Why do people take on so much debt?

[barkley]

Most finance people recommend to save for retirement versus saving for college for your kids. Especially since kids these days can attend CC for general ed ($170/class in CA), and then work through a fully online program as slow as they want while still working.

Although trade school is a great choice in the short term, it's not a good choice in the long term as it limits their ability to switch careers if they get hurt in a workplace incident or if the industry evaporates. These days most recruiters won't consider hiring someone without a BA/BS and I've heard firsthand of companies refusing to promote without a degree.

Get the degree first, then attend the trade school - cover all your bases so that if you need to switch industries, you have the ability to.

i would'nt encourage a kid who wants to go into the trades to delay it to get a 'just in case' degree. college is costly no matter the path a student opts for, the average time to graduate has increased to 5 years in large part b/c students frequently change their majors mid-stream, and these are students who have a desire to go to college in the first place. delaying an appreticeship 4-5 years at the cost of a few hundred thousand in earnings AND spending/incurring tens of thousands at minimum in student debt is not wise financialy.

 

[Tink3815]

The posts about colleges taking advantage is spot on. Seems like when the government took over the student loan programs, colleges saw an open checkbook. Student loan forgiveness just pays the colleges the money from the taxpayers.

 

[Chili327]

i would'nt encourage a kid who wants to go into the trades to delay it to get a 'just in case' degree. college is costly no matter the path a student opts for, the average time to graduate has increased to 5 years in large part b/c students frequently change their majors mid-stream, and these are students who have a desire to go to college in the first place. delaying an appreticeship 4-5 years at the cost of a few hundred thousand in earnings AND spending/incurring tens of thousands at minimum in student debt is not wise financialy.

I agree, you can go right into a trade school & get a $100k job in a year... If you decide to go back to school someday then go for it, but if it's not necessary, don't waste your time/money.

 

[JFDIS]

I grew up on a cattle ranch where my dad was a cowboy. I grew up poor financially but rich in life experiences.
When I was young my dad bought a boat. His dad said he was stupid, an idiot. My pop told him that money could have went to his savings. He completely belittled him for his choice.
I can’t tell you how many amazing memories I have as a kid fishing the Tampa Bay in that boat. Hours and hours of quality time with my dad. Snorkeling and collecting sand dollars, feet away from dolphins and manatees in their natural habitat. All of that is priceless if you ask me.
Even with that ‘stupid’ purchase they financed, you may be surprised to find them in zero debt. They have twenty acres in the most beautiful forest in Florida. My parents always remind me to have fun with my kids and make memories.

 

[barkley]

I agree, you can go right into a trade school & get a $100k job in a year... If you decide to go back to school someday then go for it, but if it's not necessary, don't waste your time/money.

or they could get that trade under their belt, snag a good paying job at a university and get that degree for free (i know a handful of people who have opted to purposely get jobs at private and public universities to reap this employee benefit either for themselves or their kids-in one case both!).

 

[gottalovepluto]

It's always mindset. 100% of the time, someone goes into debt because of their mindset.

This mindset blame is SO DANGEROUS. Pretending medical issues, divorces, job losses, etc are someone’s “mindset” is not only blatantly incorrect but serves to reinforce to people currently living those situations the voice in their head that tries to say it’s their fault they’re where they are- which just spirals the mental issues they are already battling while battling their financial issues. Like what in the world?!! Hopefully anyone like that reads this knows not to believe this judgmental, offhand comment.

 

[pindecisive]

This mindset blame is SO DANGEROUS. Pretending medical issues, divorces, job losses, etc are someone’s “mindset” is not only blatantly incorrect but serves to reinforce to people currently living those situations the voice in their head that tries to say it’s their fault they’re where they are- which just spirals the mental issues they are already battling while battling their financial issues. Like what in the world?!! Hopefully anyone like that reads this knows not to believe this judgmental, offhand comment.

Dude, you absolutely misread my post.

The mindset I was talking about as I stated, was from the Youtube show. 100% of the time on the Youtube show it's their mindset. If you'd like to look him up, it's Caleb Hammer. I really dislike how he calls the guests names in his title, but feel free to take a look at the advice he gives them, usually about Doordashing food.

