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"I find (student loans) difficult to understand. I feel like now that I’m learning more about accounting and finance it's easier to understand, but as a freshman in college or a senior in high school, transitioning into college is very confusing if you don’t have that background," Ysabella Bilbo said.
Bilbo is a sophomore studying digital marketing at the W.P. Carey school. She is a dedicated student who commutes an hour and a half to ASU's Tempe campus every day. She is also one of the many students who navigates the student loan process in order to pursue higher education.
Today, Americans have $1.7 trillion in student loans. That is a 10,265% increase from 1990, when Americans were in $16.4 billion of student loan debt.
On top of that, more and more young people are seeking car loans and opening credit cards that are often attached to high interest and low returns on investment. As Bilbo mentioned, navigating the finance world isn't immediately taught or simply grasped, leaving many young people to rely on financial inheritance, or the routines, mannerisms and patterns that are learned and passed down from family members and those around them.
The cost of being a student
Taking out student loans is a complicated process, and it is often the first significant financial decision you will make as an adult. At just 17 or 18 years old, you can sign paperwork to borrow thousands of dollars from a bank with the expectation of paying back every last dollar, including an interest payment.
Student loans are either public or private. Public loans have the potential to be more lenient with debt forgiveness and lower interest rates, whereas private loans can be more permanent and binding.
While universities and high schools offer resources to explain loans to students, many students like Bilbo find themselves more comfortable seeking advice from close relatives. Bilbo also consulted ASU alums in her community about their experience with paying off loans before she took the big leap.
"My mom and dad helped me with the financial process, they've been a key part of the process," Bilbo said. She also received an invitation from ASU to a website with free courses that explained the public and private student loans available, but she still found that family was a key component in making her decision. Now, Bilbo pays for her tuition through ASU’s New American Scholarship, as well as FAFSA loans.
Lena Raad is a junior studying supply chain management at the W.P. Carey school. Raad was a biology major on the pre-dental track but switched to a business major after considering current and future finances. She covers her undergraduate tuition through scholarships and out-of-pocket payments but knows that loans will be necessary for graduate school.
Raad, the daughter of two Lebanese immigrants, is a first-generation American. Being first-generation often leaves students without family support or advice when it comes to the loan process since their parents are not familiar with the U.S. system. But, having two older siblings familiar with the loan process, she looked to them for guidance.
"My siblings went through student loans for graduate school," Raad said. "It negatively impacted them, it was stressful. It was worth it in the end now that my sister is a cancer researcher, but it was still a lot of stress."
Arpan Goyal is a recent graduate from W.P. Carey’s business analytics master's program. After completing his bachelor's degree in his home country of India, Goyal decided to pursue his master's degree abroad in the United States.
"I took a loan from the State Bank of India, and they didn't allow my parents to get the amount in our account. They're like, if you want to pay fees, you'll have to give us access to ASU's finances or something,"Goyal said.
Since Goyal wasn't able to give the bank access to his ASU finances, he paid his tuition installments in cash and presented the receipt to the bank, who then reimbursed him. Although he had secured a loan from a bank, paying over $10,000 in each installment was still stressful.
Healthy spending habits
Attending university costs more than tuition. Many students move away from the homes they have grown up in or commute long distances to school. As young adults, students are often expected to pick up expenses on food, bills and personal expenditures.
As an international student, Goyal was in a different environment than the one he grew up in, and this came with a different price tag.
"If you want to go for lunch (in India), you have lunch for five bucks, and that's a pretty decent place, but in the U.S., you can't do that," Goyal said. While still getting financial support from family for monthly expenses, he found it difficult to participate in some social activities given the financial impact. During his time at ASU, Goyal met other international students who were able to subsidize their expenses through on-campus jobs. But given Goyal's accelerated nine-month program, he was not able to do the same.
Bilbo is a part-time shift lead at Salad and Go, and as a commuter, she spends about $100 per week on gas. Even though she manages her checking and saving accounts well, using Rocket Money, a budgeting app, to help, she also leans on her parents for financial advice outside of student loans. "When tax season comes around, they are on it. They have an accountant and they are on the bills," she said.
"I think that family advice and interference is important. I think it's nice to always have someone to rely on. It's nice to have someone that's older and wiser that has experienced financial troubles and prosperities," Bilbo said.
Raad's family, especially her siblings, have played a large part in her financial perspective. "My dad is very intentional with money, he doesn't care about impractical things. … So it rubbed off on me, even in small ways. … My siblings give me a lot of advice, they always tell me to save, save, save and stop buying unnecessary clothes," Raad said.
While Raad works part time at Alo Yoga to help cover personal expenses, she considers her mindset for the future as well. "I think once I'm married, I'll definitely go toward a house and a car and help my husband and myself save for what matters," she said.
As a junior in business school, Raad has gained knowledge on financial management in a business and personal sense. "Inflation, what we've learned in econ, supply and demand, once price decreases demand increases … it taught me how to think more practically and connect class with real life," she said.
An economist's perspective
Kartik Verma, an economics professor at the W.P. Carey school, is more familiar with the financial burdens of Gen X. Verma is from India but moved to the U.S. to pursue his Ph.D in economics. Moving abroad can be a difficult process, especially while having to learn a new financial system. Verma explained that his knowledge of the American credit card system came from a good friend of his.
"Debt is a part of life, we shouldn't fear it," he said.
While debt is oftentimes stigmatized, economists and financial advisors generally believe in the concept of good debt and bad debt. For example, taking on debt to increase your human capital is a rewarding financial decision. Increasing your human capital could be attending university, going to trade school or moving to a new city for better opportunities. Mortgage loans are also seen as an increase to your personal wealth. Most economists agree that bad debt would be considered car loans and high interest credit card payments.
Verma said as long as you complete your degree, student loans are worth the cost, but he warns against potential distractions, including overworking yourself.
"You have a work ethic (outside of school), which is very nice, but don't let that distract you from going through college," Verma said. If you spend more than four years at college, your delayed graduation will add to your opportunity cost and an increase in loans.
Verma also said it is important for students to understand credit cards. Not all young adults at university choose to open credit cards, but those who do should be warned against the potential consequences, both good and bad, that come with a line of credit.
"A credit card is not free money," Verma said.
Words of wisdom
Although guided by her family and professors, Raad, like many others, feels pressured by social media to spend money. Her advice to other students would be to avoid social media’s excessive influence on financial health.
"Don't get too influenced by social media. I feel like there's a lot of products I've bought because of it (that) I don't even use anymore. … It's just unnecessary," Raad said.
Goyal grew up in a home where making investments was encouraged. "My dad would invest in stocks and fixed deposits, we got a house, and he always supported my decision to do undergrad in the field I was interested in. Same with masters," he said. He believes it is important to take financial risks if you believe there is a payoff.
Bilbo also shared advice for commuters or others having difficulties at university. "I've put school before myself many times, and I've had to learn that it's ok to get that sweet treat sometimes," she said.
Edited by Savannah Dagupion, Leah Mesquita and Audrey Eagerton.
This story is part of The Generation Issue, which was released on December 4, 2024. See the entire publication here.
Reach the reporter at banihanijude@gmail.com and follow @jud3moody on Instagram.
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