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American College Students: In Debt, Distracted, And Doomed

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College Classroom Distracted With Macs

Being a teacher and instructor in college is more challenging than ever. Nervous eyes take glances at iPhones, quickly minimize Facebook apps, and craft rapid text messages. Students are unbridled in their distraction. They look uncomfortable sitting still.

As a college instructor for about 4 years, I’ve become increasingly aware of fellow educators expressing frustration over “lazy” students that multitask. Some educators ban smartphones and iPads during classes. Others call out students that text in class, and ridicule them in front of peers — aiming towards social conformity.

Unfortunately, technology is serving as a scapegoat for something worse. Teachers want to limit these technological forms of distraction to heighten learning for everyone, but this classroom management strategy misses a fundamental problem. Today’s students aredistracted, but their attention problem results from atmospheric student loan debt and poverty.

The American Dream and business of higher education

Built in to our ailing economy and concrete erections is a fundamental dream: hope for a better life. It’s why many emigrate here.

While achieving that success is attained through various methods, college still serves as the number one predictor of middle class life. High school graduates make a median salary of $651. By attaining a bachelor’s degree or higher, individuals make a median salary of $1,108.

BLS Educational Attainment Statistics

For decades, the message has universally been towards greater higher educational attainment. Generations of students, employees, employers have followed this rule — requiring college educations and encouraging people to get at least a bachelor’s degree. Now, about 32% of Americans have college degrees.

Guidance counselors ask high school and college-aged students to envision anything they want to accomplish. Fundamentally, they ask, “What do you desire?” and “What would you like to do if money were no object?”

But money is an object, and we are controlled by its properties — through empowerment or restriction. These questions of freedom tease students with a reality that doesn’t exist.

Student loans restrict, constrict, and destroy choice

Many will graduate with nauseating student loan debt. Heck, there’s $1.2 trillion right now! For class of 2013 college graduates, the average student loan debt was nearly $30,000. With that amount of debt and interest rates that vary from 3.86% to 7.21%, today’s graduates don’t have the freedom that’s espoused and propagated by higher education and mainstream media.

The problem gets compounded as “student tuition now outweighs state funding at public colleges.” Now, state taxes and revenue sources are contributing to even less of the total cost for students. This all flies in the face of socialistic policies in many European countries that have highly progressive, free (tax-supported) higher education.

Americans place the burden on students as young as 17 to make educated decisions that could affect the rest of their lives. Faltering in payments and failing to swiftly pay off the debt can lead to forbearance, default, skyrocketing interest rates on credit cards, and more. Credit scores and future livelihood are at risk.

Educating the desperate, sleep-deprived, and in debt

The interest is already ticking for many before graduation. Students can feel eager to get a job, get paid, and pay off debt. But even before they graduate, they must ask themselves some serious questions:

  • Should I work during college?
  • Should I take more than a normal credit load each semester to finish faster?
  • Should I skip study abroad opportunities that cost more and may extend my time?

Previous generations had the incredible luxury of minuscule tuition rates. Between 1978 and 2013, college tuition and fees grew by an overwhelming 1,225%. Simply put, college cannot be paid for with summer jobs and temporary work.

To the financially disenfranchised, student loans fill the gap for access. But there are still students that work during college. I had two jobs while also a full-time student, and there are many like me.

Then, there are students with disabilities, children, and veterans of foreign wars (to name a few). They are challenged to keep paying utilities, attain an education, and somehow keep a roof over their children’s heads. Again, student loans often serve as a mediator to accessing education — a temporary source of funding to attain a better income and vocational future. But real dreams can subtly disappear from view as financial aid bills take precedent.

Student loans magically appear, as do depressed dreams

Like many of my readers, I’ve worked hard to turn around my financial future. When I was in debt, I felt horrible. I spent money without concern and bought things I couldn’t afford. My debt was the illusion of success.

When I finally stopped to breathe in May 2013, I realized I had dug a hole nearly $40,000 deep. I was embarrassed with what I had done, and who I’d become. I wondered what I could do to reverse this dangerous course. Trust me when I say this is a common problem for many students.

