While only about half of all Northeastern students take on student debt, it is a real and anxiety-inducing burden for those that do. One out of every two Northeastern students are graduating with $16,000 worth of debt — a financial weight they must carry with them as they enter the post-grad world.
This anxiety only increases with time. Many students struggle to make their minimum monthly payments while the interest piles on, a financial stressor that can cause students to feel that their futures are slipping away. Questions such as, “How am I going to pay this off?” and “Will I ever be able to afford a house or start a family?” haunt these students.
While the trendy solutions shared through social media include mandating personal finance classes in high school and college, we must recognize that classes alone will not reverse the problem.
Having taken a personal finance class in high school, I have experienced firsthand how ineffective these lessons can be in equipping students with financial tools. The most memorable class lesson I recall is the so-called “50-30-20 rule.” This budgeting method recommends splitting your income into three large buckets: 50% for needs like housing, grocery and utility bills, 30% for wants like restaurants, vacations and entertainment — and only 20% for savings and debt. This 20% includes payments to your emergency fund, retirement account or for the paying of student loans.
At the time, it seemed a practical and easy-to-implement strategy. But as I grew older, I realized how ineffective this budgeting method actually was. If you graduate with student loans in the tens of thousands, setting aside only 20% of your income to cover savings and debt will barely cover the interest. For instance, if you graduate with $20,000 in student loans at an interest of 6.53% — the current interest rate for federal undergraduate loans — your balance could grow to over $27,500 in five years if you do not cover interest in your regular student loan payments. This leads to students being over-leveraged, a situation where one’s debt far outweighs their income. Once over-leveraged, students’ ability to pay debt down quickly becomes unfathomable. Overall, because it lacks explicit guidance on managing substantial loan debt, the 50-30-20 rule is ill-equipped to address the realities of the 21st-century student debt crisis.
However, college classes are no better than high school classes in teaching us how to eliminate our debt quickly. As a finance and accounting management combined major, one would assume that my Northeastern education would give me the tools to tackle financial realities such as student loans. While many courses have taught me broader lessons, for example how businesses interact with the economy, none have addressed the practical components of personal finance, such as how to pay off student loans effectively. The 50-30-20 rule is just one example of how formal financial literacy courses consistently fail to equip students for the real financial challenges they will face.
Financial literacy doesn’t start with balancing spreadsheets in the classroom but with listening to each other outside of it.
As young people, it’s time we take matters into our own hands and seek out the information needed to handle this student loan crisis. We should learn about financial literacy not through yet another required course but by having honest conversations with each other. The real way forward is for people to more openly discuss their financial regrets, mismanagement of money, failure to tackle being over-leveraged in debt and the strategies for getting out of their financial hole.
I have derived more financial value from conversations with older peers than in any lecture hall or Northeastern finance class. A critical moment for me came while listening to a Dave Ramsey podcast, where a 50-year-old woman called in, panicked because she had no money saved for retirement and still had student loans to pay. This moment, rather than a passage from a finance textbook, was what made me realize the importance of tackling student loans early.
Whether they come from podcasts, group chats or random strangers, these conversations help break the sense of shame that comes from financial stress. This shame often prevents individuals from seeking help or discussing their struggles. By missing out on the opportunity to learn from each other, students with mounting student debt will spiral into worse economic situations.
If we’re going to address the student loan crisis, we have to stop pretending that the solution only lies in the classroom. It starts in our community: in our shared stories, in recognizing that we all feel financial pressure and in having the courage to talk about it.
Kevin Charles is a third-year finance and accounting management major. He can be reached at charles.k@northeastern.edu.
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