On The Mark

Our country is reeling from debt repayment.  One out of every 10 people are listed as unemployed but we all know that many more are unemployed (those who were not listed as unemployed before the recession but are still wanting to work, those stay at home moms who are now ready to work but there are few jobs available which fit them, those who have graduated from school but cannot find work, and those who have been laid off and no longer qualify for assistance).  These people are having a difficult time paying their mortgage.  In addition, they are taking on higher personal credit card debt to provide for daily living expenses.   It is bad out there but just when you think the recession could not get worse, along comes the student loan.

For many years college students have been paying for their education through work, grants, and loans.  Once a student is accepted into a school, they are almost automatically qualified to receive a student loan.  That does not mean that students really qualify to repay it but schools don’t care.  Schools need the student count and the students money (FSU just laid off 21 tenured profs due to budget constraints).  Their concern is to pay their bills and the way they do that is through receiving student loan checks.

Under the old economy, college graduates could expect to receive a good job following their graduation and therefore easily make their monthly student loan payment.   With college enrollment up 17% since 2000, there is a lot of money being borrowed.  In 03-04 the average college graduate owed 17,125 but in 07-08 the average college student graduated with $23,000 in student loans.  That is a huge increase in personal debt.  Nearly 66% had received some amount of student loan.  The typical government backed student loan is around 4.5%.  This means that in addition to paying for a car loan, car insurance, and other living expenses, the average college graduate now holds a student loan of 26,719 and will pay around $250 per month for the next 10 years.   If they graduated from a private four year college, that amount is 29,000 which slightly increases the loan payment.

So, with all this debt and a bleak outlook in the job market, how will this affect contributions?  Students, and all Millennnials, love helping others.  They are quick to contribute time, energy (when they aren’t at the mall with mom!) and are ready to toss in cash to any personal needy cause they see.  They even make commitments for future donations…all with OR without a job.  What that means is this:

1.  They live on hand outs from relatives.

2.  They spend when they have it and narrow their choices in spending or giving.

3.  They don’t just give to a cause because their ‘suppose’ to contribute.

4.  When they give, they are doing so on the back of someone else, usually their parents because they end up asking for more help from them.

5.  They give less to organizations….they don’t have it to give.

6.  Churches and organizations that put themselves in debt better bail themselves out before the boomers die off.

7.  Churches and organizations that center their operations around building, may have a generation coming that cannot even pay the light bill nor may they want to.

What can you do to help a student:

1.  Encourage them to select an affordable college.  Maybe community college then transfer for the big name on the plaque school.

2.  Help them understand that life is tough and jobs are often earned by hard work.

3.  Help them structure their finances.  Move them from relational spending to budget care.

4.  Start by telling 8th graders the importance of good grades in receiving grants for college.

5.  Help those who receive grants understand that maintaining great grades is their #1 job.  It provides the money for the grant!

6.  If you are a parent, hold somethings back.  Challenge your student to understand your money is not theirs. Make sure they ‘feel’ what responsible living is like in life.

7.  As a parent, get your financials in order.  Life is more caught than taught.  Let your kids see good borrowing practices and how it impacts your spending, savings, and contributions.

A couple of resources:

http://www.usatoday.com/money/perfi/college/2010-07-11-college-funding_N.htm

http://www.huffingtonpost.com/2010/02/22/college-debt_n_471023.html