Thursday, June 07, 2012

Student Loans are a Greater Burden

A Generation Hobbled by the Soaring Cost of College published at highlights the difficult situation caused by high education debt.  As students incur tens of thousands of education, repayments can be be in the range of $500 to $1000 a month.  Unfortunately, students often don't become aware of the loan payment amount until after graduation.   Such a payment can be a significant percentage, if not all, of the monthly discretionary income, requiring the borrower to get a second or third job.

When I attended college over 30 years ago, my total student loan debt was less than 40% of the annual salary of my first job as an engineer.  The payments seemed very manageable.  While paying off my student loan, I was still able to buy a new car and purchase my first house.   Doing so today would be much more difficult.

For our daughter, paying the cost of higher eduction will be even a greater challenge.  A CNBC article projects the annual cost education will be $130,428 for private schools and $41,228 for a state university in 18 years (2030).  In an earlier post , I estimated our daughter would need about $90,000 a year for college at a private school based on a 5% growth rate

We'll need to see what college tuition is when our daughter is closer to 18.    Options that minimize the amount of student loan debt will definitely be considered.

For more on Crossing Generations, check back every Thursday for a new segment.

This is not financial or education advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

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