Student Education Crisis: Is it worth it?

When the boomer generation graduated from college, they became lawyers and doctors with an abundant future. When millennials graduate, they can look forward to becoming debtors still living in the parental abode. Student loans are shackling many of today’s graduates to decades in debt.

Imagine graduating with a $40,000 student loan debt, to be paid off at a 4 percent interest rate in 15 years. That would take $295.88 in monthly loan payments for a total of $53,257.53. If the same student were to graduate without debt and put that monthly payment in a portfolio yielding 6 percent annually, the youngster would have assets of $86,477.68 at the end of those same 15 years.

Student debt makes it difficult to establish any financial stability for years following graduation. The default rate is high, with half of those coming from profit colleges, and a third coming from community colleges. Those continuing to law or medical school find themselves in the worst debt situation, with $100,000.00 in student debt. The delinquency rate directly correlates to the years of indebtedness, as shown in the chart below.

The out-of-control student debt has decreased the demand for student loans. Fewer people are opting to go to college. This trend will continue until a college education becomes more affordable. This has stabilized the share of student loans that have become a part of the overall consumer debt. Millennials as a group are hesitant to incur debt after witnessing the mortgage crisis of 2008. Buying a house and starting a family becomes a serious issue if you are saddled with thousands of dollars in student debts.

Baby boomers faced a rosy future that was supposed to be a better one than their parents had. Millennials are facing a mountain of debt and a bleak future. High school seniors are faced with the choice of not furthering their education or going deep into debt. At the same time, post-college salaries in most fields have not kept up, making repayment of student loans even more difficult.

In 2014, 17 percent of graduates faced large loan balances. These graduates now make up over half of the $1.4 trillion unpaid college debt. Those with a graduate school degree have an easier time paying off college debts since their starting salaries tend to be higher. But that trend may be changing.

While buying a house was the logical step after college graduation for boomers, most millennials don’t qualify for a mortgage loan. However, they do need cars to get to whatever job they are able to find. This usually requires a car loan, and car loans are rising among already debt-ridden millennials.

Baby boomers enjoyed enough cash flow to invest in tangible goods, bonds and stocks. They are now the wealthiest generation of retirees. Their grandchildren will not be so lucky. With more debt than any previous generation, millennials will find it difficult to finance the current Social Security and Medicare debt and almost impossible to secure a comfortable retirement when they reach that age.

For those paying attention to the continued increase in national debt and devaluation of our currency, there may soon be a much-needed rush to a reliable store of value such as gold and silver.