5 Reasons Student Debt Could Ruin Your Future

 In Personal Finance

student debt

When it comes to debt, just about everyone has some.

Mortgages are popular forms and a lot of us have credit cards with a bit of debt tied to them as well.

However, the most pervasive form is quickly becoming student debt, which is worrisome because there are at least five reasons that it can ruin your future.
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You Can’t Get Rid of Your Student Debt

No matter what kind of debt we’re talking about, you may take some solace in the fact that, worst case scenario, you could declare bankruptcy and start your life over. Sure, your credit would take a giant hit, but you’d be able to rebuild it eventually and learn from your mistakes in the process.

The problem is that student debt is nearly impossible to get rid of. In fact, the only way you could have that debt discharged would be to first declare bankruptcy and then somehow prove that having to pay this debt back would constitute incurring a severe hardship on your part. This rarely works out.

Obviously, this is pretty scary to think about. Student debt can amount to a massive sum and most of us were just 18 when we signed up for it.

This is why you must take your student debt seriously and try to pay it off in a timely fashion. Thinking you can avoid paying it will not end well. You could have your financial future ruined and still end up having to pay it back.

It Often Doesn’t Even Help Your Career Prospects

It gets worse. If student debt resulted in graduates getting well-paying jobs in the industry they had hoped for, that would be one thing. Most of us could accept that we needed to spend at least a decade paying for this immense privilege.

Sadly, this generally isn’t the case. If you find yourself actually putting that degree of yours to use, you’ve lucked out.

For example, in 2015, just 14% of those graduating from college that year had “real jobs” lined up. This meant that 86% had no career prospects waiting for them once they left school.

This wasn’t a new phenomenon either. The year before that, Jennifer Grasz of CareerBuilder reported that 51% of employed 2014 college graduateswere working in jobs that didn’t even require they had a degree!

Worse yet, she also found that 6 out of 10 of these graduates were pursuing advanced degrees which, in all probability, would involve even more student debt.

The reality of going to college isn’t very optimistic.

People essentially take four years out of the workforce to rack up massive amounts of debt only to often accept subpar salaries in the hopes they’ll be able to pay off their balance over the following decade (if they’re lucky).

It Hurts Your Ability to Save and Invest

Of course, when you’re trying to pay back your student debt on a lackluster salary, your ability to plan for your future finances is nearly impossible.

Your 30s are an important time for you financially.

This is when you’ll need to work hard as the salary you earn during this time period will most likely decide how much you make in the years to come.

It’s also when your efforts to save a retirement nest egg must kick into high gear. For many of us, it’s also when we begin putting money aside for our children’s futures too.

The combination of how much student debt tends to constitute and the fact that you can easily spend 20 years paying it back greatly handicaps what you’re able to do where your future is concerned. Those monthly payments can keep you from the home of your dreams, putting money aside for your kids’ education, and limit other areas of your life too.

Of course, as we touched on a bit earlier, not being able to pay back this debt really isn’t an option. In many states, you can lose a professional license for defaulting on your student loans. You can also have your pay withheld as well.

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It Can Become Self-Perpetuating

It’s logical that most people want to pay off their student debt as fast as possible. Unfortunately, the vast majority will settle for simply meeting every monthly payment.

Recall that we mentioned above that 60% of graduates consider going back to school to get another degree. Presumably, most of them will take on more student debt in order to do this. However, the only reason they’re doing so is most likely because their original degree didn’t do as much for them as they had hoped.

Presumably, most of them will take on more student debt in order to do this. However, the only reason they’re doing so is most likely because their original degree didn’t do as much for them as they had hoped.

There’s also no guarantee that the new degree will help the person any more than the last one did. This is how student debt becomes a vicious self-perpetuating cycle that can ruin your future up to the very point of retirement.

It’s Getting Worse

Perhaps one of the scariest facts about student debt isn’t just that it’s self-perpetuating on an individual level, but that the problem doesn’t seem to be going way on a national level either.

People continue to take out loans for college despite all of the evidence (some of which we have covered here) that this actually isn’t a very good idea.

What this means is that even if you’re able to get control of your student debt or pay it off in a timely manner, the rest of the country’s problem could soon become yours.

Many economists are convinced that we are witnessing the last days of a student loan bubble that can’t last much longer. Some have even gone as far as to say it will have worse repercussions than the mortgage crisis.

This entire article isn’t meant to be doom and gloom.

It’s aimed at those who have student debt in the hopes that it will inspire them to take paying it off as seriously as possible.

While going back to school may still make sense for you, hopefully, you’ll think the entire idea through before taking out a loan too, because student debt can easily ruin your future.
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Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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