My post, which you opted to only take one line from, said absolutely nothing about medical issues, divorces, job losses, or even depression. You seem to have taken what I wrote about my single friend with a cat who is lonely and personalized it with your own history or that of someone you know.

Please do not take this in a flippant way, I am sorry you or the person you know is going through that, and I hope the mental health situation improves. Because you were so triggered by that line, I'll go ahead and remove it.

Just in case you also were also speaking of the other mindset I mention which I term ""I have enough" mindset", it's a FIRE phrase. Financial Independence Retire Early. ChooseFI loves to use it, Afford Anything has talked about it. Here's a great list of finance podcasts which I listened to constantly when I was working to pay off my massively high credit card debt: https://www.madfientist.com/podcast/ They helped me a lot and kept me on track when I needed the reminder of why I was working towards my goal.

 

[Betsy82]

I grew up on a cattle ranch where my dad was a cowboy. I grew up poor financially but rich in life experiences.
When I was young my dad bought a boat. His dad said he was stupid, an idiot. My pop told him that money could have went to his savings. He completely belittled him for his choice.
I can’t tell you how many amazing memories I have as a kid fishing the Tampa Bay in that boat. Hours and hours of quality time with my dad. Snorkeling and collecting sand dollars, feet away from dolphins and manatees in their natural habitat. All of that is priceless if you ask me.
Even with that ‘stupid’ purchase they financed, you may be surprised to find them in zero debt. They have twenty acres in the most beautiful forest in Florida. My parents always remind me to have fun with my kids and make memories.

I share this same philosophy.
we carry debt. More than we should. we are definitely not “barely getting by”, though, as OP implied those with debt are.
our vehicles are paid for. DVC is paid for. Our home isn’t but we’re in our 30s so that’s not surprising. We carry credit card debt. We’ve discussed and decided we are not willing to lose out on memories and relaxing time spent with our kids in order to rapidly reduce the debt. we make progress every month and that is good enough for us. We have retirement, college savings, etc.. no intention to fully fund college for any of our children, only to help. that is more than either of our parents provided us and it’s a topic we’ve discussed at length. Assist but not finance Their education.

I want my children to have the same memories you’re talking about one day.
I dont have anything like that but every single time one of my children say “remember that time…” and start laughing about a crazy adventure, my Heart sores.
one day they’ll be gone and so will our debt.

 

[Becky Mouse]

I cannot emphasize this enough. I coach high schoolers and there are always a bunch that are planning on something like teaching that ignore our two, semi-local, reasonably priced state colleges for a more sexy choice. You are never going to be a high earner as a teacher, and there’s nothing wrong with that, so don’t saddle yourself with higher debt than you need if there are cheaper options.

College is a tool to earn an education. It should be treated as such. Sometimes it needs to be a less emotional choice.

Meh, it depends on what's offered. I had an undergrad degree from a commuter school in Denver. After moving to the Midwest, i wanted to get into teaching. I could drive to a state university an hour away and get a teaching license for about $20k. Alternatively, I could go to a private university in my neighborhood and get a master's degree with teaching license for about $45k. It was a special program they offered. With the master's degree, I'd make an extra $10k/year as a teacher. I was anxious about the debt but felt that the master's option was the better choice. So, I went for the master's + teaching license program. When I graduated, I accepted a job at a Title I school. After working there for five years, I qualified for $17,500 in loan forgiveness. I had paid my loan down to that amount, so my student loans were all paid in 5 years.

 

[Matty B13]

I can't believe how much the cost of college has gone up. I graduated college in 2000. I went to a State University and I think it was about $4500/year when I went and I just looked it up and it's now $10,000/year for tuition - I'm sure room and board has gone up equally.

My sister and I were extremely lucky when it came to college. We both did well academically and went to college virtually free - our Mom was a single mom who was a teacher - she couldn't afford to bankroll our college educations. I went to a State School on a full tuition scholarship - Mom did pay my room and board. My sister was much smarter than me and she went to a fancy private college on a full scholarship that even included room and board. Neither of us went into particularly high paying careers, so I am so thankful we didn't have student loans to contend with after graduation.

