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STUDENT LOANS: Using a Resource vs Saddling Yourself with Debt

Kicking off an eight-week run down here in Texas today. If you are new to this blog, I’m a rock ’n’ roll musician, but I give about 70 to 80 speeches about financial literacy to schools around the US through a charity I helped found called Funding The Future. It’s an amazing and tireless group of people who genuinely care about the futures of every student in this country.

My fearless tour manager Tyler and I are updating the slideshow with a new piece about student loans—and, sports fans, the situation frankly sucks.

Some quick stats:

  • Student loan debt in this country is $1.5 trillion.
  • The average student debt is now $34,144.
  • Student loans have jumped nearly 150 percent in the last decade.
  • There is now more student loan debt than credit card debt.

This is the next generation to come up with ideas to move us all forward, create jobs and wealth, and keep our country and economy rolling. We are starting people out in their lives and careers with huge debts hanging over their heads. If you have ever been seriously in debt, you know the downward pressure it exerts over every single aspect of your life.

Now, is it wonderful you can borrow money to get a great education? 100 percent. Is it silly when people take out huge loans with no idea how to pay them back? Absolutely. Do I know people who leave college with a ton of debt and still go out and buy too big of a house and a BMW and wonder why they can’t make ends meet? Of course.

But let me speak to the millions of young people who don’t have families that can afford to send them to private institutions where costs are rising exponentially. Since 1987, when adjusting for inflation, the tuition costs of public universities are up 183 percent, private 142 percent, while the minimum wage is up 20 percent, and early career salaries are up 3 percent (stats from Ro Khanna). This is just not a sustainable way to attract our best and brightest minds.

If we consider the fact that only 16 percent of schools in this country teach financial literacy, it’s no surprise how easy it is for private companies to shackle students to high-interest rates for decades of repayment. Student loans are also the only loans that you still have to pay back if you lose everything and have to declare bankruptcy.

On our most recent tour, a student came up to us after the show and told us his dream is to be a welder—that it was his absolute passion. When I hear a young person excited about a craft, I know there is a good chance they will give their all—stay curious and do the work—the most tell-tale signs for future success. He gave me a very specific story of a stock car engine he wants to build someday (I didn’t understand it at all, but I enjoyed hearing him understand it and love it). He said, “Man, I can make six figures, but my dad never went to college, wants me to go to a four-year school. What do I do?” Giving any advice on family matters is dangerous no matter what but especially when it flies in the face of the beloved four-year degree. The kid’s question hit home with me ’cause my own grandparents were obsessed about my going to the best four-year school I could.

I told him what we tell kids on the mic almost every day when this kind of question comes up: I know people who went to trade schools and two-year schools who SHOWED UP, ASKED QUESTIONS, MADE REAL BONDS WITH THEIR CLASSMATES AND TEACHERS, and they are millionaires. On the other hand, I know folks who went to the best schools but weren’t focused on a goal or a trade, and they are saddled with insane amounts of student debt that has followed them into their adulthood. There are professionals working day in and day out to pay back loans that are now larger than the loans they started with.

ADVICE TO STUDENTS

1. DON’T BORROW MONEY YOU DON’T NEED

Trade Schools, two-year schools, and community colleges are great alternatives. You can always go to a two-year school while you figure out what your real interests are—put a little money back and finish at a four-year school.

2. UNDERSTAND WHAT YOU ARE BORROWING

Government-backed loans run around 7–8 percent and can be manageable if you are willing to keep a budget and actively pay them down once you get to work. Private loans can run close to 13 percent. This can be hundreds and thousands of dollars over the life of a major loan.

3. USE OPM—OTHER PEOPLE’S MONEY.

Keep grades up and look for grants and scholarships FIRST. I was incredibly lucky to go to college on a Pell grant. I also went to my state school (KU), which made things 500 percent cheaper. Communicate your needs. Talk to teachers and counselors and look for a school that wants whatever talent you have. Many students fall into the trap of thinking sports and music are the only ways out, but certain schools look for very specific skills that have nothing to do with the artificial hype and assumed glamor of field goals and hit songs.

4. YOU ARE THE DETERMINING FACTOR TO YOUR SUCCESS—not how expensive your college campus looks or how fancy the plaque on your wall is.

Mine the education you get from wherever you go. Again, work hard and you can finish at a bigger school if needed. Our success is dictated by our passion, the books we are reading, the questions we ask, our drive and our self-esteem. Granted, kids who come from successful families have an edge—they usually have higher self-esteem and family relationships and that helps them to work under highly successful mentors.

This being said, there are plenty of kids who WASTE these opportunities and other kids who have no support who are putting their shoulders against the wheel and using their pain and hunger to rise up and create something even better for the next generation. The most inspiring success stories to me are the underdogs who come outta nowhere and show the old guard how it’s really done. Now that’s rock ’n’ roll. (For an inspiring study of self-made millionaires, check out Thomas Stanley’s The Millionaire Mind. Slow and steady growth and discipline can and often does beat out the luck of family money.)

It’s no wonder that many of our presidents and heads of Fortune 500 companies went to the same schools—these are areas where real power and influence congregate. But with the right scholarship and an incredible amount of lifting, you CAN get in those areas of power as well. It’s an incredible exception to the rule but not impossible.

Often I am asked if it’s this expensive and there is so much debt, why even go to college? Because there are few other times in your life where society will admire and reward you to take time to constantly read, ask questions, and just work on yourself and your goals. This is an incredible period of growth for many people. There are alternatives—and sometimes people who go to school later in life appreciate it much more—but in my own experience, nothing better served me than moving a few hours away from my hometown and being thrown into a completely different way of life. Granted, nothing I learned SPECIFICALLY helped me make a dime fighting my way through the club scene and trying to get music placed as a songwriter. I spent a great deal of my college years recording bands in any space I was living in. But almost everything I studied has shown up in my songs/interviews/blogs and activism for financial literacy and animal rights. My belief in science and protecting the environment came directly from environmental studies classes, my sociology classes were seeds for many of the causes I fight for including Funding The Future, and the literature I read was the very beginning of my first song lyrics starting to grow and find their own legs. I read now more than ever, but I miss the days when it was OK to just lie around and read for the day. 🙂

More than anything, those years at college changed a lot of the assumed beliefs I had and helped me on a path of self-reflection and growing and opening my mind I might not have otherwise had hanging with the same group of people back home.

Everyone deserves a chance to work at themselves and to find out who they really are. But don’t jeopardize your long-term financial health for this degree. Don’t strap yourself with debt simply because you didn’t know the rules. I urge anyone reading this post to dive deeper and help students gain control of what they are signing. That piece of paper at 18 years old can be a ball and chain for decades.

Thanks for reading and I look forward to your comments!

Gooding
Moody, TX

Gooding writes a new post every Wednesday. Please like and subscribe on all social media sites with @goodingmusic. You can also subscribe to the blog’s RSS feed athttp://goodingmusic.com/blog/feed/.

FOR MORE

https://www.nytimes.com/2019/04/26/your-money/student-loan-debt-financial-literacy.html

https://www.wsj.com/articles/the-student-debt-crisis-hits-hardest-at-historically-black-colleges-11555511327

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