It’s Time to Take Another Look at Student Loans.

Think back on your life. What are your fondest memories? The birth of your children? Your wedding day? For some it might be the day you or someone close to you graduated from college. What a day. You put on your cap and gown, take pictures with your friends and teachers. Everyone is so proud of all that they have accomplished, the crowning end to a wonderful period in your life.

College graduates on average earn twice as much as high school graduates and over three times as much as high school drop outs. For generations higher education has been viewed as an essential step in achieving the American Dream and financial prosperity. Today many are wondering if this is still true or are things changing?

Tuitions seems to go up every year and more and more people are turning to student loans to finance their degrees. Over 65% of students pursuing a 4 year degree received some form of financial aid and the average student graduates with over $25,000 dollars in debt according to finaid.org. The belief was always that once the student graduated they would secure a good paying job that would allow them to repay such a large debt.

I think the time has come to reexamine this scenario. I have two co-workers who are recent college graduates and are each carrying 80,000 dollars in student loans. They pay over 800 dollars a month to satisfy these loans. Eight hundred dollars a month! That’s a mortgage payment for some people or an amazing car for others. This type of debt is going to seriously impede their ability to buy a home or start a family or a small business. Their case my appear extreme, but it is quickly becoming the norm.

As an example I chose, at random,  the University of Kansas. A year of tuition is around 25,000 dollars and another 10,000 for room and board. That’s 140k bill for a four year degree. If a student’s parents paid 40k and the student paid 20k from a part time job he or she will still emerge with 80,000 in debt. Four years at the University of Colorado can run 93k for four years, Brandeis University can run over 200k for four years. Before you or your child decides to take on all of this debt it might be time to ask yourself “Is this worth it?”

Do you want to enter the job market carrying 600, 800, 1600 dollars a month in debt? What will that do to you future? Will you still be able to get a job that can satisfy this debt and allow you to be financially independent? This is a decision that should require some serious consideration. While I am not suggesting that people stop going to college, here are some ideas to get those loans under control.

  1. Stay Home: Room and board can cost tens of thousands of dollars over four years. Sure going away is a huge part of the college experience. How much is it worth to you? Would you rather room at school and spend the rest of your twenties at home? Not as appealing when you think of it that way.
  2. Go to a Community College: Many states will give greatly reduced or even free community college educations to local students who achieve a certain GPA or class standing. Free. No student debt for the first two years. If you worked a job during this period you could even save up a nice chunk of change to pay towards the tuition of your four year degree.
  3. State Schools: The University of Texas at Austin cost state residents around 15k with room and board. Many state schools offer an excellent education at a fraction of the price of private universities. It’s the difference between graduating with 10k in debt or 80k in debt.
  4. Work: On campus jobs or waiting tables are excellent ways to subsidize your education. If you put 150 dollars a week of your earnings towards your schooling you would save over 7 thousand dollars a year, nearly 30,000 at the end of four years.
  5. Grants and Scholarships: I knew a few fellow students who found grants while they were in high school. A thousand dollars here five hundred there, it really adds up. These grants are out there you just have to find them.

Student loan debt was once thought of as “good” debt. I would argue that there is no such thing. Taking the steps to reduce the cost of college and shrink or eliminate those students loans can effect your quality or life and financial opportunities for decades. Something to consider before you pick your school.

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