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The blessing and curse of student loans part three; the effects after graduation

July 1, 2013
July 1, 2013Photo by Mario Tama/Getty Images

“Good evening Dr. Dunbar. I’m not sure how appropriate this article is for your situation, but they are topics that should be considered,” said an email from a mentor. We had recently had a talk about my future, potential marriage plans, investing strategies and afterwards he sent me the link to an article titled, Help! I’m Marrying into $166K of Student Loan Debt.

This article is the continuation of the series titled The blessing and curse of student loans, which was inspired by a tweet by Jim Cramer of MSNBC’s hit investing TV show Mad Money.

In part three of this series, the long term ramifications for taking out excessive amounts of Student Loan debt will be discussed particularly in the context of marriage, starting a family and setting out to build wealth. Another mentor, a Sociologist advised me once that, “When you marry someone, you marry the person, their values, and their family.” The underlying message of the mentor who forwarded me the article at the opening of this article added a fourth piece when marrying someone; their finances and their potential debt load.

It may sound cruel, shallow and bizarre, but some individuals do consider their potential spouse’s debt-load (and overall financial health) before walking down the aisle. In my opinion, two people shouldn’t rule out marrying one another because of student loan debt, but as my mentor said it is something to be strongly considered as it will significantly affect the lives of the two people as well as the family they create going forward.

“Your greatest wealth building tool is your own money,” Dave Ramsey states in the Dumping Debt module of his Financial Peace University where he discusses how debt (of all kinds) hampers the building wealth and the creation of a stable life.

Simply put, debt payments eat into one’s monthly cash flow, money that can be used in other ways such as building a savings and/or creating investments foreign concepts depending on the household you come from. Most teenagers and college students who have yet to start paying their own bills and living expenses can’t fathom this. Many don’t find out until the debt has been borrowed and they’re locked into paying it back.

It isn’t until after graduation that the reality sets in for many young adults that they now need to provide their own food, clothing, shelter and transportation off of the income that they’ll make. This can be easier or more difficult depending on where the graduate decides to live but it can be exponentially more difficult if a student loan payment is consuming most of their monthly cash flow.

Some graduates don’t have to ability to pay their bills when they graduate either because they can’t find jobs, or the jobs they do find can’t pay the amount of student loan payment that they now owe every month, in addition to the above mentioned necessities.

And what happens when graduates have attained their degrees but not the means to take care of themselves? They do things like move back home with their parents, or they go back to school for more degrees or to buy time. These days many graduates are also:

• Putting off marriage.
• Putting off having children.
• Delaying other important milestones such as buying homes, saving for retirement, investing in wealth building strategies such as buying stocks for example.

It’s hard to criticize individuals in these situations because all of these things can and should only be done once some semblance of stability is attained. For these reasons, it’s important once again to start teaching youngsters about financial literacy early on in life as advocated by writers such as Robert Kiyosaki, Dave Ramsey and Sabrina Lamb. It’s also important to get the word out that higher education in the United States has very much become a business in itself, where educating students is no longer the only goal.

Owing large sums of student loan debt can be avoided if a student’s college plans are thought out carefully before hand. Key considerations when thinking about college and how to finance it will be discussed in part four.