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Started By
Message
What do you choose: 5% for 20 years of your future income or student loan repayment?
Posted on 8/19/21 at 12:00 pm
Posted on 8/19/21 at 12:00 pm
I was talking to a family member who is starting college whose tuition cost will be about $80,000 over four years.
Right now she says she wants student debt and will repay it when she makes millions.
I tried to explain to her that if there were a program that allowed people to sign off on garnishments of 5% for 20 years, then the break even with no interest is $1,600,000 in earnings…or she would need to make $80k annually for 20 years.
I can understand an 18-year-old Still having dreams of being the next Zuckerberg. But I was surprised that her mother agreed with her.
I Informed them that the average earnings of working college graduates both old and young is $66,000 a year.
So while the individual might be right in not wanting 5% garnished, Society in general should opt for the 5% garnishment.
If you only make $24,000 a year as a barista after your degree, you’re not saddled with paying student debt you can’t afford and is “progressively” proportional to your actual earnings.
How many of you went to college for some mid-level manager dead end middle class life, and see some military or cop retire at 40, and thought “Damn I should’ve done that”?
All these young kids think they’re going to be Uber successful and we know that 99% of them will not. Shouldnyoung kids be saddled with debt or should educational institution’s compensation be tied to actual earnings?
Right now she says she wants student debt and will repay it when she makes millions.
I tried to explain to her that if there were a program that allowed people to sign off on garnishments of 5% for 20 years, then the break even with no interest is $1,600,000 in earnings…or she would need to make $80k annually for 20 years.
I can understand an 18-year-old Still having dreams of being the next Zuckerberg. But I was surprised that her mother agreed with her.
I Informed them that the average earnings of working college graduates both old and young is $66,000 a year.
So while the individual might be right in not wanting 5% garnished, Society in general should opt for the 5% garnishment.
If you only make $24,000 a year as a barista after your degree, you’re not saddled with paying student debt you can’t afford and is “progressively” proportional to your actual earnings.
How many of you went to college for some mid-level manager dead end middle class life, and see some military or cop retire at 40, and thought “Damn I should’ve done that”?
All these young kids think they’re going to be Uber successful and we know that 99% of them will not. Shouldnyoung kids be saddled with debt or should educational institution’s compensation be tied to actual earnings?
This post was edited on 8/19/21 at 12:03 pm
13
Posted on 8/19/21 at 12:01 pm to Kujo
She should go to trade school
Posted on 8/19/21 at 12:02 pm to Kujo
What will she be studying?
Posted on 8/19/21 at 12:06 pm to Kujo
quote:
I tried to explain to her that if there were a program that allowed people to sign off on garnishments of 5% for 20 years, then the break even with no interest is $1,600,000 in earnings…or she would need to make $80k annually for 20 years.
If you average 66k for 20 years you'd also have 66k garnished only leaving a 14k delta. I'd rather take my chances that I'm going to make more money over 20 years than 80k a year and pay it back. The "risk" of having to pay back the entire amount is less than the "risk" that the garnishment out paces the real amount of loans taken.
Posted on 8/19/21 at 12:26 pm to Kujo
I don't like the idea of kids be straddled with debt, but the 2 biggest issues are students can receive large loans to everyone regardless of earning potential, and school costs are straddled with so much unnecessary bloat.
If schools would limit loan amounts based off of median earning potential by degree; you would see less people with useless degrees.
Also, if they did not have the federal government backings; they would not have such large administrative staffs w/ so many people making over 6 figures. Also, you would have as many teachers only having 2-3 classes a semester with grad assistants filling in and doing a lot of the busy work.
If schools would limit loan amounts based off of median earning potential by degree; you would see less people with useless degrees.
Also, if they did not have the federal government backings; they would not have such large administrative staffs w/ so many people making over 6 figures. Also, you would have as many teachers only having 2-3 classes a semester with grad assistants filling in and doing a lot of the busy work.
Posted on 8/19/21 at 12:33 pm to Kujo
quote:That's high for a state school and low for a private. What kind of school is she attending?
$80,000 over four years.
Posted on 8/19/21 at 12:36 pm to Kujo
5% of my 2021 wages could have financed my entire education.
Posted on 8/19/21 at 1:13 pm to Kujo
Why is she paying $20k a year? She must be smart enough to get some scholarships?
Posted on 8/19/21 at 1:17 pm to Kujo
quote:
How many of you went to college for some mid-level manager dead end middle class life, and see some military or cop retire at 40, and thought “Damn I should’ve done that”?
I've never met anyone who retired at 40.
Posted on 8/19/21 at 1:19 pm to Kujo
Really all depends on the amount of student loans. I only took out about 20k. So it wouldn't be worth it at all to me.
Posted on 8/19/21 at 1:30 pm to Kujo
quote:
How many of you went to college for some mid-level manager dead end middle class life, and see some military or cop retire at 40
Funny thing is, as a biology major with her sights set on medical school, she will likely be close to half a million in debt by the time she exits medical school. Tuition, living expenses, all the USMLE, Anki, etc. stuff you have to buy. The practice tests, etc. It's super expensive.
It will be of great surprise to her when she's making ~50k/yearly as a resident doctor for 3 years minimum and her best bet might actually be to join the military for loan repayment. Tell her she should look into that now.
Posted on 8/19/21 at 1:30 pm to Kujo
quote:
I tried to explain to her that if there were a program that allowed people to sign off on garnishments of 5% for 20 years, then the break even with no interest is $1,600,000 in earnings…or she would need to make $80k annually for 20 years.
It’s a dumb idea. A better idea would be a 5% garnishment for all with student loans until paid off (with interest). There is no reason to limit it to 20 years. And there is no reason to penalize high earners by forcing 20 years.
Also, any student who is smart would expect to make more than 80k over the next 20 years. If not, how could you justify borrowing money to go to school at all?
I think your financial instinct is pretty much backwards.
Posted on 8/19/21 at 1:33 pm to Kujo
I can't relate, the G.I. Bill paid for all three of my degrees.
Posted on 8/19/21 at 1:42 pm to Kujo
quote:
Right now she says she wants student debt and will repay it when she makes millions.
This never happened
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