FORBES: Student Debt vs. Car Loans
Career College Central Summary:
If you listen to all the commotion, you would think that the level of college debt in the U.S. today is a crisis of epic proportion—hundreds of thousands of unfortunate young people leaving college with crushing loan debt.
The facts might surprise you.
According to the Project on Student Debt, only 69% of the graduates from public and not-for-profit institutions in the class of 2013 had any student loans, and their average debt was $28,200. Surely $28,200 is not inconsequential, but you don’t need an MBA to recognize that the payoff from that debt is enormous: over their lifetime, college graduates will earn on average $800,000 more than those without a college degree according to the Federal Reserve Board.
Consider this. Each day, thousands of young people walk out of a car showroom with a new or used car and a new debt. Coincidentally, the percentage of new car buyers that take out a loan (70%) is about the same as the 69% of students with college loan debt. (While we don’t know what percent of college-age car buyers finance their cars, it seems reasonable to assume that it is higher than the average as this demographic group is less likely to have accumulated funds needed for a cash purchase.) The size of the average new car loan? Almost identical to the size of the average student debt: $27,000.
Over 10 years, a typical term for a student loan, the average debt of $28,200 will require a monthly payment of $284 a month at the current federal loan rate of 3.86% According to Experian, the average new car loan today has a monthly payment of $471.
Where’s the outrage over the debt associated with students’ auto purchases? Going into debt to buy a car that will last six to 10 years is apparently acceptable, but going into debt to gain the lifetime benefits of a college education is somehow an indictment of our higher education system.
Of course the goal of those of us in higher education should be to make college affordable for all young people. And starting out one’s life with debt is never a good thing but it is far more advisable to borrow and get a college education than to forego going to college.
Click through to read the full article.
Leave a Reply
Be the First to Comment!