Millennials are defined by many things: their love of social media and avocado toast, their supposed sense of entitlement … and their crippling student loan debt.
Today’s graduates have an average of $37,172 in student loans, which is a 6 percent increase from last year.
But I have to think, or at least hope, it won’t always be this way.
Will millennials be the only generation with crazy student loans?
I don’t have a crystal ball. But here are four reasons the tide could change and subsequent generations might not be saddled with crazy student loan debt — followed by experts who say that might be wishful thinking.
Millennials won’t let their kids make the same mistakes
If you talked to my friends about their children’s college education, they’d say something along these lines: “My kids can go to community college or get scholarships or do something else entirely, but they’re not going to take out a lot of loans.”
That’s because they don’t want to see their children suffer the same fate they did: the feeling of being held back by student debt.
Many parents of millennials didn’t understand student loans, as they hadn’t taken them out themselves. They didn’t warn their kids about the consequences, about the fact that this debt could haunt them for a long time.
But it’s hard to imagine millennial parents, having experienced the shackles of debt, would let their kids make the same mistakes.
Mark Kantrowitz, a college admissions and financial aid expert, has a different opinion.
“Not only will the children of millennials make the same mistakes as their parents, but they’ll also make their own new mistakes,” he said. “Millennials, for example, are not saving for their children’s college education to any greater extent than their parents.”
Higher education funding could change
Bernie Sanders might have lost the election, but the ideas he trumpeted are alive and well. Many people want to reduce the cost of college — and potentially make it free for all.
In recent months, New York state announced free tuition for residents whose families make under $125,000 per year. The University of Michigan did the same for families earning less than $65,000 per year. And Brown University joined the growing ranks of elite institutions that offer only grants — and no loans — in their financial aid packages.
Kantrowitz didn’t comment on the schools themselves, but he said changes to government funding were one of the “only foreseeable changes” that could stop the tide of ever-increasing student debt. That being said, he wasn’t optimistic it would happen.
“Although one can argue that government grants will pay for themselves through increased federal income tax revenue because college graduates earn higher income and therefore pay more taxes, policymakers lack the political will to make this happen,” he said.
Educational alternatives could grow
You can already see it happening: a backlash against formal higher education. One poll found that just 38 percent of recent grads felt their education was worth the cost.
As a result, Pablo Solomon, an educational consultant and vocational counselor, thinks tomorrow’s students “will do a better job of choosing educational and vocational training that might actually result in their having the ability to make a living.”
He also believes more businesses will partner with colleges so students will have jobs waiting for them when they graduate.
Potentially turning that idea into reality are a few alternative forms of education, including:
- Massive Open Online Courses (MOOCs): These online courses offer unlimited participation and are taught through recorded lectures, readings, and forums.
- Bootcamps: Mostly limited to software coding right now, these short and intensive courses promise students will find employment after graduation.
- Income-share agreements (ISAs): With this type of education, students don’t pay anything upfront; instead, they owe their educator a percentage of their income once they graduate.
Although Kantrowitz appreciates these ideas, he doesn’t think they’ll have a real effect on the higher education market.
He called ISAs “just another form of debt” and said that although they “shift the risk of failure” from the borrower to the lender, they still must be repaid. As for MOOCs and bootcamps, he pointed out that comparatively few students can successfully complete these types of programs.
“Certainly, all of these innovations have value, but they are not nearly as disruptive as the hype would have us believe,” he said.
The cost of college is unsustainable
The average cost of one year at a private nonprofit college has nearly doubled — from $25,070 to $45,370 — since the early ‘90s. Meanwhile, the median household income has increased by a paltry 11 percent — from $53,350 to $59,039.
That’s unsustainable. So wouldn’t colleges eventually have to lower their tuition?
Not necessarily, said Kantrowitz.
“While the idea that market forces will cause a drop in prices as demand drops has a certain allure, the real world doesn’t work that way,” he said. “Wishful thinking will not make the cost decrease. The only real solution is for the government to start paying its fair share of college costs.”
And if things don’t change, he predicted fewer students will pursue a college education. “At some point, we will reach a tipping point where people just can’t afford to go,” Kantrowitz added.
Kantrowitz said more people have already started attending lower-cost community and public colleges — a shift that could eventually force liberal arts colleges without big endowments to merge with nearby colleges or close.
Jason Johnson, director of communications at uAspire, an organization that helps young people afford higher education, agreed.
“There is the possibility of there being a ‘new normal’ in the future, where the cost of attending college at many public and private institutions for low-income and some middle-income families becomes out of reach at current levels of financial aid,” he said. “The downside of this ‘new normal’ is that it will make it harder for businesses to find qualified workers and place a drag on the nation’s economy and productivity.”
What to do if you’re over student loans
As you can see, it’s unclear whether future generations will suffer from the same student debt burden millennials have.
All you can do is make your voice heard and help those around you make smart decisions.
And if you already have student loans, here are some ways to ease the sting of repayment:
- Income-driven repayment: Selecting an income-driven repayment plan will allow you to cap your payments at 10 to 15 percent of your income, with the remainder being forgiven after 20 to 25 years. Just be aware you’ll pay significantly more interest over the lifetime of your loan.
- Deferment or forbearance: These programs allow you to pause payments on your federal student loans for up to two years. Although they’re a boon in an emergency, note that unsubsidized loans will still accrue interest during this period — meaning you should use these options only if absolutely necessary.
- Refinancing: If you have a high income and credit score but are drowning in debt, consider refinancing your student loans at a lower interest rate.
Use your story to teach your younger siblings, your friends, and eventually your children about the consequences of borrowing money for school.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|