Financial aid usually was deposited into negative balances at universities and then extra amounts were distributed to the individual student’s bank account. Suddenly, bank accounts were flush with thousands of dollars — budgets seemed irrelevant.

Everyone from the in debt to the creditors to general public confuses these loan instruments for real cash. Yes, you can spend student loans however you see fit, but the consequences are punishing. Every dollar is taxed by the current loan interest rate, and is a dollar in the wrong direction: towards poverty.

The problem of poverty in college-age students

Unlike the clarion calls that suggest America is number one, we seem to have created a master plan for educational failure. Research suggests that “poverty, itself, hurts our ability to make decisions about school, finances, and life, imposing a mental burden similar to losing 13 IQ points.”

By saddling our future graduates with nearly $30,000 in average student loan debt and a future of near poverty for many, we are hurting their ability to learn in the process. Lower-income and impoverished populations constantly report lower amounts of sleep, vocational uncertainty, higher stress, and show evidence of hindered decision-making capabilities.

These are the students of today. They are trying to succeed in a cultural landscape that begged them to get educated, punished them for getting that college degree with years of debt payments, and then limited their employment options.

As the dreams fade due to financial concerns, anxiety and distractedness likely increase. The dream of “What’s your purpose?” can quickly be replaced with “Who will hire me?”

We want bright, capable graduates, but we “victim blame” them instead

America is eager to have the best workforce in the world. We are a nation that aims to be a beacon of hope and role model to developing states. And yet, we are breeding and cultivating some of the most in debt, distracted, and impoverished students.

It’s not in the interest of this country, the world, and future progeny to continue this wicked cycle of educational attainment and poverty. It’s not in the interest of creating a bright, educated populace to have them cowering in poverty for doing so. It’s not in the interest of America to impair decision making in finances and education in the process.

As teachers express frustration for their distracted students, they need to fundamentally understand the complex, systemic interplay of student loan debt. This financial instrument is inherently complex and can psychologically impair the most capable students. They might not be able to pay attention because they’re burdened by a future of poverty, student loan debt, and restricted opportunities.

Something needs to change. This system isn’t sustainable. Fortunately, a small light of hope might be on the horizon.

Post by The White House.

President Barack Obama recently announced a massive initiative to empower those from diverse financial backgrounds to receive a “free” education. His plan includes funding community college educations for those working part-time and maintaining certain educational requirements. Over the coming months this will be hotly contested and debated. But this is the first step, in what needs to be many, for those in need of an education that’s truly accessible and affordable.

Students cannot continue to shoulder most of the burden. There are powerful inequalities in income and wealth — educational opportunities shouldn’t be one of them. If we can muster the courage and wherewithal to increase taxes towards education, we may see what America is truly made of.

Debt Is The Illusion Of Success

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Lamborghini on Rodeo Drive
Lamborghini on Rodeo Drive in Beverly Hills, CA. Photo: John Beagle/Flickr

I’ve never had an empty bank account without some support from others. I’ve never hit zero dollars, and then decided what I need to sell to make ends meet. I’ve never run out of money, and been unable to make a co-pay or buy food. This is a privilege of my social class, but it’s also a consequence of this country’s acceptance of debt.

When I turned 18, I immediately applied for my first credit card. I researched and found the ultimate cash back card for my beginning credit line. At the time, that meant a $50 bonus for opening the account, and a check every time I hit $50 in rewards. The bonuses weren’t much, but they were a taste of the good life.

Even before I was accepted into graduate school, I started spending more. A computer sound system — that was amazing! A beautiful road bike. New smartphones whenever I wanted. Life was good, but it was all an illusion. It was all charged to credit cards, and my poor spending habits only descended as my academic career continued.

Eventually, I needed to take out a balance transfer, and opened a new credit card that allowed me to transfer and put off my debt. When I finally started getting student loans, I needed more to pay off the credit debt. This is the classic “robbing Peter to pay Paul” concept of debt payments. I constantly owed one bank something or another. Frankly, this life was stressful and full of unknowns. I constantly questioned, “Will I have enough to pay off this debt?”

