected!

      Related: FS-DAIR: Pay Down Debt Or Invest?

  38. Wow I had no idea those schools offer full coverage for families with those income ranges. That’s good to know! I got through college on grants, scholarships and paying for half of thr rest myself. I’m really fortunate that my parents took the financial aid paperwork seriously and figured all of that stuff out. I was one of the lucky ones who didn’t have to pay full price plus I went to a public school to save money.

  39. Thank you for pointing out the numbers. I have been arguing this point for a few years now. Student loans suck. Period. However, they are not unmanagable if you live within a budget. Plus, right after college is a great time to have a second job, then you can pay them off faster. I graduated 15 years ago with $16,000 in student loan debt. While not as high as it is today, it still sucked paying it off, which I did all while saving for retirement and a house. Part of the problem, imo, is that people do not want to accept the responsibility of paying off their debt. Our country is lacking in personal responsibility and personally, I think the students should be required to pay off their debts.

    1. Why do you think people think there is a crisis of paying back what they OWE? Shouldn’t there be more thanks that someone was willing to risk lending money to them to get what they want?

      It should be an HONOR to pay back a debt w/ interest. Could people be confusing good old inflation with ever growing debt figures?

      But, I would like to hear more perspective from those who think there is a student loan crisis.

      1. I think its a “crisis” because people want to live beyond their means and not within their means. Is it hard? Sure, but at that age it shouldn’t be. Right after college I was used to living on a little bit of income, so when I did make some money I was able to live within my means quite easily.

      2. Chris Murray

        Hi Sam,

        I realize morality is a touchy subject, but is tuition increasing several hundred percent across the board and greatly outpacing inflation over the past few decades really justifiable? There is some opinion out there that student loans have become far too accessible. Should every 18 year old middle class kid in the country qualify for thousands of dollars in loans regardless of what they intend to study and potential future earnings it might give them? I struggle to agree with the notion that lenders “took a chance on me” since there is an incredible amount of money made from the interest and securitized student loans. I do agree that everyone should repay no matter how much it sucks, but maybe the system lost sight of the point of helping young adults finance higher ed. So I guess my opinion on the “crisis” is that tuition hikes seem unreasonably high while the power of a bachelors degree appears to have diminished to some degree.

        A personal aside, I don’t struggle to repay my loans but I have tried to refinance through sofi and have bee immediately rejected twice. I looked into it before I found your site because they claim to consider more than just a credit score which was the appeal. Another personal finance website states the average credit score is 766 with a $130k household income to qualify which hardly backs their claim of considering more than a FICO score. My credit score is average, I have no consumer debt and my salary is right about the median household income in the US and I am a single person.

        I know this is an older post but I think this topic is fascinating so any response would be great!

  40. One avenue you forgot to mention is the military. I served 5 years, finished my BS while in the military, and afterwards I finished my MBA through the GI bill. Not only did I avoid student loan debt, I was actually paid while finishing both degrees. In my opinion any able bodied American has the opportunity to graduate from any school without student debt. Sure you’ll miss out on some frat parties, etc., but that hardly sounds like a national crisis to me. I have a hard time feeling sorry for people who aren’t willing to make sacrifices for the things they want in life.

  41. Service academies are an excellent way to get a top-notch education and enter a rewarding profession, with zero student debt!

  42. Interesting, I was just looking at my student loans this morning. I still owe just under $40,000 but my rate is under 2%.

    I don’t have a lot of economic incentive to pay it off, but I hate paying it. Its more of an emotional incentive. It is my small debt amount, and it would just be nice to get rid of it.

    1. With the 10-year yield now at 2.35%, you are “in the money.”

      But, I paid mine off anyway, b/c it annoyed me. And once I did, I felt greater than any economic arbitrage feeling ever gave me.

  43. This of course is the theoretical scenario (but I’m sure you know life isn’t perfect.) In public institutions, we have a broken financial aid system. For example, my parents who have a very low income also own a primary residence which have a high value (which by the way has negative cash flows and is in dire need of renovation.) But of course, that didn’t matter. The net value of the property was added onto my FAFSA application and I got no aid. It isn’t just me I know many people that got screwed over like this.

    1. I hear you on how FAFSA doesn’t have a high enough income/wealth threshold for a lot of middle class folks. My situation was the same, with two parents working government jobs. But, I could have paid for my $2,800 annual tuition at W&M working at my craptastic $3.65/hour McDonald’s job. I made a choice to go to a state school, rather than to a private school.

