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What No One Told You About Student Loans

Borrowed Future - Episode 1 - 47:12

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The student loan crisis is impacting you, your friends, your kids and our economy. College is more expensive than ever and you’re being told, “Student loans are good debt,” “You can’t go to college without debt,” and, “It will be worth it.”

These lies have duped the average college student into taking out $35,000 in student loans.1

In episode 1 of Borrowed Future—a Ramsey Network podcast series investigating the student loan debt crisis—you’ll hear from Dave Ramsey, Anthony ONeal, Rachel Cruze, Michael Torpey, Seth Frotman and others on the reality of the student loan debt crisis. You’ll also hear from real people burdened by the stress that goes along with huge monthly payments and a mountain of debt.

How Much Students Are Really Paying

We interviewed people from all points of the student loan spectrum. Some graduated with federal loans, some graduated with private loans, and some didn’t graduate at all. Here are the numbers that represent their stories:

  • $54,000 in college loans without a degree to show for it
  • $62,000 in debt only to make $19,000 a year
  • $121,000 for a master’s degree to work as an administrator
  • $175,000 in private student loans and federal student loans combined
  • Over $600,000 in student loan debt

More than 45 million Americans have student loan debt, and the burden is keeping many of them from moving forward with their lives.2 The average student graduates with $35,000 in student loan debt with an average monthly payment of $393.3, 4

If this sounds normal to you, it is.

Student loan debt has become a part of culture. It's woven into society, and it's just accepted as a normal part of life. But it's negatively affecting real people and the economy. And now, it's a crisis that's drawing national attention. While everyone doesn’t fully understand the true impact that this debt is having, people are starting to see that it has life-altering consequences.

Student Loans Are Leaving People Paralyzed, Terrified and Overwhelmed

Every single year, another million student borrowers default on their debt.5 The student loan crisis is getting out of control.

“Every day, I talk to someone who's got $100,000 or $200,000 or $250,000 in student loan debt,” says financial expert and nationally syndicated radio host Dave Ramsey. “100% of these people are completely emotionally overwhelmed. They're paralyzed. They're terrified. They do not know what to do.”

Dave continues, “They were led down this path by a set of values put on them by a series of guidance counselors and parents who weren't thinking, educators who were out of control, and a congress who continues this ridiculous student loan debacle. And here they sit, trapped. And they don’t know what to do.”

Dave paints the bigger picture of what this means for them: “Who they were supposed to become—they can't [become that]. Because they're walking around with this 400-pound ball over their head, and they're trying to balance that and live a life.”

“What No One Ever Told Me About Student Loans”

So why is anyone signing up voluntarily to carry around the 400-pound ball? And how did no one notice until now?

Author of the book Debt-Free Degree, Anthony ONeal, has firsthand experience trying to balance the burden of student loans. Now, he's devoted his life to helping young people make better decisions, especially when it comes to money. He doesn’t want young people to make the same mistakes he did.

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When telling Borrowed Future about the first time someone at his high school mentioned college, Anthony says he felt like he was already behind: “I'm tripping, because my parents haven't told me anything, my counselors haven't told me anything, my friends haven't told me anything. And I'm like, ‘What the heck do I do? Do I go off to college? If I do go off to college, how do I go off to college?’”

When Anthony approached his school counselor about the situation, his counselor told him his grades weren’t good enough to qualify for scholarships. “But there's also student loans,” she said.

What he didn't know is that student loans would send him down a road that would take years to clean up. Student loans are a problem, impacting Anthony, you, our kids and our nation.

“I go home,” Anthony says, “And my parents are like, ‘Yo, we have the GI Bill, and anything above the GI Bill . . . we'll just take out some loans.’

“That was the thought that myself, my counselor and my parents had: If you do not get a scholarship, or you do not cover it all with the GI Bill, we'll just take out some loans. We'll just go talk to Sally Mae and ask Sally Mae, ‘Can I borrow some money?’ And we already know her answer. It was going to be yes.”

