Money Monday: Staving off student loan woes

by April 7, 2014

As National Financial Literacy Month unfolds, we’re taking a look at story ideas pegged to various life stages.

Next up, a look at money issues that are front and center for young adults. This is the life stage at which establishing good habits and avoiding major pitfalls can make the difference between financial stability and decades of pasting one Band-Aid after another on one’s fiscal wounds.

hire me on mortar board

Photo: AU blog

Student loans and career choice are, of course, a big worry with this generation and perennial story topics abound.  But I do sometimes think student debt woes are overhyped; yes, some professionals graduate with six-figure debt, as do some students who choose to join elite programs that don’t generate much of a return on investment. But the average student debt of graduates is less than $30,000 – about the size of a typical car purchase – and should be manageable (assuming the grad is able to find a job.)

Here’s a handy interactive map by the Project on Student Debt that shows the average debt and the proportion of students graduating with debt; the related database operated by the Institute for College Access and Success allows you to run all sorts of interesting tables on costs and debt by actual institution, including community colleges and trade schools.  Here’s an OregonLive take on the numbers, as an example.

Why not a comparison of the costs, debt and placement/salary rates for various degree programs across a number of institutions?  Nursing, engineering, business administration, etc. – find some real readers still mulling their options and enlist a financial planner to help them weight the dollars and cents factors of their choices.  (I once had a planner run numbers for a student who had reluctantly passed on his dream school to accept a full scholarship at a respectable but not legendary college; the planner figured that at minimum, that choice would have a $600,000 positive effect on the young man’s net worth by age 60.)

You also might write about the pros and cons (according to financial advisers, human resource managers, etc.) of creative approaches to paying for college, including: taking a couple of years off to save before matriculating; the leap-frog approach of alternating work years with school years, borrowing from family members rather than bank, and doing as many credits as possible via advanced placement or local community college programs (like this one in Ann Arbor that helps student earn a high-school diploma and college certificate simultaneously.)

Help your audience understand  earn-as-you-learn opportunities via local skilled trades unions, including machinists, electricians and plumbing.  The U.S. Department of Labor oversees apprenticeships and operates a searchable database; I randomly selected Marion County, Ind., and got hits on more than 100 “registered program sponsors” listed with training programs ranging from boilerhouse mechanic to animal trainer to paralegal.  (A number seemed to be related to a jobs re-training program and not all are presently offering training berths but it’s a lead you can follow up on to guage the availability of apprenticeships in your county or region.)

Student debt forgiveness programs might be of interest to readers, as well:  As USA Today reported, as many as one-quarter of American workers might be eligible for debt forgiveness or an income-based repayment program.  And check out your area’s big employers – are any offering student-loan help as hiring incentives, or paying for grad shool degrees for existing workers?

Personal finance basics

Some young adults may be learning about compound interest, budgeting and so forth the hard way as they juggle the above-mentioned loans, but it never hurts to include sidebars and infoboxes about basics like how compounding works and the concept of dollar-cost averaging.  CreditCards.com reports that “Millenials have unhealthy credit habits,” including the use of cards for revolving debt.  Again, you might use these concepts as a springboard to ask local financial planning experts (I like those with the Certified Financial Planning credential) and credit-union advisors, as well as counselors at debt-management agencies, to explain how little amounts of either debt or savings can add up substantially over time.

It’s important for the young-adult cohort to manage what they have well; this Businessweek article “Millenials mired in wealth gap as older Americans gain,” illustrates how the housing market collapse has cost this group more than other demographics.   (As an aside, strive for balance.  Articles like this tend to portray their subjects as victims; one might also pose the question “are 30-year-olds ready for a $350,000 house in any circumstances?”  What was their rainy-day fund like, for example, and why did a plunge in the home’s value – which wouldn’t affect the monthly payment – drive homeowners into bankruptcy?  Get all the details you can to provide a well-rounded report for readers.)

And here’s a neat New York Times interactive graphic “Is it better to buy or rent?” real estate; it might make some Millenials feel better about not being able to afford property right out of the starting gate.