      Even now, with W&M tuition at $12,500 a year, I can still pay for my tuition with a craptastic McDonald’s job b/c they are now paying $10/hour. Further, there is Uber, at $25 net an hour, super cheap rates now that are 50% lower than when I was in undergrad, etc.

      Is paying back what we owe really a crisis?

  44. Those are all great, obviously makes sense to take debt to be in finance, medical fields. Whats wrong with the world is that just because they did 4 years of easy classess then they believe that 100k a year is easy.
    I just think that over 50% of college students are wasting their money.. simple some professions. Make money others dont. Like i always say, if you dont have to take harder classes in math, science except you are becoming a lawyer you are wasting your time. At least most of them, i know some people will do good no matter what they study, but is their innate ability to sell ! If you dont sell you are the buyer my friend.

  45. theofficialjohnandre

    My girlfriend and I earn around $140k total. Putting 2 kids through College at Princeton would be insanely expensive..

    What bothers me is that there are no checks and balances…unlimited govt student loans equals unlimited tuition raises..

    1. Good thing if you had a kid who got into Princeton, you aren’t paying rack rate with a $140K combined income! That is one of the key points of this post. Your kid will get subsidies at your household income level.

  46. I have an issue with your calculations. You are comparing debt levels for students their first year after graduating from college with median income levels which they may not achieve, if ever, until mid-career, not the first year after graduation! While I agree that the “bubble” may not be as bad as people fear, I think your calculations may be painting too rosy of a picture.

    1. This is a very valid point.

      I am making six figures now after 25 years of experience. I started out making $34K after finished school. So I am making about three times as much before adjusting for inflation.

      I think new grads in my field today probably make around $50 to 60K in my area so I am making about twice so not three times after adjusted for inflation and raises for experiences.

      So there can be a big difference in pay between a newly grad and later in career. Of course this is just my example as everyone will be different.

      So for most people the pressure from student loans will be greater at beginning. As your income rises over the years this pressure will be lessened.

      Just food for thought.

      1. I don’t think this is too surprising though, no? Everything is always harder in the beginning as we go up the learning curve, earn, and save. Only after years of effort do things start getting easier. Do we build great products. Do we start living a better life.

  47. As someone who writes about higher ed on a weekly basis, I have mixed feelings. Yes, there are some incredibly high published tuition rates out there. However, it’s fairly easy to avoid the most expensive schools and do something cheaper instead.

    The biggest problem we have is with educating people on how/when to compare college costs. Choosing a for-profit school, for example, is the easiest way to pay 3-4 times what you should for your degree. Further, private schools are generally much more expensive than their public, four year counterparts. Plus, students need to choose a college major that can actually lead to a decent-paying job.

    I’m tired of people “following their dreams” to be a social worker or whatever then complaining about how much they owe in relation to their salary. Everything you could ever want to know about salaries and career outcomes can be found online if you bother to look.

  48. College debt is not something that is hidden from students or potential students. Hopefully any debt that is incurred is planned for in regards to future career earnings. Beyond that, simple fiscal responsibility would help must of the purple I knew who complain about the burden of their loans. Having a car payment higher then the monthly student loan payment is a prime example of stupidity.

    1. Are there actually people with a car payment higher than their monthly student loan payment? If so, then perhaps they value a car more than education.

      It does seem kind of crazy, but clearly there is NO STUDENT DEBT CRISIS for them, if they are able to take on an expensive car loan as well.

    2. I agree that the debt itself it not hidden by universities but employment prospects and salary statistics are. Willfully lying about these numbers is how law schools have keep enrollment rates up for years.

      I enrolled in a middle/lower-tier law school and paid, for three years, $40,000 a year in tuition/costs plus $15,000 a year for living expenses. I graduated with about $170,000 in debt. When I enrolled, my school’s self-reported employment statistics indicated that 95% of students had jobs writhin 6 months of graduation and that the average salary of those jobs was $160,000. In other words, the school basically told all prospective students that they had a 95% chance of landing a big law gig so who cares about $170k in debt when you can easily pay it off in 2-3 years with your big law salary.

      Unfortunately, these self reported law school employment statistics couldnt have been further from the truth. By my conservative estimate, no more than half of my classmates had paying jobs 9 months from graduation with only a handful (10 or so) landing high paying big law jobs.

      Now I could have done more research on employment statistics and went to a more affordable school (my undergrad state school’s tuition was only $12k per year!), but I was wooed by the pseudo promise that I’d make enough enough money to quickly pay all debts off.

      It took me seven months to land my first legal job, and the pay was even okay. I worked hard and am now at a big law firm making fantastic money. I could pay everything off by next year but (to plug one of Sam’s favorite companies) I refinanced with SoFi and now have low enough rates that I’m okay waiting it out to save for a down payment on a house.