Anthony did end up getting a scholarship from the National Forensics League. Combined with his father’s GI Bill, he actually was able to cover the cost of all his classes that first semester. In fact, he’s so passionate about scholarships, that he created one of the biggest, best and easiest scholarship search tools that exists: the Debt-Free Degree Scholarship Search

“When I had it all paid for, I still did a dumb thing,” he admits. “I still borrowed money to go after the lifestyle, to get the clothes, to get the car, to buy the roses, to go to McDonald's. I borrowed money just for the freaking lifestyle."

“I still borrowed money to go after the lifestyle, to get the clothes, to get the car, to buy the roses, to go to McDonald's. I borrowed money just for the freaking lifestyle."

“And studies are showing that a lot of students' college is paid for, but they're still borrowing money to live. Live off of what? You're borrowing money, and you're paying back so much! But no one ever told me that. No one ever said, ‘You're robbing from your future, Anthony, if you take out student loans.’ It was normal. So, I said, ‘I'm going to be normal, and I'm going to join them.’”

When students start borrowing massive amounts of money as a teenager, it sets them on a path that just spirals into more and more debt.

Anthony says, “Not only did I take out $10,000 in student loans, but I also took out $15,000 in credit card debt. I also borrowed $10,000 to get some furniture debt. Before I even turned 19, I'm $35,000 in debt, and I wake up like, What in the heck is going on? No one told me!

“What woke me up—because I did not have a plan—was me being homeless at the age of 19,” he admits. “I'm sleeping in the back of my car because I didn't take every one decision that I made seriously, and I never took the time to write out the vision for my life, write out the plan for my life. I just followed what everyone called normal.

Normal is trying to finance things that I really could not afford at all. Normal is trying to impress my friends and go to the same school that my friends were going to. That normal ended with me in the back of the car.

“It's normal to have $35,000 in student loan debt. It's normal to have about $15,000 in credit card debt, it's normal to spend about $20–30,000 on a wedding and financing a wedding. That's normal? I was tired of being normal. I was ready to be different. And being different means we don't have to be normal to be successful. We should not be financing things. We should not be in debt.”

Is Student Loan Debt “Good” Debt?

A recent Ramsey Research study of consumer debt shows that four out of 10 people don't even think student loans are debt. So that begs the question, what exactly is debt? Here’s what debt is:

Debt is owing anything to anyone for any reason.

So, if you borrow money for a student loan, that is debt. You have to pay it back. And if you're making payments on your college loans—that money can't be spent on something else, like rent, gas, food or retirement savings. That's bad for you and the economy.

Anthony is not the only one who thinks debt is bad. There's a guy out there who has been yelling about this on a street corner for almost 30 years. And that street corner happens to be the third largest talk radio show in the United States: The Ramsey Show.

“To go and spend money that you don't have to maybe graduate is absolutely ludicrous,” Dave preaches. He’s helped millions of people crawl out of debt and build wealth. Needless to say, he's got a strong opinion when it comes to student loan debt.

“Student loans are often said by people to be ‘good debt,’ which is laughable. Is education a good thing? Yes. Is it worth investing in? Yes, in a proper setting, with proper analysis as to what kind of a degree you're going to get, and is it applicable in the field.

“But when I took my kids to college, who graduated a decade ago, we went to a four-year state school and in the orientation, the lady says, ‘We have a high graduation rate: 58%.’ Which is above the national average, by the way.”

Dave breaks it down this way: “Now, if I got a 58 on a test, they would have given me an F. But they're calling themselves big dogs because they got a 58% graduation rate. Translation: 42% did not graduate. So, everyone that takes out a student loan, four out of 10 times, does not get a degree.

“So, this idea that you're automatically going to get a return on investment assumes you've completed a degree in a field that will pay you more than you would have made had you not gone to school. And it assumes you freaking graduate. So, it's a stupid set of assumptions to get us to the point that this is ‘good debt.’”

