Student Loan Debt Crisis
In an earlier episode I posted a link to this article Student loan debt is fastest growing household debt category in US. If you haven’t read it yet, I recommend that you do.
We live in interesting times, and debt plays a major role in the average American’s life, be it student or parent. Consider that the national debt is approximately $22 trillion, of which $1.5 trillion of that is student loans.
China is one of the largest foreign owners of the US national debt, but what is scary is that the Social Security Trust fund, our retirement money owns most of the debt.
Unfortunately, the politicians in Washington spent all the money that was for the citizen’s retirement. We often hear in the news that in a few years Social Security will run out of money.
You probably already know that money has already been spent, but if you didn’t know that, you do now. It is also a fact that the population is getting older and there are not enough people in the work force paying into social security to afford to pay for everyone’s social security benefits.
At age sixty-five everyone has to register for Medicare, which is health insurance for those that have retired. Some politicians running for office today claim that if they get elected, they will implement Medicare for everyone. That sounds real good, but my question is… where will they get the money to pay for it? If that were to happen, the national debt would go through the roof and so would our taxes.
Today the politicians call Social Security an entitlement, which is misleading because WE paid into the fund for our future retirement, and it is OUR money. We keep hearing in the news that in the next twenty years the Social Security fund will run out of money, and payments to retirees will be a lot less. That is not what they promised us when Social Security was created.
Interesting enough, while we are experiencing this catastrophe, our national debt keeps on increasing, as does the wealth of our politicians. They get a raise almost every year; they have their own retirement plan that doesn’t come close to what Social Security offers, and they have their own health insurance. To be perfectly honest with you, I believe that the public is getting ripped off and there is nothing that they can do about it. The only power we have is our vote, and I believe that even that is not calculated honestly.
As you can see we are in a mess and taking out a student loan will just make life more complicated. To get an idea of the effect that student loans have on people’s lives, look at the Student Loan Debt Statistics.
I don’t think anyone in their right mind wants their child or themselves in debt as soon as they graduate from college and haven’t even started working yet. Do you?
So is there a solution, and if there is what is it? The answer is yes, there is a solution but it won’t be easy. There is a list of things that one can do, but the most important item on that list is to save now.
You might think I’m crazy and that you are financially stressed as it is, but you can do it… if you want it bad enough. If you don’t, then you will suffer the consequences of not taking the required action.
There are basic financial rules that one must live by to stay out of debt, and the most important one is to “never” spend more than what you earn. This is a bad habit that Americans have grown used to because everyone has easy access to credit and credit cards.
It wasn’t like this fifty years ago, but today almost everyone has a credit card in their wallet. There is nothing wrong with that, except if you don’t pay the entire amount due by the end of the month you end up paying a lot more than you realize. The average credit card rate is between 14% and 19%, and there are many that are much higher.
As an example, if you owe $1,000 and pay the minimum monthly amount due, it will take you 53 months to pay that off, taking into consideration that you don’t keep on adding to your debt. Type your credit card debt and the interest rate on your card into the Minimum Payment Calculator and figure out how long it will take you to pay off your credit card debt, if you only pay the minimum.
Saving money is a good habit to learn and practice, however many families can’t, because they don’t earn enough and at the end of the month they have nothing left to save.
To resolve that issue, one need’s to earn more income, and that is the next topic that I will discuss.
In the meantime I recommend that you sit down with your, spouse, your child or your parent and have a discussion about money and about creating a budget.
People have to plan their lives and live by their plan otherwise they will get into trouble. In my next post I will share some ideas on how to put some money aside for college, and what a person can do to earn extra income.
Until the next time have a great day, and if you have questions let me know.
Goulash