      Long story short, I ended up in a great place, but I am only one of a few from my class. I believe most of the jobless ended up eventually finding something or transitioning to another profession, but for most people that graduated with the same amount of loans as I did but didn’t end up at a solid law firm are financially ruined.

      So yes I will believe there is a student loan crises for as long as universities can get away with inflating employment statistics and lying to students. As things current stand, it’s a win win situation for schools. They raise rates and govt loan programs cover the full cost. Until student loans can be forgiven in bankruptcy, or until schools are held accountable, the crisis will continue.

      Also, like most govt policies, the theory that higher tuition is good because the richer students will pay anything, which helps subsidize tuition for poor students, ultimately hurts the middle class. While my family was not rich enough to fully cover my education expenses at any university of my choosing, we were also not poor enough to benefit from govt assistance programs or university-sponsored tuition reduction programs.

      1. I am a bankruptcy attorney working for a bankruptcy court and I wanted to clarify one thing- student loans can be discharged if their repayment would constitute undue hardship. Nine out of eleven circuits follow Brunner test established by the Second Circuit Court of Appeals in Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987), to show that repayment would constitute undue hardship. See e.g. Kasey v. Pennsylvania Higher Educ. Assistance Agency (In re Kasey), 187 F.3d 630 (per curiam) (unpublished table decision) (4th Cir.1999) (discharging approximately $15,000 in student debt of single mother with three minor children whose net monthly income was between $930 and $1,130, and whose monthly expenses exceeded her income by almost $300), Innes v. Kansas (In re Innes), 284 B.R. 496 (D.Kan.2002) (discharging more than $60,000 in student debt of father of six who earned approximately $30,000 per year and had a prosthetic leg and bipolar disorder), and Cheney v. Educ. Credit Mgmt. Corp. (In re Cheney), 280 B.R. 648 (N.D.Iowa 2002) (discharging $15,000 in student loans of 41–year–old divorced mother of two who earned an average of $405 per month, exclusive of child support and various kinds of public assistance). To establish undue hardship, a debtor must show:

        (1) She cannot maintain, based on current income and expenses, a
        “minimal” standard of living for herself and her dependents if forced to
        repay the loans;
        (2) additional circumstances exist indicating that this state of affairs is
        likely to persist for a significant portion of the repayment period of the
        student loans; and
        (3) she has made good faith efforts to repay the loan.

        This test poses difficult proof issues and it is rarely met. While facing request for a discharge of student loans, bankruptcy courts evaluate debtors’ income and expenses and, at least in our circuit, compare the debtors’ finances with the United States Department of Health and Human Services’ Poverty Guidelines. Many expenses claimed on the bankruptcy schedules are considered unnecessary expenses for purposes of this test. Another problem is showing that “this state of affairs is likely to persist for a significant portion of the repayment period.” Usually, debtors with a serious medical condition, which affects their ability to work never have any problems with establishing this prong.

        Only the First and Eighth Circuits have declined to adopt Brunner. The Eighth Circuit uses a “totality of the circumstances” test that considers (1) the debtor’s past, present, and reasonably reliable future financial resources; (2) a calculation of the reasonable living expenses of the debtor and her dependents; and (3) “any other relevant facts and circumstances surrounding each particular bankruptcy case.” Long v. Educ. Credit Mgmt. Corp. (In re Long), 322 F.3d 549 (8th Cir. 2003);Walker v. Sallie Mae Servicing Corp. (In re Walker), 650 F.3d 1227 (8th Cir. 2011). The First Circuit has not adopted either test, although bankruptcy courts within the First Circuit have adopted the totality of the circumstances test. Nash v. Conn. Student Loan Found. (In re Nash), 446 F.3d 188 (1st Cir 2006); see, e.g., Bronsdon v. Educ. Credit Mgmt. Corp. (In re Bronsdon), 435 B.R. 791 (B.A.P. 1st Cir. 2010).

  49. Oh yes, this is definitely a big deal.

    Then there are the people like me, who chose to take out loans in graduate school…a whole additional issue. I was extremely fortunate to have only a few thousand dollars of debt after undergrad, but grad school is a different story. I’m not sure what the solution to this is, but I think it would involve requiring potential grad students to do the math on how much money they need to live from month to month, how much they need (not want) to take out in loans, how much they can reasonably expect to be making after grad school with this new degree, and how much their loan payments would be.

    I myself did none of this math, and I’m dealing with the consequences now.

    1. Hi Sarah,

      That is a good idea, for all potential grad students to fill out an interactive calculator with expected debt repayment schedule and income and see how things look.

