Debt.  It’s a negative word that carries all kinds of negative emotions with it.  Most of us have it, yet it creates a life of entrapment, shame, and discontent.  So where did all this debt come from? According to a recent CNBC article, 1 in 4 Americans is carrying student loan debt.

How are 70% of college graduates coming out of school with debt?  Why are students saddling themselves with debt before they even begin to live their adult life?

I will use myself as an example:

I went to a 4-year University on scholarship (combination of sports and athletics), followed by a doctorate program to become a veterinarian (price tag of $230,000).  Now, I have to have some level of intelligence to get my degrees so I can tell you it isn’t because I’m unintelligent that I signed up for student loan debt.

Most college graduates are also smart people who are driven and focused.  So what causes them to take on an average of ~$37,000 of debt to walk into their future with?

We are told student loan debt is “good debt.”

In looking back on my life and trying to figure out where I was given permission and encouraged to take on student loan debt, it was during my high school career.  In a “Careers” class, it was taught if you couldn’t afford college, there were student loans available. Student loans would not hurt you because they were viewed as “good debt” in the eyes of the financial world.  No money for school? Problem solved!

This is the problem.  Student loans are bad for so many reasons, but it is usually too late once you realize how awful they are (ie. sitting on $250,000 of debt, this girl right here).

Student debt is bad debt.  I repeat, student debt is bad debt.  Student debt is BAD debt.

If you are considering taking on student loan debt.  Don’t. Take it from someone who has messed up, big time!

5 Ways Student Loan Debt is Bad:

1.  Most college-aged kids are 18-20 years old, and they are making immature financial decisions.  

Most people this age think they know everything and are mature because the law calls them an adult.  The problem is, you really aren’t emotionally mature enough (in most cases) to make a smart financial decision for the rest of your life.

Everything looks amazing from 18 years old.  You have your entire life to live and pay off your debt, that you think will be easy-peasy when you “make it big” with your awesome degree.  So you sign up for debt to give you what you want at the moment and carry that with you into your future.

According to a report from Burning Glass and the Strada Institute, 43% of recent graduates are underemployed in relation to their degree qualifications and are therefore underpaid.  Landing that dream job with the dream salary may be just that….a dream.

In no way was anyone going to stop me from making decisions for myself at 18, but had someone talked to me about what real life with student loan debt would actually be like, I probably wouldn’t have done it.

2.  College-aged kids signing up for student loan debt don’t even know how to manage money.  

This seems to be an epidemic throughout all age groups, not just young adults. A Gallup Poll found that only ⅓ of Americans use a household budget.  

A 2017 report in Marketwatch found that half of Americans are living paycheck to paycheck. This means they are struggling to make ends meet every month and are just one emergency away from losing it all.

I am completely guilty of not understanding money at all when I signed up for student loans.  To me, it was all just Monopoly money. I planned on making enough money after school to pay it back super fast and get on with my life.  At the time, I was bouncing checks and living beyond my means with the best of them, but man my wardrobe was awesome! All sounds like a good plan, right?

There is a problem within our homes and our school systems when kids aren’t taught how to manage money.  Kids aren’t taught that debt is a bad thing. Borrowing money should not be normal. Why are we being encouraged to borrow to get through school?  I’m on the other side after graduating with debt and it isn’t pretty.

3.  Student loan debt will rob your future.  

I knew since the age of 10 I wanted to be a veterinarian.  I wanted to work until I couldn’t work anymore. I would have a family, but would always work full-time because I would love my career.

Here’s what I have learned, 10-year-old Rachel, 18-year old Rachel and even 25-year-old Rachel didn’t really know what 30-year-old Rachel would truly want.  I was completely naive at 18 and 22 when I launched myself into $230,000 of debt for my “dream career.”

If I had to choose today between being a veterinarian, in debt, having to work full-time to pay off loans vs. not being a veterinarian, with no debt and being able to stay home with my kids;  I would choose my kids every time.

Ask my 22-year-old self that same question and you would get the opposite answer.  Now that I am actually living my life and living with the student loan debt, working full-time, and raising kids I am finally understanding the difficulties I placed on myself when I was 22 and didn’t know any better.

Student loans are stealing not only money but choices and freedom from your future.  I am almost 10 years removed from my decision to go to vet school, but it is still controlling my choices today.

Don’t rob your future based on what you think you might want 10, even 20 years down the road.  The truth is, you have no idea what you will want 10 years from now. At least give yourself the opportunity to make choices down the road.  Don’t trap yourself or rob yourself of that freedom by taking on student loan debt.

4.  Student loan debt is still just debt.  

This one can be a bit tough to swallow.  After all the talks of student loans are “good debt,” and “it is totally normal to take out student loans; it’s how people get through school,” you have to know it is all just debt.

This “good debt” will stick with you for 10-20 years.  This “good debt” will influence every decision you try to make for your life and may keep you from living a life you want.

In the financial world, your student loans are debt.  This is something that takes away from your net worth.  You are not given a pass because this was taken out for your education.  These loans are still just loans.

5.  Taking on student loans will put you behind the curve for building true wealth.  

Do you want to be wealthy? I do! The true way to wealth comes from your income.  Student loans will monopolize your income until your debt is paid. How long will that take?

Think about this:

If you go to college and graduate school, you are typically graduating at 26-28 years old.  At that age, you then have to use your income to pay off the debt you accrued. A state study from the OneWisconsin Institue found that graduates of Wisconsin colleges take 19.7 years to pay off a bachelor’s degree and 23 years to pay off a graduate degree.  This means you could be 40-50 years old before you really start investing and have access to your full income.

Now let’s pretend you didn’t go to college and just started in the workforce at 18.  You acquired no debt and have started investing since you were 20. Even though your income potential may not be as great without a degree, (The Bureau of Labor and Statistics reports an average salary of ~$40,000 for someone without a college degree) you have given yourself 20 additional years of investing for retirement.  You will be wealthy.

Which option would you choose?  Sitting where I am now (with a professional degree and a professional pile of debt) I would absolutely choose to not have the debt and to be making less than I do now.

If you are thinking about taking on student loan debt, don’t rob yourself of your choices in the future.  Don’t steal money from yourself 20 years down the road. Student loan debt is not “good debt,” it is just debt.  Instead of taking on debt, take a breath to decide if it’s worth it. Do you know how to manage your money? If you don’t, start figuring it out today!  Look out for future you by making smart decisions today.

Don’t forget to pin this for later!

New to money management?  Start here to see what this is all about.

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