does that number even make sense to you? yes, that’s one trillion three hundred billion, one hundred ninety three million, five hundred seven thousand seven hundred and fifteen dollars. it’s the total amount of student loans in the u.s. as of 9:33am eastern time on march 21, 2015. oh wait, it just went up. it’s now $1,308,193,901,222. in two minutes the balance went up nearly $400,000. get your head around it. you’re likely a part of it. check out the debt balance at collegedebt.com.
oh, you think you’re special? so did i. you think you’re path will be different. you think you’ll take on $30,000, $60,000 or god forbid $100,000 or more in student loans and your story will be different. ok, if you’re going to harvard, yale, penn, columbia, dartmouth, brown, cornell or princeton you may be an exception to the rule. but if you’re going to the harvard of the south, the princeton of south dakota or the yale of east texas then you’re going to be just like the rest of us. what you, you think i’m a jaded 35 year old guy who didn’t get to live his dreams. i’m not. you think i don’t know what i’m talking about .i do.
here’s what you do. go talk to people in their late 20s and 30s who financed their college education. go ask them what it’s like. some of them are making their minimum monthly payment, have bought a house, new cars, are married and have kids. it’s normal for them. the just hang out with their debt payments every month. they make enough to pay the bills. maybe they’re saving up for a vacation someday. maybe they’re killing it as a cubical jockey for some big company downtown and are on track to take on a manager role in 2-3 years. maybe they’re making $60,000 or $70,000 and getting by. sure it’s enough, but it it the life you dreamed of? is it what they dreamed of?
oh, you’re going to be a doctor so these rules don’t apply. no, a lawyer? ok, you’re right. here’s what you should do. you should go to a private college on student loans. rack up $100,000 in undergrad debt. then, go to med school and tack on another $150,000, maybe $200,000. don’t worry, it’s going to be ok. you’re going to be a doctor and it’ll all be fine. doctor money is just 8 years away. oh, you’re going to specialize. there’s another 3 years for a fellowship. take that 8 years to 11 years. but don’t worry, you’re going to make $200,000 a year right out of your fellowship. sure, you may have $300,000 in student debt, but you’ll make $200,000, so, it works out. right? you get a few payoff options for that $300,000 in debt. lets say you set it up on a 20 year repayment schedule. don’t worry. it’s just $2,290 a month. and you’ll end up paying $549,604 for that sweet education. if it’s a 10 year payoff you’ll pay $3,452 a month and pay a total of $414,289 for that medical career. don’t worry, you make $200,000 a year, right? you’ll bring home roughly $12,000 a month making that kind of salary (single with minimal deductions). so, you still have between $8,500 and $9,700 a month after you pay your student loan bill. you’re fine. right?
you’ll finish your fellowship and you’ll be a great specialist. but you’ve been driving a beater car all the way up to that point. so, you’ve got your first paycheck and you need new wheels. so, you get a new car. but you deserve a good car because you’ve sacrificed so much being in school from kindergarten until you’re 30. so, you’re going to get a sweet bmw. on lease of course, because why buy it outright when you’re just going to trade it in for a new model in a couple of years. let’s call that $700 a month on that sweet car you deserve. drop your total monthly down to $7,800-$9,000. still pretty good.
you’ve been living in a hell hole of an apartment for the past several years so it’s now time to get a house. i mean, you’re making $200,000 a year. you’ve got to have your own house. so, you get one, but not a crap one. you live where the doctors live and where your leased bmw won’t be vandalized or stolen. let’s say you’re in a decent city and going to live in a cool area. let’s call it $500,000 for a house. don’t worry, your payment is only $3,000 a month on a 30 year mortgage and you’ll only pay $779,464 by the time you pay it off. good thing your parents helped you out with the $25,000 you needed for a down payment. great, you’re on your way. you still have $4,800-$6,000 a month in cash after paying house and student loans. that’s before you pay you home owners association fee of $150 per month, your utilities of another $250 a month, your gas for your bmw suv of $200, car insurance on that leased suv of another $100, gym membership at $150 since doctors need boutique gyms, groceries at $800 a month, invest in your 401k at 15% of your gross income for another $2,400 a month, eat out/go out for another $400 a month, travel on your time off to those cool destinations you couldn’t get to when you were a broke med student or resident. let’s just say you go on two sweet trips a year with some of your doctor friends. italy’s amalfi coast for 9 days in late spring and kauai for a week mid fall for another $12,000 for the year, budgeted at $1,000 a month. that leaves us somewhere between owing $650 on a credit card and $550 in extra cash for the month which would allow you to buy a few new clothes for your tattered student wardrobe. crap, you forgot to budget cable and internet at another $100 a month, plus your cell phone for another $100. that takes you down to owing $850 or having $350 in extra cash. but don’t forget you’ll want to travel home for a few holidays, buy your parents, siblings, nieces and nephews some cool presents, maybe date and get married. who knows. there’s a lot of great things ahead.