      May I ask what are the exact consequences you are dealing with beyond just paying back what’s owed? What about taking on some side hustles to help with payments and saving money on rent by living w/ parents? Those aren’t bad options no?

      Let me check out your site to learn more!


      1. A few friends of mine recently graduated from vet school and are facing a few consequences that I am sure are similar to Sarah’s. A lot of people do not think about the loan amounts and the prospects of their future income. All my vet friends wanted to become a vet because they love animals. Most racked up $200k+ in loans at around 6.5% interest rate. Now that they have graduated and are making roughly $75k-$100k, they are feeling the sting of those loans a little bit.

        Most college majors and the loans associated with them are completely manageable, but a few people took out way too much loan money to get into a field that doesn’t pay well.

        1. Let’s do the math with the worst case scenario here!

          $200,000 debt at a whopping 6.5% interest rate, 10 years to repay = $2,200 a month. This assumes one is too stubborn to refinance their student loan rate by at least 1% lower.

          $75,000 a year in income, 30% effective tax rate = $4,375

          What’s left? $2,175.

          Rooms go for $1,000 in SF, one of the most expensive cities in America. $1,175 is left. How about food ($600) and transportation ($85/month muni pass). $490 left to spend on entertainment, and maybe even save $100-$200 a month!

          What does one do with the extra 20 hours easily they could work a week in the gig economy? Get a gig! $25 X 20 hours = $500 a week, or another $2,000 a month. Who is stopping them? Nobody.

          This is not a student loan crisis. This is a crisis of desire to pay back what is owed and HUSTLE. If I’m willing to put in 7 hours a week driving for Uber, why wouldn’t people who actually need the money put in at least 7 hours?

          1. Yes, for sure, side hustles are a great idea, as is cutting spending as much as possible. These things are doable, and I am doing them, and I will eventually pay the debt off.

            I think what I’ve struggled with most are actually the psychological ramifications that go along with my situation, especially since I do not view my debt as anyone’s fault but my own. I’ve spent a lot of time feeling incredibly guilty and regretful that I made the decisions I did without doing the math first. (Although, again, I do think it would have been a bit helpful if my school or the government had required or at least encouraged me to do the math.)

            Also, since I’m still in grad school (defending my dissertation and DONE in five weeks and counting!), I’m definitely not making $75K currently. :) But hopefully I can find a decent job, plus a side hustle, as soon as I’m done.

            1. Gotcha. Don’t feel guilty! You are currently in an asymmetric situation now b/c you are still in school. Come back to us once you graduate and find a job. When you do, your feelings of regret and guilt will dissipate. It’s not that bad! What you are experiencing is the FEAR of wondering whether it is all worth it. I felt that way, which is why I went to public school instead of private school. I felt guilty and fearful that what if I graduate from college and didn’t land a sweet job. I wanted to at least be able to pay for it w/ my McDonald’s crap salary of $3.65/hour!

          2. Also, if anyone happens to be interested in reading, here is my description of my grad school loan situation:

            Again, not exactly the same crisis that you’re describing here regarding undergraduate degree costs…but definitely a sort of personal crisis for me, and for a lot of others, like perhaps Casey’s friends who went to vet school.

          3. You’re exactly right, FS. This is a work issue. It’s a “living beyond your means” issue. The money is there. But it’s not there if you want to buy two fancy cars, have kids, pay ridiculous rent or house payment, vacations, and goofing off. It’s all doable if you’re willing to live on a budget (and not even a beans and rice budget at that).

          4. Agreed. Many of the vet students I went to school with chose the most expensive apartments, ate out all the time, and some even bought new Dodge or Ford pick-up trucks with their student loan money! Not just one person, but I can think of at least 5 that bought new cars/trucks, in a class of 80 people (and none of their cars had “died” first). They saw that as free money, but, when we graduated (not so long ago), the ones that had new vehicles complained the loudest about their loan debt. Some wish they hadn’t gone out to dinner as much. I had roommates, cooked my own food and brought my lunch to school, and but did go out with friends most weekends. I graduated with 28K in student debt, which I paid off in 5 years with a starting salary as a small animal vet of 55K. Just my two cents.

            1. That’s the thing. Going out to eat expensive food and buying a new car is NOT A CRISIS. It might be a financial mistake, but that’s certainly not a crisis. Everything is rational. You want the truck more than you want to pay off the loans. Otherwise, you would pay down your loans.

          5. I’m having a hard time figuring out where you can find a livable place for $1,000 in SF… I am (fortunately) debt free and looking to move into the Bay area next year. Any tips, Financial Samurai?

