Outstanding student loan debt stands at 1.2 trillion and continues to grow at an alarming rate. Is the bubble ready to burst on this epidemic? Tuition costs are over-inflated. The main reason for tuition cost being so high is people have easy access to borrow the money to fund their education.
Billionaire Mark Cuban appeared on CNBC the other day discussing this crisis and how it is affecting the economy. Cuban proposes this:
“The best way to fix the student loan bubble is to limit the allotted amount of loans each student is allowed to receive each year to no more than $10,000, Cuban said, adding that a cap on student debt would force universities to lower tuition and curb spending.”
He went on to say that by capping student loans you would stimulate the economy since young people are burdened with paying off the loan instead of buying houses, cars, and other goods and services.”
I fully agree with Mark Cuban on this topic. Making it way too easy for anyone to get a student loan is a major problem. When money is made readily available, you will notice that costs become inflated. This is all too familiar with what happened in the real estate bubble; all you had to do was breathe, and they would loan you the money. If you are a student, all you have to do is breathe and they will give you a student loan. At some point, the bubble is going to burst.
Today, student loans are trendy and cool, while society has the mentality, “Got to have one.” When you follow the herd mentality, you are living life on everyone else’s terms and not yours. You are losing your power.
Borrowing money to fund an education is almost always a bad financial decision. There are alternative ways to fund your education. Most are kept under wraps because it is not as sexy as having college debt.
Whether you are a parent wanting your child to go to college or a student thinking about going to college, here are some ways to put yourself in a better financial position in the future:
1. Save for College:
Start a savings plan. There is a 529 plan available to help you grow your money tax-free for college. Remember, if you don’t have the money to pay for it, then don’t do it. Spend money you have. It is simple financial common sense.
2. Grants and Scholarships:
This is free money. There are billions of dollars available in grants and scholarships each year. You can start with www.scholarships.com to learn more.
3. Go to a Junior College:
Junior college is still somewhat affordable since it is funded by taxpayers. You can knock out those elective courses, like English, biology, and art history, that go towards your degree at a fraction of the cost of a major university or private college.
4. Skip College:
This one, Sallie Mae and universities don’t want you to know; skip college all together. Get your foot in the door of an industry you like or are thinking about entering. Get paid to learn. Many major corporations have training classes available that actually train you to do your job. Isn’t it much better to get paid to learn a career and get some experience under your belt instead of sitting in a classroom and racking your brains out learning some theory you will forget a week later? Furthermore, how many times have you heard that the CEO of the company started in the mailroom or washing dishes.
Mark Cuban has provided some good insight to the student loan problem. Something needs to be done, otherwise the bubble will burst and we will have to pick up the shattered pieces of the aftermath. Having student loan debt is no way to start the beginning of your career. It is time to just say no to student loans.