So, it's a stupid set of assumptions to get us to the point that this is ‘good debt.’

Along with Dave, there are lots of other experts who say you should stay away from this "good debt." One of those people is Seth Frotman. He is the executive director of the Student Borrow and Protection Center in Washington, D.C. He is also the former ombudsman at the Consumer Financial Protection Bureau, a government agency designed to protect students. Put in a much cooler way, NPR called him: the student loan watchdog.

“So there are these misperceptions that student loan debt is ‘good debt,’” Seth says. “Or there is something about the fact that the word student appears before the word loan that makes people think that this is somehow different. This was just another form of consumer debt that we were in charge of overseeing.

“And unfortunately, with the dramatic rise of student loan debts, we've now added, essentially, $1 trillion of student loan debt overnight. [There are] predatory players who view the student loan crisis as their chance to make a quick buck.”6

Seth explains: “So you have private student lenders, student loan servicers, debt collectors, private equity companies, even social media companies, who are looking at the student debt market and creating a business model that is essentially premised on ripping off students.

Seth calls us all out for burying our heads in the sand and calling it “good debt.” He says these lenders do not have the best interest of students in mind, “Because every piece of history we have to show is that that is not the case.”

The Logic That Led to the Student Loan Crisis

If student loans are ripping off and hurting students, why is anyone taking them out? What's going on in students' minds? We went to a local college prep high school to find out. These students are very smart—just maybe not when it comes to money.

Their knowledge ranged from having never even heard of FAFSA to believing they could pay off a $40,000 student loan in “a year or two.”

Here’s the transcript from one of our interviews:

Borrowed Future: Do you know where you want to go to school yet?

Student: Columbia University.

Borrowed Future: Very expensive school.

Student: We could work it out with financial aid and stuff.

Borrowed Future: So, I'm looking at the tuition for Columbia University. Do you know how much it costs to go there?

Student: A lot. Like $60,000 a year?

Borrowed Future: You nailed it.

Student: Yeah.

Borrowed Future: And so, have your parents talked to you about this? Did you have a conversation when they're going, “Hey, we can't afford to send you to a $60,000-a-year school.”

Student: We haven't had that conversation. They never said I can't go because of financial reasons.

Borrowed Future: Would you take student loans out to go to Columbia?

Student: I would if I felt like it was really, really something I feel like would benefit me in the long run. I feel like it's a great option for me.

Borrowed Future: Okay, so you'd be willing to take out student loans to go there.

Student: Yes.

Borrowed Future: If you were like, I got in, I'm real excited. This is going to be worth it.

Student: This is it.

Borrowed Future: Yeah, what makes it worth it?

Student: I think it would be worth it if I got in and they told me that they could offer me a scholarship, and they could make this work for me. Then I'd be like, Okay, well, I'll do it on my end if you'll help me out on yours.

Borrowed Future: Okay.

Student: Because I feel like it is our education—it is also our responsibility to do something for it. We have to work for it a little bit.

These kids have high hopes for their futures. But we also interviewed a teacher who interacts with these students every day.

“They're not thinking much past what they're going to do with their money this weekend,” says Jerry, a personal finance teacher. “They're going paycheck to paycheck, for the ones that have jobs or allowance or wherever they're getting their money from. But that's the biggest challenge, I guess. It’s because they're not thinking much past what they're going to do with their money this weekend.”

By talking to thousands of students in schools across the country every year, Anthony understands a teenager's mindset too.

“One of the biggest things that I see with this generation is they do not have a plan,” says Anthony. “I believe that's why we have a generation of students . . . who just walk into a college experience and just quickly sign the student loan paper because they didn't have a plan. They didn't have a direction. They didn't have a vision. And then, they wake up four or five years later, and they're drowning in $35,000, $100,000, $200,000 in student loan debt.”

Part of Anthony’s role in fighting the student loan crisis is creating a series of tools to help students go to school debt-free. His Debt-Free Degree College Calculator, for example, asks a few simple questions to show parents and students exactly what dollar amount they need to plan for.

