Millennials: The Canary in the Coal Mine of Student Loan Debt

student debt
This is the third post in a short series of thoughts on Millennials. You may want to read the first and the second posts before you read this one.

Most people would agree that massive amounts of student loan debt play a large role in crippling Millennial success. It's easy to blame Millennials for making poor financial choices. In our defense, we didn't know any better. Now that we DO know better, we need to be the generation that changes how America manages personal debt. Let our experiences serve as a warning to others.

I'm one of the lucky students who attended college on a scholarship and didn't accrue student loans. Some of my friends are in the same boat: they or their parents paid for their college in cash or through scholarships. But most of my friends have tens of thousands of dollars in student loans. One report says that the average student debt load in 2012 is around $30K. That amount doesn't sound too bad, on its surface. According Allessandra Lanza, quoted in this article, "the general rule of thumb for student loan borrowing is that the total amount of student debt should not exceed the borrower's anticipated annual salary for the first year out of school." 

But many of my Millennial peers, especially those who pursued an education past the undergraduate level, were imprudently advised not to worry about their growing student loans. They were told that they would be able to pay it off with no problem. They were told that their salaries would be much higher than the real-world salaries they discovered upon graduating into the worst recession since the Great Depression. In following this advice, many Millennials accrued debts that far outweigh their expected first year's salaries. And these salaries don't seem to be growing very fast.

Heck, with unemployment and underemployment rates as high as 53%, we Millennials are lucky to have any job in our chosen field of study, let alone one with reasonable compensation. Sure, some of my peers have landed those high-paying dream careers that we were promised. But many of my peers, even those who are smart, educated, hardworking, and easy to work with, struggle to establish themselves on a successful path. For many, looming debt payments make it harder to make rational career and life decisions that will build future wealth. 

Millennials know first-hand how dangerous debt can be. Sure, you can leverage debt to make your life better. But is it worth the risk? For many Millennials, the answer has been no. We must learn from our experience and use these lessons to make better decisions in the future. For example:

We should exhaust all other options before taking out student loan debt. Maybe that means we apply to every last scholarship we can find. Maybe that means that we postpone going to college until we have worked and saved money. Maybe we could work while attending school. Maybe we should just attend a cheaper or different kind of school than the one we think we want. These paths sound hard, but many students have traveled them in the past and still do today. 

We should pay off our debts as fast as possible. Many Millennials are already postponing big financial decisions, like buying a house, getting married, or having children, because of overhanging debt.  Sometimes the best way to stop sacrificing the things we want for our future is by sacrificing the things we want to day. We must learn to live frugally. Avoid the trap of thinking that we have to drive an expensive car, buy an expensive house, or wear expensive clothes to live a good life. Make as much money as we can, save as much money as we can, and put it all towards our student loan debts. 

We shouldn't ever go into debt again. We should have learned our lesson. We don't add insult to injury by piling on a graduate student loan after we've just paid off our undergraduate loan. Unless we are very sure of a payoff, we find other ways to pay for our future education. 

We should teach others what we have learned. We should be the spokesgeneration for avoiding student debt entirely. We should take responsibility for our mistakes and help others avoid them.

What do you think? Are Millennials ready to rid the world of debt? Are we the canary in the coal mine?

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