Student Loan Debt … Debt Sentence?

In the Wisconsin public university system, the average student graduated with 5 times the student loan debt in 2011 than they had in 1982.

Logo of the University of Wisconsin Colleges

The amount went from $5,000 to $27,000 in just under 20 years. Let’s check that number against inflation. Between 1982 and 2011, the buying power of $5000 more than doubled to $11,654.87. Let’s review:

  • Wages increased 2.4x
  • Consumer Price Index: increased 2.3x
  • College Costs: increased 5x

We all have heard that higher education inflation is higher than “regular inflation”. For example, in 2009, the price of higher [public] education increased by an average 6.5%, despite a 2.1% decline in the Consumer Price Index (CPI) during the same time.

In 1981, I graduated from a different UW (University of Washington in Seattle) with that same amount of debt-$5000. At the UW today, the average student debt load is $23,000, $4000 under the other UW.University of Washington Campus & Vicinity

University of Washington Campus & Vicinity (Photo credit: AvgeekJoe)

What happens after the end of the “formal education”? You might have a job, you might be a boomerang child and move back home with your family, or you might get an “internship” that pays $10 an hour for a job that used to be given to a college graduate. That graduate may have made $20,000 in 1982. Last year, a college graduate or a worker of any age needed to make $46,619 to equal that 1982 buying power.

I know people who have $15,000, $25,000 and $50,000 in student loans. Even if they have “good jobs”, as opposed to a paid internship [formerly a permanent a job with benefits], it is hard to pay your bills.

Here’s a website for everyone to check out as their kids graduate from college this spring.  http://www.thecalculator.org/ This one is for Washington State only and illustrates how much they need to make to cover expenses in every Washington county. For information on other state self-sufficiency calculators, please click here.

For an interactive graph on student debt in the entire US, check out this chart at truthdig.org.

Please be careful as you check the cost of higher education for yourself and family members. Bankruptcy is not an option for student loan debt (or medical expenses).  Trick question:

  1. Who will loan you money to retire?

I’m not saying don’t do it, but really dig into the post-graduate numbers to see how much your graduate will need to earn to cover their debts. Ideally, they are by your side as you engage in this process!

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Filed under Be Prepared, Debts

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