Anthony doesn’t believe college loans are ever worth it. “I met a 62-year-old woman. She's paying off her student loans next month. She's been paying on them for 40 years. But wouldn’t you rather take six years of hard work, of sweating, of missing nice evenings with friends, and going on vacations so you can enjoy the next 40?”

Debt Doesn’t Get You Ahead—It Keeps You Behind

Sometimes, our expectations of what we think life will look like don't match up to reality. Seth Frotman dealt with that reality every day at the Consumer Financial Protection Bureau.

Seth shares that his team really did want to help students, but it felt like they were fighting a losing battle: “We saw people over and over again because of their student debt . . . the only thing they did was everything that they were supposed to do, which was take on debt to get their degree. And the number one thing we heard was, ‘How has this happened to me when I did everything right?’”

Anthony O'Neal has seen that play out time and time again. People who did everything right when it came to their future—they took on debt to get the degree, to get ahead, but all it left them was behind.

Anthony explains, “Just the other day, I had the opportunity to speak at a HBCU—Historic Black College or University—to all of their incoming freshmen. They had about 1,500 freshmen who were starting their new journey.

“A young lady came up to me who is graduating this year, her senior year, and she says, ‘Anthony, because I came here out of state, I'm graduating with about $180,000 in student loan debt.’ She said, ‘I'm going to be a teacher, and I'm going to make maybe $40,000 a year.’ And I looked at her face, and she was like, ‘What do I do?’”

That’s what breaks Anthony’s heart. “And I couldn't be like, ‘Yo, you should not have even come here,’ because she's already at the end of it. And I felt so bad for her because [she’ll be] making $40,000 a year, and she's nearly $200,000 in debt before she even graduates.

“I told her, ‘Hey, you're going to have to get aggressive. You're going to have to get a second job. You have to get very creative in these next four to five years. You are really going to have to push yourself hard. You may have to go home to bounce back and to really start figuring out some things. But do not let this debt slow you down from really going after your dream as far as being the best schoolteacher and really impacting our kids. It's there, and I am so sorry that it is there.’ I am so sorry that I wasn't even there to help her and give her guidance before she even started.

“I don't want to talk to kids like her, in her senior year of graduating, 20 years old, and she's like ‘What do I do?’ My heart breaks for these young kids who signed a piece of paper, knowing that it was a loan, but did not know exactly what they were signing. They didn’t know that there were other options, that there were better options to going to college. Student loans are not an option. At all.”

The Shocking Reality of Student Loan Interest

Everyone starts with good intentions to go to college and graduate. And loans feel like an easy way to make that possible.

What can start as a small loan can grow and grow. One woman we talked to named Terri shared her struggle. She did everything the right way. She had scholarships, grants, and worked two jobs while going to school full time. But during her junior year, things changed when her options ran out. Here is what she had to say:

“I was at my third year of college, and they had cut off all of my grants, and so I had no financial aid to be able to pay for it. I was already working two jobs at that point, going to school full time, so they offered me the student loans.

“I was told that's the only way I would be able to stay in college. And since I had no money, I was like, ‘Okay.’

“When the lady was telling me about the student loans, it made it sound like it was very simple, ‘You know, you don't have to pay it back until six months after you graduate. The interest doesn't accrue until six months, so by then, you should have a job to be able to pay it.’ So, it sounded like a feasible solution to my dilemma.

“So I went ahead and took the $5,000, which covered my tuition and my books. So, that started the cycle of debt in regards to education. My balance when I graduated, finally, was $15,000. It is now $60,000 and growing [because of interest]. And that's while I've been making payments on it.”

In case you missed it, her $15,000 student loan grew $45,000 in interest while she was paying it down! That’s a tough pill to swallow. Perhaps saddest of all is that Terry says she had absolutely no idea that would happen when she took out the loans.

No one thinks of the worst case scenario when they take out student loans, and Anthony is no exception.