Currently UMass Amherst is just under $35k for tuition/room/board in state....... I graduated in 1997 and it was $12k. I'm not really happy with the ever increasing tuition and fees at UMass and especially the astronomical salaries of the Administration there. They blame the Legislatures, but they should really be looking at themselves and the crazy raises them been giving themselves for the last 25 years.

 

[amylevan]

Thinking you have to go into debt to make memories with your children is simply deluding yourself. Spending your time with your kids is free, and ultimately the best memories.

I’m not judging, we currently have a loan on our camper, It’s low interest and we bought it to vacation with our kids….both of which are justifications that are just that…justifications. Ultimately, we wanted it, so we did it.

But no way would we carry 20-30% credit card debt so that we could make memories with our kids. That’s a line in the sand we will not cross.

 

[Dulcee]

I cannot emphasize this enough. I coach high schoolers and there are always a bunch that are planning on something like teaching that ignore our two, semi-local, reasonably priced state colleges for a more sexy choice. You are never going to be a high earner as a teacher, and there’s nothing wrong with that, so don’t saddle yourself with higher debt than you need if there are cheaper options.

College is a tool to earn an education. It should be treated as such. Sometimes it needs to be a less emotional choice.

I teach high schoolers. How many of your high schoolers come back in 5, 10, 15 years and are actually on the same path that they thought they'd be on when you saw them at 17 years old?

The future I was planning at 17 looked very different than the future I was planning at 21. And the reality of what I am doing today looks very different from what I planned at 21. Each of those pivots had its financial implications to get to a place where I am content with the career path I'm currently on.

Very few kids who are entering college or the workforce today will be doing the same thing at 40 that they planned to do at 17. I think sometimes its easy as adults to pull the hindsight is 20/20 view and tell kids just pick XYZ and choose the most direct path there, when they are very much still just trying to figure out what their path actually is.

 

[0FF TO NEVERLAND]

Some people have high limit credit cards and they just keep adding to it, thinking over time, they will pay it off. Until one day you wake up and realize you owe thousands now, not hundreds. And that zero APR you had, is now gone. And your hit with over 100 in interest fees a month

It gets out of hand for some people.

 

[WDW_fan_in_TX]

I was stupid and took out a couple of small credit cards ($1,500 credit limit between them). I just used on lunches, at the baseball card store, buying Christmas gifts, etc. Now I'm paying for it. Bad credit score and having to make a payment once a month. I've since stopped using them. I still keep them in case of an emergency (washer going out, car needing tires, etc), but I haven't used them a single time this calendar year. But I did it all being stupid and just being given what I thought was a free loan.

 

[barkley]

I teach high schoolers. How many of your high schoolers come back in 5, 10, 15 years and are actually on the same path that they thought they'd be on when you saw them at 17 years old?

The future I was planning at 17 looked very different than the future I was planning at 21. And the reality of what I am doing today looks very different from what I planned at 21. Each of those pivots had its financial implications to get to a place where I am content with the career path I'm currently on.

Very few kids who are entering college or the workforce today will be doing the same thing at 40 that they planned to do at 17. I think sometimes its easy as adults to pull the hindsight is 20/20 view and tell kids just pick XYZ and choose the most direct path there, when they are very much still just trying to figure out what their path actually is.

it's the same story today with young people entering college as it was when i attended in '79-the majority change their minds about what career path they will pursue and that's fine-great even b/c people's minds change as they are exposed to new ideas/experiences. that said-i would MUCH rather see a young person fully understanding what can be lifelong financial implications of their choice of college so those changes in interests and aspirations don't negativly impact them for decades down the road.

we live close by 2 community colleges, 2 state universities and 2 private universities. community colleges are a different animal so not even figuring them into the mix, the tutions (no fees or dorms which add many thousands per semester) vary as follows-

state u #1- $8139 per academic year
state u #2- $12701 per academic year
private #1- $48990 per academic year
private #2- $50735 per academic year.

