Unintended Consequences.

In May of 1974, the comedy series “Happy Days,” closed its first season with an episode in which Howard Cunningham decided to build a bomb shelter. Harkening back to the post World War II and early Cold War days, the episode was based upon the decision a number of families made to build a shelter in the case of nuclear attack. As the events of the episode came to a climax, Tom Bosley’s character realized some of the unintended consequences of building a single family shelter and decided to scrap the plans for his family’s ultimate safety.

Identifying the Pot Holes on the Road to Happy Days

Similarly, the American public is coming face to face with the unexpected and unintended financial consequences of the Federal College Loan program. As of 2017, there are more than 44 million American citizens owing student loan debt totaling $1.31 trillion.1 This is more than 5000 times the total student debt just 14 years ago. According to studentloanhero.com, the average 2016 college senior graduated with student loan debt of $37,172 with a $351 monthly repayment.2

Starting a career with a monthly college loan repayment exceeding $300 strains virtually any career beginning salary. Most begin their careers with the additional expenses of housing, a car loan, and one or more credit cards offered by generous financial institutions. Easy credit offers easily result in comfortable home furnishings, vacation travel, and more. If a social life or a new family is added, the predictable result is an overextended income.

Even more alarming is the growing senior population carrying student loans well past the age of 60! According to U.S. News & World Report, nearly 3 million senior citizens continue bearing student loan debt, with the average balance exceeding $23,000.3 This is a significant burden carry into retirement years, with identifiable risk in years of normally lower income and repayment potential.

Enter a newly requested and highly desirable “employee benefit.”

According to Kathryn Mayer, “Employees are eager for employers to offer a benefit that will help them tackle their student loans, arguing the move will not only help them personally, but it also will increase their motivation and loyalty to their employer.”4 Such a benefit, modeled upon similar programs for teachers to receive loan repayment assistance, is now the third most attractive employee benefit, trailing only health insurance and a 401(k) or 403(b) match.5

A relatively new program is Boise Bible College’s partnership with the Loan Repayment Assistance Program Association to assist students who graduate with a four-year Bachelor’s degree. Identified as the BBC Pledge, if a graduate makes less than $35,000 dollars annually, assistance will be provided toward their outstanding student loan.6

The bottom line

Students attending traditional Christian colleges and universities, particularly those whose chosen path of study is toward an occupation on the lower end of the pay scale, should be wary of running up student loan debt while in school. It is a debt that is being accumulated and must be repaid with interest.

Student loan debt strains one’s life as it diminishes the power of the income that is earned. This is true no matter the salary. Debt constrains our ability to practice the virtue of generosity. Income used to pay debt (student or credit card), diminishes our ability to set aside income for retirement. The smallest delay in beginning a retirement program, or diminishing the amount contributed, has a far more dramatic impact on the income produced than normally believed. Deciding to be thrifty and avoid the accumulation of debt may seem very difficult in the student years, but the discipline acquired will provide a lifetime of benefits.

This is a conversation that parents and guardians should have with students before entering the college years. As Money Q&A points out, most will graduate high school without taking any course in personal finance,7 and there is the question of the competency of those teaching the classes in the states where courses are required.8 Certainly this judgement is open to question due to it’s broad generalization, but the premise of parental responsibility is unquestionable. If parents accept their role as primary instructors in the virtues of thrift and generosity, as well as the wisdom of saving for later, the foundation for a smoother financial road will be in place.

1 Is College Debt Advisor’s Next Black Swan? Clark, Bob. Think Advisor. March 15, 2017. ABC Television
2 Clark, ibid.
3 How to Cope With Student Loan Debt in Retirement. Brandon, Emily. money.usnews.com. January 30, 2017.
4 Employees clamoring for student debt benefit. Mayer, Kathryn. benefitnews.com. March 9, 2017.
5 Mayer, ibid.
6 Boise Bible College Pledges To Help Graduates Pay Off Student Loan Debt. Shelton, Bonnie. KTVB.com. April 28, 2016
7 Three Crucial Money Conversations Parents Need To Have Before College. Coleman, Hank. moneyqanda.com.
8 Why It’s A Mistake Teaching Financial Literacy In Schools. Coleman, Hank. moneyqanda.com.