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The Crushing Costs of College

October 22, 2018

Student debt is exploding so much that it’s redefining the American Dream.


Consider this – $1.5 trillion in student debt has become the second largest type of household debt, trailing only mortgages at $9 trillion.


The amount of outstanding student debt has tripled in the last decade, which has put more pressure on auto and credit card debt.


It’s the wrong kind of trickle down. Cash goes to pay the student debt and auto loans, and the other expenses hit the credit cards.


It’s no wonder more than 1 million student loan borrowers go into default annually and 30 percent of borrowers can’t keep up with the debt after six years.


And let this sink in – by 2023, 40 percent of all student loan borrowers are expected to go into default.


It isn’t hard to see why.


The Consumer Price Index (CPI), a common measure of inflation, rose 21 percent from 2007-17. Over that same time, tuition costs soared 63 percent, school housing went up 51 percent, and book costs increased a whopping 88 percent.


The average starting salary of a college graduate is $50,390, which is up 2.8 percent from 2017. In July 2018, the CPI increased 2.9 percent.


In other words, average starting salary growth is not keeping up with inflation.


Consider this average budget:



An average salary grosses about $4,200 per month. After taxes, the average budget eats up more than half the take-home pay of an average college graduate.


At the end of 2016, 22.4 percent of households carried student debt. For those age 18-34, that number rises to 44.8 percent.


Their average balance? $33,000.


Clearly, the return on investment for higher education isn’t as straightforward as it once was.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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