Thursday, March 26, 2009

Mom...I'm In Debt

Gen Y; I hope you're ready for some pain.  No, not physical...unless you count bed sores from sleeping in and spending too much time on the couch  watching House reruns because you're unemployed.  I'm talking about the financial pain we'll feel it for the rest of our lives; yup...we're going there.

The reason for my angst is a recent Wall Street Journal article stating student loan defaults increased to 6.9% from 5.2% over the past year.  Hooray, recession!

Sadly, this default rate comes from a perfect storm of a worsening recession, increased tuition to attend college, less saving by our parents to help us with paying for college, and a general willingness to go along with the crowd and drown ourselves in an average of $20K of debt by the time we graduate.  

The sad thing is this; all our life, we were told to take on debt to fuel our collegiate dreams.  "Oh, you're going to study anthropology at a prestigious and very private liberal arts school?  AND you want to double major in art?  That'll cost you $30K a year in loans!  Don't worry; five years is an average.  That means at least half of the people out there finish after five years!"  No one ever told us that maybe we should do a cost-benefit analysis.  No one ever asked us the question of, "Do you really think that's smart?  What's your exit strategy?  How will you pay that back?"  Nope...we, the happy Gen Y, followed our dreams to minimum wage jobs and debt loads we won't pay off for the next thirty years.  Even without a recession.  Yay.

The hard part is this; should we have known to ask those questions?  I don't feel like our parents did.  Who was supposed to teach us about financial literacy?  The value of compounding interest?  Or even the general wisdom of savings?

Usually, Josh and I post about creative solutions or things that companies or people can do to improve their position (financially or otherwise) with Gen Y.  In this case, I don't see much of a solution for Gen Y.  As the first generation to not exceed the standard of living of its parents, there are few options for us.  I could give the standard "cut up your credit cards, eat Top Ramen, sell your belongings, date cheap women, budget, and only drink PBR" type lines...but they seem inadequate given the number of people in my generation that will stay in debt for the rest of their lives as they struggle to overcome student loan debt, care for their aging parents with no savings, get married, have kids, and generally try to survive their lives.

Well, now that I've vented, I'm going to find that bottle of Three Buck Chuck I've been saving.

Mama said knock you out


Melinda said...

It can seem overwhelming, but it is possible to do it. It is not harder than it use to be. My parents did not talk to me about loans, nor did they have money for my education.

I graduated from a state college in '82.
I was one of those triple majors you were sarcastic about.
I graduated early by one term.
I worked all of the way through.
I paid every cent of my own way.
I did not own a car until after college.
I recycled and bartered for decades after, long before it was politically correct to do so.
I have been thrifty all of my life.
I am now in that caring-for-aging-parents phase and caring for a disabled family member.

I have a lot of confidence in Gen Y.

It can be done. No one ever said it would be easy. Most of life isn't.

Jenna said...

Hopefully, we will learn lessons like Melinda. Or start saving for our future children's college funds before we even conceive them! But I do worry about the debt my friend's have incurred while in college. Count it as a blessing that I didn't have to go into debt (thanks mom and dad) and personally believe that education is one of the few things people should go into debt for. That an traveling the world.

Anonymous said...

Truth is, organizations like are big on helping people out of situations just like that for free.

When my daughter grows up, i'll be having her call them and work her thru how to pay off student loans and other bills. Their service is free anyway.

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