“Do not do what I did,” he warns. “I did not have a plan but went to school. Six months in school, I'm drowning in debt, and I'm homeless, because I did not have a plan. Two years later, I'm in default with my student loans.”

Both Terri and Anthony’s stories are “normal,” because student loan debt is normal. And this is what happens when people decide to be normal. There's a lot of normal people out there—more than 45 million of them—carrying student loan debt.7

Swimming against the current in a sea of normal is Rachel Cruze. She's a financial expert, bestselling author, and host of The Rachel Cruze Show—a show focused on making money fun and creating a life you love.

“Student loan debt has become so normalized in our culture,” Rachel says, “Because everyone is taking out loans. And we have believed this lie that you can't be a student without a student loan.

“And you look over just a simple bar graph of what student loan debt has done over the decades, and [you see] the price of tuition has increased because students can borrow however much money they want, and go to college wherever they want.

“There's no competition in this area of life, and so they keep raising prices. And the Federal government—they keep loaning out money to these students. And so, because of that, it's the easier path to sign your name to a dotted line, and you get the repercussions four and a half years later.

“You are starting out your life in the hole. You are starting out your life, on average, $36,000 in the hole.8 So when those bills start to come, your options are limited. Meaning, you have to go get whatever job you can to start paying these bills.

“Man, what a better picture of freedom, if you didn't have these bills that you absolutely had to pay back, and you actually had the time and the resources to say, ‘Hey, I'm going to take my time and figure out what do I really want to do.’”

Rachel advocates for making a different choice from the get-go—that you have to go against the norm to win with money. She says, “Doing the hard work and being diligent and saying, ‘Okay, you know what? I want to focus on doing what I can to go to school completely debt-free.’ That is weird in our culture.

“It's a financial hole that can be avoided completely if you made some different choices and decisions. And the hard thing is, these students, they're not dumb! They're not unintelligent human beings. No! A lot of them are very smart. They've just been told the wrong information.”

Is It Possible to Go to College Without Student Loans?

Anthony ONeal has a firm answer to this question: "Can you go to college debt-free? Yes! Is it going to be easy? No!”

Anthony says if everything was easy—starting a business or becoming a millionaire, for example—everyone would be doing it. He says, “Only the successful ones, only the ones who are willing to work, have integrity, have character, and do whatever it takes to become successful are the ones who are actually successful. Successful people do what unsuccessful people are not willing to do.

“Then let me say this,” Anthony adds, “It's not about a privilege thing. It's not about a race thing. It's about people who work. If you put in the work, you'll get the results. If you want to be lazy, if you just want to have an easy route—yeah, go sign student loan papers and be in debt and bonded for the rest of your life.

“Avoid the stupid mistake that I made of borrowing money to go to college, even when I didn’t need it. No one gave me another route, like, ‘Hey, Anthony, maybe going off to community college is the best route for you. Or maybe checking out a trade school is the best route for you. Maybe starting off this way is the best route.’

“People may look at you, and they may laugh at you. They may question you. They may even doubt if you're ever going to get through, but you have to be so passionate that no matter what, you are not going to give up. You're not going to borrow one dime to go to school, even if it means you've got to move a little bit slower.”

He goes on, “There's currently $1.5 trillion in student loan debt. You're not going to be in that. You're going to graduate college. You're going to walk into your future, not a part of the stat, but you're starting a new stat. What's the new stat?”

Anthony O'Neal wants to get rid of the sad student loan statistics. He has a path for how you and your kids can avoid student loans and graduate debt-free. In his new book, Debt-Free Degree, he teaches parents how to help their kids pay for college without debt, even if they haven’t saved for it. This is a step-by-step plan that combines common sense and honest humor.

Debt-Free Degree doesn’t just tell you what to do. It also tells you why to do it, how to do it, and when to do it. 

Tune in to Borrowed Future next week to hear the biggest myths about student loans and the reality about student loan forgiveness that politicians won’t tell you.

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About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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