Student Loans "Prevent" Home Ownership, But It Doesn't Have to be That Way
Whenever I see the topic of student loans trending, I will usually click on some of the links to see what the folks are saying about it. Usually, it's a lot of complaining about how student loan debt is preventing people from achieving the American dream. To a certain extent I can understand the sentiment, but I refuse to follow the narrative that student loans are the unstoppable obstacle that so many have seemingly come to believe.
If you've read some of my writing beforehand, you probably know that I am a huge Dave Ramsey follower. My wife and I follow his financial advice to get out of debt and it is working remarkably well for us (we'll be done with our debt snowball by the fall). And since I listen to his show a few times a week, I'm simply not buying much of the narrative about student loans, especially what CNBC recently published.
In their story, the reporter made the case that this loan debt is preventing a large number of people from buying a house, and that's true... A partial truth, though. Yes, having debt is going to prevent you from accumulating wealth, that's the very nature of debt. But just like other debts, like credit cards and car loans and home equity lines of credit, a student loan is something that each person signs up for and is ultimately responsible for no matter your career trajectory.
How often have you heard of this situation: Johnny goes to college for four years and gets a degree in German polka dancing, has $100,000 in debt, and no job prognosis to help him pay off that debt. He complains that his student loans are ruining his life and looks for loan forgiveness while looking for jobs in areas not remotely close to what he studied. He can't accumulate savings because his loan payments are $500 a month in addition to rent.
Whose fault is this situation? It's not society's fault; it's not his parents' fault; it's not the Republicans' or Democrats' fault; it is Johnny's fault alone.
One might think, "how callous! Can't you see how he's struggling?" Yes, of course I see how he's struggling, and the responsibility for that situation falls squarely on his shoulders and no one else's. He is the one who signed for these loans all of those years, and no one forced him to do it.
With this kind of situation, it's okay to admit that studying something that had poor or no future job potential was a mistake, and let me repeat it for emphasis: It's okay to admit you made a mistake!
The first step towards solving a problem is to admit there is one, and maybe that problem is choosing a degree that is really not going to offer good job opportunities. Nonetheless, that debt remains, and it is not bankruptable. It's there until you pay it off or you die. Clearly the better option is to pay it off, but how can you do that?
Paying off debt quickly requires an entire paradigm and lifestyle shift. Rather than just making the minimum payments, it requires getting on a tight budget each month, giving each dollar that comes in an assignment, and allocating as much money as is possible towards the debt. Not a bit, not some extra, a lot more, almost all dollars that are not being used for food, shelter, and basic bills.
For many people, that can take years. But at the end of the journey, they come out fundamentally transformed people for the better. They are transformed from hopeless to victorious, and that's what those drowning in loan debt need.
Anyone can get out of debt, it is possible. It may require taking some extra work or selling some things around the house, but it can be done. But it first requires that we take responsibility for the choices we have made in the past, especially if they were bad choices. From there, we can focus on minds on killing that debt, on kicking Sallie Mae out of the spare bedroom so that we can keep the money that we earn. When we can do that, we can do things like buying houses.