But that was all behind the scenes. On the surface, I was a brimming success. Look at the materialistic items I was able to purchase — the “things” I had amassed! I could scan around my room and provide details about the latest purchase — all without addressing a gaping hole in my story.

Everything was purchased with debt. My things were the banks’ things.

Debt prevents us from seeing how little we actually have. It’s a scary psychological trick that banks prop up for us. Why should anyone be able to spend more than they have? Why must we finance our vehicles, homes, and dreams? If we do not have the actual money, why should we be enabled and empowered to spend?

I’m not sure that, as humans, we’ve evolved rapidly enough to adapt to taking out and handling debt properly. And yet, our system pushes people to adapt or perish in bills and debt collectors. The victims of this systemic problem are blamed and tarnished — left to bankruptcies (unless it’s student loan debt — you must die to rid yourself of that) and court proceedings.

We need to reevaluate both success and reality. In reality, the life I lead is a modest one where I cannot afford that European vacation I desperately want. But my credit card and possible student loan access says otherwise. In reality, I cannot afford to own a nice car I want. But my bank keeps offering me car loans at 2% interest APR.

Where can I find the middle path? Where can I compromise and meet my budgetary reality? The simplest answer I’ve found is realizing that I don’t need much. In fact, most everything I ever purchased served an unnecessary status function in my life. The only way I’ve been able to stay afloat these days is by realizing how little I “need” and how much can be thrown away as “wants” — some of which are extrinsically motivated.

When I want to spend more than I have because I can, I constantly remind myself about the stress and unknown feelings surrounding debt. There was such powerful shame because I couldn’t “control myself.” We need to take responsibility where we can, while also recognizing that we live in a system that ushers out goodies to perpetuate and encourage spending — then blames you for participating. The best we can do is remove the credit card chicanery and unveil the truth: debt is the illusion of success.

Should You Donate While In Debt?

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Colorado State University Endowment Report Donate

I started fundraising and creating an endowment for suicide prevention at Colorado State University in 2010-11. Before I graduated and went to my doctoral program in Iowa, the fund was permanently endowed — reaching $25,000 in about a year. Last week I received my annual “Endowment Report,” which provides the earnings, contributions, and total value of the fund.

As I opened the report, it was hard to stay standing. Today, about 3-4 years since the founding, the scholarship has nearly $34,000 in funds! When the scholarship reaches about $50,000 in savings, it should be able to pay out multiple scholarships each year — or one large check. Ultimately, this can go into the pocket of a college student in need, who hopes to make a difference in the field of mental health.

But back in college, I only had a few hundred dollars in my name. When I got the idea to start a scholarship, I donated nearly everything I could to help seed the fund. I was passionate beyond belief and this cause was everything to me. I remember looking at my bank account, wondering how much more I could give without going broke. It was a delicate financial time, but I had money. And that’s an important point.

When I entered graduate school, I took out massive amounts of student loans, was ignorant about budgeting for the semesters, and irresponsible in spending. Between car, credit, and student loans, I amassed about $40,000 of debt in two years. Throughout this period, I never stopped giving to charity.

Each year, I spent anywhere from $200-500 — small sums in the grand scheme of things — in donations. I kept giving and giving — even when I had nothing. Zilch, nada, zero. Loans were the only thing keeping me afloat.

Even worse, I began to feel the pull of credit debt. This is the particularly nasty kind — an undertow that’ll sweep you out before you know it. With thousands in credit debt, I started engaging in credit balance transfers. These are financial shell games that you can play with yourself and credit companies. You open a new account that provides a 0% balance transfer, and then pay a little fee. Usually, that company provides 0% interest in those funds for about a year. A great deal, if it weren’t for the fact that my spending never stopped.

My spending was out of control and that included charitable spending. I hate writing that line. I hate the idea of cutting back gifts to charity. And I certainly hate the advice I must give today.

I need you to be ruthlessly defensive of your finances when in debt. I need you to ignore your desire to help others, so that you can help yourself. I need you to consider a future where you can help others even more, when you have the savings available.