            1. Oh right, shared apartments, didn’t think of that! I’m looking to live by myself though (I know, not the best decision financially but I also value my sanity by not having to deal with others in close quarters!).

              Long story short, I’m a 25 year old Boston native working in software/tech. My parents raised me frugally and now, post college grad, I’ve been debt free and close to having the “average net worth of the above average person” as defined in one of your articles. I still live with my parents, but am looking for a new independent experience in the Bay area with its tech culture and active lifestyles.

              I plan to be in SF within a year. We’ll see how that goes!

          6. I think your post is actually fairly ignorant. The issue in the “crisis” isn’t whether the money can technically be paid back (it can). The crisis is that the loans gobble up a significant chunk of money that would otherwise permit people to invest in their retirement, save for a down payment, fund a college account for their own kids, etc. Yes, you can afford to pay $1,500/mo in student loans, but this has real ramifications for personal finances and the economy. Did people get themselves into the mess in the first place? Sure. But the benefits of higher education are not commensurate to the costs.

            1. I’m sorry you are having a difficult time with your student loans. The best way I’ve found to be less ignorant is to learn as much about other people’s perspectives as possible besides running the numbers as I’ve done in this post.

              Did you go to Cornell per your email handle? If so, great school! How would you have done anything differently? And what is your current situation today?

            2. I did, but grad school. I make great money and can easily afford our student loans now. My wife and I had ~$400k in student loans when we graduated and are now under six figures. It’s so painful paying off student loans with after-tax money that is being taxed at the highest rates. The student loans definitely delayed us financially by several years. I know we are the fortunate ones though – many classmates were not as fortunate and have really struggled under the yoke of student loans. Again, I don’t think it’s a situation of not being able to afford them, but it obviously is having severe effects on the economy in delaying household formation (this fact cannot be disputed) and financial timelines.

              1. “I make great money and can easily afford our student loans now.”

                That sounds pretty good to me!

                Regarding delaying household formation, good thing we are living much longer than our parents.

          7. Getting a gig is not so easy if your skills and resources are limited. I often troll craigslist looking for gigs and occasionally I find a weird gig but that usually doesn’t provide 20 hours’ worth of income. A gig might be $50 here and there but is rarely consistent or other than short-term. (My longest running gig lasted several years with minimal expenditure of time and effort but it paid only $25 per month.) I mentioned resources because gigs are readily available for those with vehicles, but I have neither a vehicle or a license to drive one.

            Having said that, student loan borrowers can effectively enjoy a bailout simply by avoiding default or getting out of the default they are in.

            I’ve been in student loan hell for over ten years – with an ongoing garnishment which leaves me at poverty level – and currently have a loan consolidation in the pipeline. At completion or processing, the loans in default are paid off and a new loan is issued, WITH AFFORDABLE TERMS and ultimately forgiveness of unpaid interest and principal.

            Borrowers not in default have access to “income-driven” repayment programs which do not require a monthly payment until the borrower’s income exceeds 150 percent of federal poverty level. Sure, that is peanuts to a financial Samurai, but it means that repayment has now been made affordable to nearly every borrower. With a finite repayment period and balance forgiveness at the end, repayment is now affordable to student loan borrowers with huge debt or minimal income.

            Contrary to popular belief, defaulters are a cash cow for Treasury as punitive fees are added to their balances and low incomes are garnished – it’s the complaining borrowers not in default who are getting bailed out.

  50. John C @ Action Economics

    One stat that gets thrown around a ton is the average student loan debt amount, which over asserts the “problem”. Median is a better metric of student debt than average because the averages are greatly tilted upward by those doctors you mentioned graduating with $180,000 of debt. I pulled up an article from last year showing the average was at $25,700 and the median was at $13,000, and this only includes students who had a debt balance, so all of the kids graduating from college debt free aren’t counted.

    Like with any other major expense, the individual has a great control over how much money he or she spends on a college education and what portion of that becomes debt. The debt itself isn’t the problem the debt is a tool. The problem is kids and their parents who either don’t plan at all or have extremely unrealistic expectations of the job market for a chosen degree path.

    1. I’ve read this same thing. Lawyers, doctors, and people getting finances/business/engineering degrees at top notch schools skew the average debt ratios. This makes it easier for media outlets to present the numbers as a crisis. Show the “average” student loan debt, and then run a story about an unemployed art history major with $60,000 in student loan debt. No doubt some small percentage of the population has legitimate struggles with this problem. The problem is that the story is dressed up to look a lot worse on the national scale.

Leave a Comment

Your email address will not be published. Required fields are marked *