Nobody has explained to you just how risky student loans can be:
- Most student borrowers don’t have a four-year financial plan.
- Most student borrowers don’t have a career plan with a targeted starting salary.
- The federal student loan system is a trap for the unwary. Almost any high school graduate can find a college or university that will accept them. However, the federal student loan system has no underwriting standards. They will loan money to any college student without regard to their passion or their academic ability.
- Your high school GPA is very predictive. Five out of eight high school graduates who matriculate have a GPA of 3.5 or better. The chance these students graduate from college is 72%, and they are going to be very strong candidates for one of those relatively scarce “college” jobs.
- College is a competition. The chance of a high school student with a 3.0 GPA graduating from college is 50-50, a coin toss, and the odds drop rapidly from there. If an “average” high school student manages to graduate from college, they then enter into a fierce competition for a “college” job.
- The average six-year graduation rate for all college students is around 60%. Family income is the biggest determinate of who graduates from college. If you are a student from a family in the lowest income quintile, your chance of graduating college is 11%. If you are a First Gen student, your chance of graduating college is 26%. The average six-year graduation rates for African American and Hispanic students are 42% and 50%, respectively.
- Graduates with STEM degrees generally earn a generous starting salary. However, these majors are difficult. Thirty-five percent of STEM majors change their majors within three years. If you find yourself teaching high school math, when your career plan assumed the starting salary of a chemical engineer, you are going to be in financial trouble.
- For those who “roll the dice” and take out student loans, there is a 100% chance they will be receiving a bill six months after they separate from college. Yes, that is separate, not graduate.
Most student borrowers (70%) won’t graduate and get a well-paying, professional job. Forty percent drop out. Thirty percent graduate but find themselves underemployed, e.g. making lattes. (See notes.)
W-A-Y too many high school graduates, many with the “deck” stacked against them, opt for college, leaning on student loans to “pay the freight.” Most of these students would be wiser to find a Plan B.
I suggest you watch, Borrowed Future, a documentary on student loans. This video is available for free on Amazon Prime.
Notes
The “college outcomes” data comes from the recent study by the Burning Glass Institute/Strada Education Foundation study. An article on this study was published in the Wall Street Journal in April 2024.
https://www.theatlantic.com/ideas/archive/2020/01/college-wealth-premium-collapsed/604579/
‘Don’t borrow for college,’ warns Harvard economist’—why he says it’s a ‘waste of money’ (cnbc.com)
Speak Your Mind