$1,200,000,000,000 and Counting

photo-1439853949127-fa647821eba0$1.2 Trillion dollars. That’s the total amount of student loan debt outstanding today.

To help you understand what that might mean for your student, let me paint you a picture.

Imagine: Your daughter, we’ll call her Emily, has just graduated from college. Emily has gone from being the 17-year old high school student she was just four short years ago to the confident, college educated, self-sufficient young adult you always dreamed she would become. (OK, self-sufficient might be pushing it a bit, but you get the idea).

Emily’s first job after college pays $48,127 (according to a 2014 salary study by the National Association of Colleges and Employers), but she owes nearly $30,000 in student loans (average student loan debt $28,400, Project On Student Debt).

Emily gets married. After college, what comes next in life? The next logical step for many people this age is marriage. Assuming Emily marries another average college graduate, aka Jake, you now have about $60,000 of combined student loan debt.

We won’t talk about the credit cards, car payments, health insurance premiums or other expenses a young couple like Emily and Jake might have. For now, let’s just focus on the college debt.

After college and marriage, what then? Emily and Jake buy a house. Nothing fancy. Just a “place for your stuff” as the comedian George Carlin used to say. Zillow.com estimates the current median home price in the Twin Cities at $212,300. Who knows what the average house will cost by the time your kids buy their first home, but let’s say their mortgage is $200,000.

To recap so far, Emily and Jake have graduated from college. They are married and have over $60,000 of student loan debt, as well as a new home with a $200,000 mortgage. They are living the dream.

What’s next? Kids!

I won’t tell you what George Carlin says about kids, but the Twin Cities is one of the most expensive markets in the U.S. for infant day care. Costs for day care vary, but the average cost of infant day care in our area is over $1,300 a month.

So now you have a young family with $60,000 in student loan debt, a $200,000 mortgage and possibly another $1,300/month or more in child care expenses.

How can a young family like this ever get ahead? How many years will pass before they have even $1 of positive net worth to their name?

Long-term effects of debt. Excessive student loan debt will change your kids’ lives in ways they can’t imagine. Debt may affect when your kids marry, if and when they have children, how many children they have, their ability to buy a home, what careers they choose, etc.

No matter how smart your kids are or how good they may be at advanced calculus, in many cases, their concept of money is only slightly more advanced than that of a 10-year old. And they are making six-figure financial decisions at the age of 16 or 17 that will affect them for the rest of their lives.

Some borrowing is OK. For most families, student loan debt is a necessary part of their plan to pay for college. Like mortgages and other forms of debt, some debt is OK. The problem is the amount of debt and what you are actually financing.

$30,000 in student loans is just the average. Borrowing that amount to get a degree in Engineering where starting salaries average over $60k is one thing. Borrowing double that amount for a career that requires an advanced degree or one with more limited income prospects is something else.

The colleges will tell you and your kids not to worry about the debt. I am telling you: worry about the debt.

Pay Less for College. For more information about how to pay less for college, check out my e-book of the same name. It’s a short, easy read that will help make you a more well-informed consumer of a college education. Better still attend one of my free workshops at your local high school. For a list of schools I am presenting at this fall, click here.