To those in debt today, you need to put the mask on yourself first — before helping others. Now you may ask, “Why would I do that? Generosity is exceptionally important to me!” In response, I’d say, “I can relate to that feeling. I have given every year of my adult life to charities — in and out of debt.” But it’s time to change our perspective to charitable giving while in debt.

See, when you spend beyond your budget and give to charities when in debt, you’re actually writing a fat check to banks. Those that retain and house your loans — from the federal government to private corporations — receive their own donations when you make this financial mistake. The interest on loans given to you allows banks to realize ever increasing profits and earnings. Worse, it forces you into debt longer than you need be, and prevents you from being able to give more at a later date.

It’s with a pained heart that I must suggest that you stop giving until you’re back in the green (or black). I don’t want banks to make another dime off you, and I’m sure you don’t either. So let’s make a pact to stop giving until we’re done with debt. Then, and only then, let’s consider how we can best help those in need.

Special shoutout to Ben and Stefanie at The Broke and Beautiful Life for an awesome article that inspired this!

Think Compounded Interest Is Always Good? Think Again.

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Manhattan Beach Undertow of Debt

When I had nearly $40,000 in student loans, every purchase felt like an impediment to conquering my debt. It was debt on debt. A tragic snowball effect, each item cost more than the sticker price — every time. I didn’t think I could leave this cyclical world — doomed to mistakes for decades to come.

I was dissatisfied with my spending choices. For instance, after my first installment of student loans, I promptly bought new furniture for my apartment and splurged for a nice car (made possible by another loan). Oh, the humanity! I was making some horrible decisions.

I had entered the world of debt without an escape plan. And I just kept spending. Then, a major wakeup call hit me: debt could prevent me from living the life I want to lead. Excessive student loans would nearly force me into certain career trajectories, as well. I wanted to make a change, but still saw little hope of reducing my debt (while in graduate school).

With greater financial literacy and competency, I developed an eagerness to make some sort of change. One of the largest lessons in the personal finance world is compounding your gains via interest, dividends, and other regular income. Essentially, you earn a regular income from your investments, which can then build even more wealth. By using this method of saving and building income, your money will work for you. It’s a brilliantly simple way of making sure you continue to amass wealth. I wanted to make this happen.

Unfortunately, I was filled with dread, as I realized I was on the wrong side of compounded interest. My $40,000 in loans were actively earning interest for banks and the federal government — ranging from 3.5 to 6.8% APR. Money was working for someone else. I was fighting against a sinking ship of debt, which compounded every day. Every day, I ended with less money than I started — even if I didn’t swipe or spend a dime.

When compounded interest is working against you, it feels like the Pacific Ocean’s undertow. You step into that warm water (spend a little bit of money you don’t have), and it slowly takes you out to sea. At first, you don’t notice the gradual loss of sand beneath your feet (the bills beginning to add up). It can be pleasant — relaxing even — to swim (and spend). And as you swim, you lose sight of the shoreline. Suddenly, you’ve been sucked out to sea and it can be hard to see how you get back to square one.

A fluke — one-off — happened to me over the last year-and-a-half. I started Frugaling.org, recreated a rock-solid budget, made more money than ever, and began to invest. The debt was handily defeated. It was at a precipice in my budget — my net worth reached zero, again — when I realized the powerful hold that compounded interest had over me. I was now free from the undertow of debt, and I ran away as fast as I could.

We have a horrific, metastasizing problem in America today: student loan debt. What happens is that people in their late teens and early twenties begin to rack up massive figures before they see their future paychecks. It’s a recipe for disaster, and the country will suffer from this.

Unfortunately, there’s an even bigger problem from delayed income and growing debt: we delay saving and building for retirement. We eschew the benefits of compounded interest — in our favor — and suffer under the debt. This restricts our ability to become entrepreneurial, live healthily, take risks, and build a better future (for ourselves and future generations).

Today, I’m standing on the other side of compounded interest — the one where I steer and control my finances. I feel empowered by it. I don’t necessarily want more and more wealth, but I don’t want to be back in debt ever again.

I’m done with that undertow.

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