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A Pathway to Reduce Student Loan Debt and Increased Long-Term Financial Wellness

This article is slated to be updated with the latest FAFSA, Scholarship, and Financial Information. For more updated information, please refer to our 2023 and 2024 articles.

Written by: Ray Giese, Director of Career Development

Every young adult hopes to ultimately find their way to the corner of the “Happy & Wealthy” quadrant by choosing a career that will provide them with a lifetime of earnings and personal satisfaction.  The prevailing thought is that every high school graduate must apply for and attend a college of their choice to help secure their chosen career path.  Each year high school students and their parents engage in the mad scramble to apply to the highly selective colleges with the hope of acceptance to the top choice on their list.  Often concurrent with that effort is the frantic search for the funds to help pay for the education.  Both students and parents firmly believe this ritual is the ticket to success in life, with the final destination being the intersection of Happy & Wealthy.  

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How Are We Doing?

So as a society, how are we doing in this regard?  What grade should we give ourselves in guiding young adults to their final destination?  The reality is sobering, and the grade assigned is low.  According to the U.S. Department of Education National Center for Education Statistics, of the full-time students entering college in 2010 (the study of the most current cohort), only 40% completed their studies leading to a degree within the typical four-year timeline.  

4-year graduation rate – all 4-year institutions, nationwide40%
6-year graduation rate – all 4-year institutions, nationwide60%
College students never graduating – all 4-year institutions, nationwide40%
The employment rate for college graduates, 201778%

Another 20% take up to six years to graduate, while 40% of students entering a four-year college never graduate (but likely still have student loan debt to repay).  While 78% of college graduates find employment after graduating from college, 22% do not.  Of the 40% who did not finish college, nearly all stated that affordability was a prime consideration in deciding not to complete their degree (Federal Reserve System, 2018).

Solutions to Date Don’t Address the Root Cause

Solutions to improve the outcomes have included:

  • Focus on in-state community colleges and transfer programs that cost less;
  • Look for a part-time job on campus to help defray costs;
  • Pursue available scholarships with vigor;
  • Build and stick to a budget;
  • Research future occupations before committing to a primary course of study;
  • Assess the return on investment of any potential career;
  • If currently in debt, consider refinancing options.

However, none of these possible solutions focus on the root cause of the problem.  There is a lack of planning for post-high school advanced training and education to help students identify a “best fit” career and the appropriate college (or advanced training opportunity) to help them prepare for that career. 

Personal financial wellness begins from the capacity to earn a living – making sustainable wages and setting aside a consistent portion of those wages towards future needs, wants, and wishes.  In turn, the capacity to earn a living depends on matching and integrating natural abilities, skills, interests, values, goals, family background, and personal style to reveal “best fit,” sustainable, and satisfying career opportunities.  Thus, it stands to reason that the best way to ensure long-term financial wellness and personal satisfaction is through a career development planning process that helps students identify, select, and secure best fit careers.  

Career Development Planning to Improve Financial Wellness

There is a need to study further the relationship between career development planning and subsequent post-high school educational and career success.  However, it stands to reason that the more aware young adults are of their natural abilities and other career-related parameters, the better they can plan for their post-high school education and maximize the educational and financial opportunities that best match their initial career goals.  In turn, career development planning not only lessens the need for student loan debt but hastens the subsequent launch of a successful and satisfying career path.  Finally, minimal student loan debt and a higher earnings capacity will lead to more opportunities to save and invest for long-term goals and achieving life-long financial wellness.

Taking on student loan debt losing those precious initial years to paying off debt and not saving and investing for other longer-term goals is devastating from a financial wellness standpoint.  Many people never catch up and are destined to a less than adequate nest egg.

A More Effective and Efficient Pathway to the Intersection of Happy & Wealthy

What can young adults learn about the process of planning for a successful and satisfying career that will ultimately lead to higher earning power and a brighter financial destiny?

Many young adults and their parents may be focusing on the wrong things–that being choosing a post-high school institution (predominately a college) based upon a “top-ranking” by reputation or third party “experts.” It would be more important to consider how the choice of education institution best fits the student’s ideal career development plan and what an appropriate return on investment may be.  Students typically focus on their interests, location, and extracurriculars, rather than what program and learning environment match what will enhance their career success.  

What’s wrong with this approach? Interests change throughout life, thus resulting in a need to adjust career plans. An initial career choice based mainly (or solely) on interests will typically lead to career “unrest,” dissatisfaction, frustration, and increased anxiety.  From a personal finance standpoint, it disrupts the individual’s earning power, resulting in less capacity to save and invest over time.  Those critical “early” years of accumulating wealth and allowing the magic of compounding to work are lost.  As for the desire to get into “top” institutions?  It may not be the “best fit” for the student based upon the student’s natural abilities, personal style, or learning abilities,  leading to changing majors and a higher potential for transfer or dropout.  

A better “pathway” emphasizes assessing young adults’ natural abilities as the foundation for the initial choice of a “best fit” career.  Natural abilities are those attributes and tendencies that a person is born with, can perform with relative ease, and often produces a high level of satisfaction.  Understanding one’s natural abilities and having the opportunity to use them in a career will likely lead to higher overall career success and happiness. 

Read more at CFP Pathways

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