Do this year’s college grads face the likelihood of crippling debt and delinquent repayments?

The student debt that Millennials and now Gen Z have and are incurring is crippling and, long-term, could financially devastate an entire generation. Those who went to college in the 1980s or earlier simply can’t relate as the cost to attend college then could be covered by working part-time as a waiter or bartender and any debt they graduated with could be repaid within a handful of years working at a job that paid well but not even great.

Today’s students are often attending schools that charge $25,000 or more per year plus another $15,000 in related costs such as traveling to and from school each semester, rent, food, and books. A four-year degree, therefore, often costs $160,000. Part-time jobs typically pay about $10 per hour. At 20-hours a week, that’s $41,600 over four years, so about $120,000 needs to be financed. Student loans often carry interest rates of eight percent or more, so over 20-years the average student is going to see about half of their gross wages disappear to repay the principal plus interest on their student debt.

The end results is that the average graduate of a four-year college or university is effectively being asked to live on about $25,000 per year. If they run into any unexpected, significant expenses like the need to replace a car or have surgery, then there is a very real possibility of them falling into delinquency. Many of the student loans then charge huge penalties, including significantly higher interest rates. So if you miss a payment one or two times, your already exorbitant interest rate of eight can easily escalate to 16 percent and then 24 percent. Before you know it, you’re paying 24 percent interest on a six-figure loan that is non-dischargeable in bankruptcy. If that’s not a recipe for financial disaster, I don’t know what is.