Student Loans – A Growing Headache For Some

I grew up in an household where my immigrant parents preached education heavily.Only in the last two years of high school did I start to take school more seriously, and realized the importance of studying hard in order to be accepted to college. It was embedded in my head that a college diploma was the only way to get a job, and become successful in life. Almost nine years later of full-time employment, thanks to colleagues and the internet did I realize that this is not true. But, back then, school was all I knew as the way to get a job after graduation.

I eventually graduated high school, made it to college, and successfully graduated with a degree in Marketing. During my time in college, and some tough moments, never once did I consider dropping out of school. Failure didn’t exist for me, partially because I was scared of failing my parents and their dream of seeing me graduate, and I didn’t want to be that guy working at the factory for the rest of my life. I fully well knew what the life of a factory worker was as I got see my parents come home everyday filled with dirt, dust and very exhausted. I also got to live that factory worker life for three months every summer, as I worked hard in a factory during school breaks in order to pay for school. Another reason why I didn’t want to be a factory worker for the rest of my life was because I wanted to live life to the fullest. I always enjoyed finer things, and just wanted to live comfortably.

STUDENTS WITH STUDENT LOANS DROPOUT RATE ON THE RISE

Facing heavy debt burdens, a tough economy, and poor job prospects, many college graduates are questioning the value of their college degrees and wondering if they will be able to pay back their student loans. While debt is a serious problem for a growing number of college graduates, degree-holders tend to bounce back the quickest after a recession. In the long run, most college degrees are worth the money, even when funded by a student loan.

Despite knowing this, there is an alarming rate of college students that are dropping out. Approximately 29% of all students dropout after taking out student loans at some point during their program. If this number alone is not alarming enough, we all know that whether a student graduates or drops out is still on the hook to repay their student loan. Majority of those who drop out are saddled with high loan payments even as they are more likely to be unemployed and earn less than their degree-holding peers. For those who default on their student loan, they’re left with a devastating financial history that will haunt them for years to come.

The dropout rate of students with student loans is rising across all universities, colleges, and its especially high for those students who are enrolled in private colleges. Of student loan borrowers at for-profit colleges, 54 percent drop out, in addition to one-third of all student loan borrowers at community colleges and one-fifth of student loan borrowers at both public and private colleges.

What happens to those who don’t graduate?

Student loan borrowers who don’t graduate with any college degree are likely to earn less than their counterparts who graduate with a degree. It is estimated that college dropouts will earn roughly $800,000 over their work-life less than their counterparts who graduate with a degree of some sort. Next comes the loan defaults on the government students loans or private student loans. This is simply because they are less likely to find jobs and make less money. Approximately there is a 16.5% chance of a student loan default to occur by dropout students versus 3.4% for non dropout students.

Why are students dropping out?

There are a few different reasons for an increase in the student dropout rates. Some of them we’ve probably heard over time, such as students taking time off after high school vs. going straight to college, and another is trouble handling the course load due to part-time work during school enrollment. However, I think there are two other reasons that stick out – A high unemployment rate that’s part of our society today and the ever rising cost of tuition for post-secondary education.

There’s not much to be excited with the high unemployment rates – 7.3% in Canada and 8.1% in United States. Furthermore, there are many more retirees today who are forgoing retirement and working well into their late 60′s, so the baton is not being passed onto younger college graduates.

The cost to obtain a three or four year degree keeps rising every year. On average it costs $4,000 per year at the local community college, $8,000 per year at a University, and about $26,000 per year at a private college. This does not include books, parking, travel, and any other extra costs associated with getting a post secondary degree. The discouraging part is what graduates are getting for a salary after graduation. After graduation I landed my first big job out of school, and my salary was $28,000. That was almost nine years ago, and today the starting salary is not much higher. If I were to take a good educated guess the average starting salary would be roughly $33,000/year (depending on the degree and designation). So, in eight years the entry level salary only increased 6.6%. Furthermore, the above salary works out to roughly $27,000 after taxes, yet the average rent for a one bedroom apartment in Toronto is $1,200 ($14,400 per year) or 53% of the graduates yearly salary going towards shelter. Just based on these quick numbers, I’m not surprised that less students are postponing post secondary enrollment or even dropping out of college as a whole. The numbers can be misleading and discoursing, but education as a whole, even with debt after graduation will repay it self down the road. 

Education Offers Opportunity

Nothing in life is guaranteed, and this includes obtaining a college degree. A college degree does not guarantee employment or a dream job, but it gives you an opportunity and a step ahead of everyone else. By simply obtaining a three year college degree, you’d already be ahead of 70% of everyone else without a degree. There are exceptions to everything, and I’m sure you can throw out a bunch of exceptions at me, but I can equally find exceptions to your exceptions, therefore making the point mute.

Preparation is key, and more needs to be done by parents, and students to prepare for high school-ers for post secondary education. There are many student aid websites that are offering free information, calculators and information on student loans, repaying them and obtaining them.

If you’re like my self, and have a college degree, consider your self blessed. For those of us with college degrees, let us realize we are in the massive minority. Essentially we can look at the world as divided into two – educated and non educated people. For those without a college degree or on the verge of graduating high school, do your self a favor and get a post secondary education, even if its a two year general diploma.

Attending college is attainable for anyone. Grades, chores, responsibilities, and money should never hold anyone back from getting a post secondary education. We live in a society that everyone is given a chance to get a college diploma, so we must take advantage of this opportunity. The world we live in is awfully competitive, so bear down, and get that college diploma.  And if you’ve got an college diploma, you might as well go for a university degree! And who knows, maybe even your masters degree one day.

Readers, why is the dropout number of student loan borrowers on the rise?

Eddie