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Student Loans Are Hurting Relationships

I am struggling through a financial dilemma.

Wait, let me clarify. I am helping my daughter struggle through her financial dilemma.

She’s a recent college graduate, in a five year program where she can earn her MBA in one additional year. During her last year as an undergrad, she took two graduate classes, so she’s all in.

Until recently…

Turns out the FASFA, the Free Application for Student Aid, only covers undergraduate studies. And, she didn’t qualify for any of the small amount of monies the university has to give graduate students. So, the cost for one year of graduate school is $50 thousand dollars. You didn’t read that wrong… one year is 50 thousand dollars. This doesn’t include books, fees, housing, food, and so on. Gulp!!

Now, I am an adult educator and believe wholeheartedly in investing in oneself through education, but when she told me the cost, without hesitation, I said, no way! With tears in her eyes and disappointment in her stature, she explained how she could take out loans.

Her thinking is this.

Take out loans for 50K (oh let’s not forget to add to that the 23K she already has in loans) so finish school with $73,000 in school loans. If, after graduation, she could find a job that pays her 60K she could live on 30K and use 30K to pay off the loans in just a couple of years.

But here is the cruel reality. IF she did get a job paying 60K she has to consider the costs of taxes and insurance, so round that up to 30% off the top of her take home pay, making it $42K. Her income would be $3500 a month. Is she still going to take half of that to pay toward her student loan? She would have to live independently on $1750 a month.

Recently, I listened to one of my favorite podcast Death, Sex and Money and they talked to professionals about the impact of their student loans. The conversations were sad and devastating. It’s a must listen!

We heard about years of incremental payments and the thrill of getting to a zero balance, but also about delayed weddings, tensions with your parents over shared debt, and fading hopes of ever buying a home or saving for retirement.

Then, this article came across my feed. Jessica Dickler (@jdickler) reports that 1 in 8 divorces is caused by student loans. She reports that outstanding student loan debt now stands at a record $1.5 trillion and for couples just starting out, that burden is having an impact on their lifestyle and ability to buy a home or have children.

The average outstanding balance is $34,144 which is up 62% over the last decade. It’s such pressure that the article advises couples to consider a prenuptial agreement specifying that any money put toward that debt during a marriage would be credited back off the top of the marital assets.

A report by the American Association of University Women (AAUW) found that on average, women hold $833 billion—or almost two-thirds—of the country’s $1.3-trillion student debt, compared to the $477 billion that men hold.

How did we get here and what is the solution?

My consult to my daughter is this. It’s not a yes or no decision. Look at the problem and consider a multitude of different options.

There are many times we have the desire to double-down on purchases that are beyond our means, albeit graduate school, a new car or larger home. We want it so much we make-up scenarios on how it could work. The most important thing is to put pen to paper and get real about actual costs and impacts of our decisions.

→ Get a full-time job and take one class at a time making monthly payments toward each course.
→ Get a full-time job that has a tuition reimbursement program to assist with the costs.
→ Invest a lot of time searching and applying for scholarships.
→ Investigate a teaching assistant position to see if there could be deferred tuition costs.
→ Find different schools with MBA programs that are less expensive.
→ Work a few years to gain real world experience then apply to an MBA program.
→ Once in the working world, see if an MBA is still needed, or desired.