Managing and Avoiding College Debt
This article teaches parents and students valuable lessons on how to control debt levels during the critical college years.
In today’s economy, the cost of college tuition, not to mention living expenses and books, is skyrocketing higher and higher.
And with all those costs, it is becoming more and more common for graduates to leave school with more than a diploma. They leave with tens of thousands of dollars in debt as well.
For many families, student loans are seen as an easy way to afford a college education. What they forget is that these students are committing themselves to monthly payments of up to $300 dollars depending on the level of debt. And it’s not uncommon for students of four-year state universities to graduate with $20,000 or $30,000 loans to pay off. The amounts are even higher for big-name private institutions and students who continue on to secondary education programs.
What does all this mean? About ten years of debt repayment. While the interest rates on student loans are very reasonable, you have to pay them off during the first ten years of your professional life, when your salary will likely be its lowest.
For graduates with four-year degrees, starting annual salaries are at best in the low $30s, and that’s for students with engineering or computer programming degrees with outstanding academic records. At worst, you may have to settle for salaries in the high teens or low $20s, and then that student loan really starts to pinch you financially.
There are ways to avoid the college debt problem. For starters, it’s not written in stone that you have to attend a four-year institution for four years. The stigma once attached to community colleges is pretty much gone as more and more good students attend them for financial reasons.
By attending community college and living at home, you will likely have time to work a part-time job. And with practically no bills, you can save much of the money you earn. Once you’ve earned a two-year degree, you transfer to the four-year school where you earn the rest of your degree, continuing to hold a part-time job and live off your savings from the previous two years.
Granted, this may not sound like as much fun as taking out the loans, going to the big campus, and not worrying about your finances. But you’ll save yourself a ton of money in the long run. And even if you just reduce the amount of money you borrow by 50 or 60 percent, you come out ahead in the long run.
Another fantastic way to attend college without debt is to join the National Guard Reserves. Under the GI Bill, the government pays for all of your tuition, plus a monthly stipend for expenses. In exchange, you have to commit to the National Guard for six years. For many students a six-year commitment to the National Guard sounds a lot better than a ten-year commitment to repaying a student loan.
It’s hard to communicate this point to college-age kids, whose top priority is simply getting out on their own and exercising their independence, but making a monthly payment on your student loan for ten years is a huge burden. It’s worth the effort it takes to avoid it.
