Understanding Student Loans: What High Schoolers Need to Know

MM Note: I recently connected with Kyle and I was so shocked about his story, that I had to have him on the blog. This is really important. High Schools are where student loan debt begins and what students are being told is absolutely shocking. We all share the responsibility to educated students on students loans, but Teachers can have the biggest impact.  

I’ve been a high school teacher for nine years. And it’s downright scary.

No, not because any moment can be caught on SnapChat, Instagram, or Facebook.

Because, high schools are becoming a promoting ground for debt.

Yes, you heard me correctly.

Students are being taught that taking out large student loans is okay and that going into debt is completely worth it.

Unfortunately, I was taught the same thing. Because my family had only saved only a few thousand dollars, I had no choice. I went to school with student loans.

I was told, and taught my whole life that student loans are a viable and good option to further your position in life.

College tuition costs continues to skyrocket = more student loans

“Student loans are good debt!” I was told. They were just normal.

I took out loans and owed over $30,000 by the time I graduated. Then I carried that debt for 6 years. Until I was 28 then I finally bucked the system and went on an 18-month journey to bust my way out of “normal.”

Now I’m a high school social studies teacher. So what do we tell our students? Has counseling on career readiness and student loans gotten any better?

No, it’s gotten worse. A lot worse.

For all of you who aren’t high school teachers (and maybe for some of you who are), here’s the inside scoop.

It’s ingrained in kids today that “if you don’t go to college, you won’t get a good job and you’ll die poor and lonely.” Seriously. That’s what they are told.

Sure maybe not in those exact words, but you get the point. The message is everywhere. Go to college. Take out loans. Do whatever you can to pay for college. It will be worth it.

Do I think high schoolers should go to college? Sure. I am all for higher education, I really am. But it’s not the only path. And taking out student loans isn’t the only option.

What I am not for is the atmosphere that we are pushing kids into:

You didn’t get scholarships? That’s ok, student loans are available.

You didn’t work throughout high school? Student loans to the rescue!

Your parents didn’t save for college? Get a student loan and you’ll be a winner today!

The reality is, student loans are almost looked at as “a good thing.” This is absolutely insane to me. Debt is not a “good thing”. It took me awhile to learn this, but I’m a firm believer in the theory of “it’s hard to save money if you owe someone else money.”

No one, and I mean no one, is telling them how serious taking out a big loan is. The way it’s sold is as almost like “free money,” that sure you’ll have to pay back in the future, but don’t worry by then you will be making LOTS OF MONEY.

But is that true? Let’s look at the numbers:

7 in 10 college seniors graduate college with nearly $30,000 in student loans. That number is only increasing as college costs are at an all-time high. Also, the compounding interest is crippling new grads and their future savings potential. Say you graduate with $28,400 in student loans. Your cost is not just $28,400. Your loan carries an interest rate of 4.66% and you loan term is 10 years.

Your total cost over the lifetime of the loan: $35,583.

And that’s on the low side.

If you do have student loans, check out Credible where you can get a much lower student loan refinancing rate, which could easily save you thousands and thousands of dollars over the life of the loan.

It’s ok though, you’ve got a good job now that you’ve graduated! You can buy a house, a new car, have a few kids and live happily ever after!

Not exactly. Student loan debt is crippling millennials into lives and decisions they never thought they’d have to deal with. We are pushing back marriage, home ownership is a pipe dream, and kids? I barely want a dog at this point! Seriously, I’m 28 and how can I think about affording kids? Not anytime soon for sure.

Studies have also shown that if you have student loan debt your retirement accounts will grow at half the rate of those without debt.

A POTENTIAL SOLUTION?

So how do we fix this atmosphere that “student loans are good debt.”

Change with the people who have the biggest chance to impact our kids: Teachers, counselors, and parents.

Instead of taking a career exploration class, let’s make it mandatory that all kids take a personal finance course where they have to have a plan for their financial futures.

Not fantasy world, give them a house and a car. Real world examples.

I believe that simple financial education in high schools is the key to solving the student loan crisis.

There is no more impressionable time for students than when they are in middle and high school. Teachers and Counselors see them and impact them more than most people, including parents. We are around them the most, we have the opportunity to change the trend.

It will take some difficult and blunt conversations, but it’s necessary if we want to reverse the trend.Education systems as a whole need to stop promoting student loans as “a good thing”. If you want something, work for it. If you want to go to a private out of state school, you better be getting good grades and applying for so many scholarships your junior/senior years of high school that you get carpal tunnel from writing so much.

You better plan on working 20+ hours per week WHILE in college to start paying off those loans early, not to mention continuing to apply for scholarships. You better go to school with a plan. It’s ok to explore your career path, but spending 2.5 years doing “general studies” might as well be gambling in Vegas.

We need to educate these students with information that can set them up for success in their futures.

We don’t need to send them to a diploma factory only to come out in worse financial shape than if they would’ve worked at McDonald’s for four years.  

Kyle is a personal finance blogger who paid off $33,000 of student loans in 18 months! His goal is to share strategies, tips, and tricks for getting out of debt and saving money! Check out Kyle’s blog at dollardiligence.com

Follow him on Twitter @dollardiligence

Learn More: Read our in-depth post on How Student Loans Work.