the first 2 years at each are pretty much identical course wise with general ed. other than one being a much better pathway to pursue a medical degree and another law, the ba/bs offerings/credentialing and master's programs are on par with one another. just looking at the numbers, a student at state #1 or state #2 could change their mind once a year delaying gradution with each change by a full year 4-6 individual times before incurring the cost of one single year's change/delay at either of the private.

it's simple dollars and cents that need to be explained to students exploring college. whatever degree they decide to pursue, is it feasable let alone do you want to be looking at incuring and paying for the identical degree/job opportunities (for 5 years which is the average these days with changes of the mind)-

$45,000 ish
$62,000 ish
$245,000 ish
$255,000 ish.

the difference in those numbers can have life altering and life limiting implications.

 

[Dakota731]

A lot aren't getting the same funding from the state as before and they have to make it up somewhere. That's not the sole reason but is part of it just like local school districts that have had budget cuts.

Don’t let higher ed fool you. After working at a large university for years, there is so much waste and so much money sitting in endowments yet they continue to raise tuition every year.
My college built some amazing new gyms, sports facilities, dining halls, etc. since I left. That’s where a lot of the money is going. Making colleges shiny and attractive to applicants. But none of that affects the quality of education, unfortunately.
During the past twenty years, administrative salaries and benefits rose by 40% and spending on athletic coaches jumped by 50%. New administrative positions pop up every year, all which have catchy titles but rarely equal value to students for money spent. Education has become a big business bureaucracy in this country and most of it has no real benefit for the kids attending.

 

[Betsy82]

Nvm

 

[tvguy]

Don’t let higher ed fool you. After working at a large university for years, there is so much waste and so much money sitting in endowments yet they continue to raise tuition every year.
My college built some amazing new gyms, sports facilities, dining halls, etc. since I left. That’s where a lot of the money is going. Making colleges shiny and attractive to applicants. But none of that affects the quality of education, unfortunately.
During the past twenty years, administrative salaries and benefits rose by 40% and spending on athletic coaches jumped by 50%. New administrative positions pop up every year, all which have catchy titles but rarely equal value to students for money spent. Education has become a big business bureaucracy in this country and most of it has no real benefit for the kids attending.

When I attended a small private University, during my Freshman year (1975-76), some elderly lady donated $50,000 so the basketball players could have filet mignon for dinner on game days. They set up a separate line for them in the dining hall. I knew the Vice President of Fundraising, and he said the toughest part of his job wasn't finding donors, it was finding donors who did not put strings like that on their donations or getting them to divert some of their funds to things like tuition assistance. He ultimately got the donor to allow any money not needed for the steaks to be moved in the General fund. I would suspect most of that money was not needed for steaks.

 

[PrincessDadx2]

Unless they are asking for your advice or asking you to pay their bills then it is none of your damn business. I get that you feel superior to "those" people, or maybe jealous, but being judgmental when you have no skin in the game is never a good look. You don't know what or why and are not qualified to judge them.

Personally, I am sure I have more debt than most on this board, but use it as a tool for when I don't want to sell investments or when the interest is less than what I am earning.

 

[theMoreDisneytheBetter]

Unless they are asking for your advice or asking you to pay their bills then it is none of your damn business. I get that you feel superior to "those" people, or maybe jealous, but being judgmental when you have no skin in the game is never a good look. You don't know what or why and are not qualified to judge them.

Personally, I am sure I have more debt than most on this board, but use it as a tool for when I don't want to sell investments or when the interest is less than what I am earning.

Hopefully this is a generic “you” and not directed at me (the OP).

I certainly don’t feel superior, or jealous, or frankly judgmental. I asked a question because I was trying to understand a set of decisions that are very different from the ones I would make, which started from a question that someone else posed. Reading the comments on both threads has been fascinating, because the world is a lot bigger than my little corner of it.

Finally, as a taxpayer, I certainly do have skin in the game once student loan forgiveness (or other government giveaways that have been proposed) comes into play.