but don’t worry, you’ll be a doctor. that extra couple hundred dollars a month in freed up cash is all you dreamed of. you’re investing into retirement and your income will likely go up. maybe you’ll even drop an extra payment on the house or loans once in a while. it’s livable. but you’re going to be a doctor. you’re good at math. you’ll figure it out.
or maybe you’re not going to be a doctor. maybe you’re looking at making $30,000, $50,000 or $70,000 within the first couple of years out of school. then, that $100,000 in student loans is far more daunting. that’s $763 as a monthly payment for the loans on a 20 year payment schedule or $1,151 on a 10 year schedule. or say it’s not nearly that much, it’s only $50,000 in student loans. that’s $575 on a 10 year schedule and only $382 on a 20 year schedule. that’s totally doable, right? well, if you want to live in your parents’ basement through your 20s it is. let’s say you get a job that pays you $40,000 right out of the gate. you’ll bring home about $2,750 a month. with $50,000 in student loans you’ll still have between $2,175 and $2,368. of course you too have been driving a beater through school and it’s on its last leg. so, you need an upgrade, but getting a new bmw like the doctor isn’t going to happen. you’re practical and realistic so you’ll get a hyundai elantra. actually, don’t make that bad decision. get a honda civic, you’ll be glad you did when it’s still running in 5 years. anyway, it’s an $19,000 car and your payments will only be $300 a month. no big deal. you still have $1,875-$2,068. that’s plenty to go around. but you want to move out of your parents’ basement. so, you and a friend get a place to rent. it’s a decent apartment and runs around $1,300 a month. your half is only $650 bringing your monthly cash balance to $1,225-$1,418. you’ll do the same as the doctor and invest 15% of your income into retirement (which means you’ll still retire very well off if you keep it up–well done) for $500 a month bringing your balance down to $775-$918. you’re still good, right. ok, now living expenses. they’ll be lower than the good doctor because you’re a realist and know you don’t make as much. your utilities are only $75 a month since you split them, your portion of cable and internet run you another $50, you’ll skimp on groceries and just spent $400 a month, you’ll have $200 a month to eat out/go out, $75 in car insurance, you found a cheap gym for $25 a month, your portion of cable and internet is $50, your cell phone runs you another $100 a month and you’re planning an awesome ski trip this winter that’ll run you about $1,200 for a budgeted $100 a month. how’s the math going? what do you have left? well, you’ll have between $75 and $300 a month on your credit card. that’s if you land a $40,000 a year job and only have $50,000 in student loans. you can forego the new car and get your balance back above zero. you can choose not to pay into your 401k and have some more spending money. you can live off of ramen noodles and free up some more cash. you can decide not to go on your ski trip and hold on to some more money.
think about this, what did you want life to be like in your 20s? 30s? do you want to be able to travel, play, go our, build relationships, go on adventures, pursue your passions? did you want to be free to dream, to hope, to plan? what does freedom look like. understand what you’re getting into. if you’re lucky enough to have your parents paying for college, go give them a hug right now and tell them thank you. they’re enabling you a great deal of freedom as you enter adulthood. if you’re working had and paying your way through school with jobs or scholarships and good decisions, then congratulate yourself on your hard work. it will pay off. but if you’re planning on taking out student loans to put yourself through school. stop! slow down. do some math. understand what you’re getting into. look at your college choice. is there another way? can you work and pay it off as you go? it’s doable. it’s hard, but it’s doable. do you realize the impact of student debt on your future? you’re going to college. you’ve proven you are capable of doing math. now, go do some math. understand not only the monthly payment on the loans but the total amount you’ll pay to pay them back. get an idea of how those payments will impact your monthly budget post college. go into it with eyes wide open. you’ll be glad you did. there’s so much freedom when you don’t have school debt. i promise!
by the way, the u.s. student loan balance is now up to $1,308,207,835,209. just another $14 million in debt added in the last few minutes.