One of the reasons so many people are dragging their student loans out forever has less to do with whether they can afford their payments and more to do with how people view their money and their student loans (and debt in general).
All of us were taught that our personal finances are private. We generally don’t go around telling people how much money we make or how much money we have saved. We don’t hang out with friends and compare bank balances, or IRA balances, or 401K balances.
And most of all, we don’t tell people how much our car note is, how much we owe on our credit cards, or how much student loan debt we still have.
It’s Embarrassing
One reason we don’t disclose how much debt we have is we would be embarrassed. That’s right. It’s not just private… it’s embarrassing.
Think about this for a minute. What if you had a group of friends and as each month or year went by you would get together and share with each other how much you still owe on your student loans? Would you feel proud to show everyone how much you still owe? (One thing you would learn is that many of your friend’s student loan balances are going up because their low monthly payments are not even paying the monthly interest. You would also learn that many of your friends are using deferment and forbearance to avoid making any payments at all. So the interest is continuing to accrue and make the debt even higher as each month goes by.)
Or would you feel better if you could show your balance going down quickly because you are making larger monthly payments? Wouldn’t you be proud to show the progress you are making on your student loans?
Your friends would slowly begin asking you how you are doing it. They would ask you for advice so they could start winning the battle against their student loans too. The financial intelligence of the group would go up as they watched you drive your student loan balance down to zero.
The New Social Party Game!
If people were to disclose their debt balance to friends and colleagues every month, I bet their life would improve. I bet their financial position would improve.
I’m not suggesting that everyone should start blurting out their student loan balance to everyone. I’m just acknowledging the fact that most of your friends are not proud of their debt despite what you see them doing with money in their life (and despite what they say about their education or their student loans).
Normal is broke. Don’t be that guy.
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