Paying for college today can be stressful. Reading all the posts from parents on Facebook underscores the fact that college is expensive and parents are trying to pay for it without borrowing or graduating with massive student loan debt.
According to the Education Data Initiative:
Student loan debt in the United States totals $1.766 trillion.
Continue reading Avoid High Student Loan Debt with these Financial Strategies
It’s been in the news—Bernie Sanders has introduced a bill to cancel student loan debt. I don’t want to share any political viewpoints here. I want to express what this communicates to the past and future generations of students.
I have two children who incurred student loan debt. One of them worked hard to pay hers off. The other is still paying his. My daughter got good grades in high school, earned scholarships and borrowed wisely. After high school, my son entered the military and after completing four years of service used the G.I Bill to pay for some of his education. For the rest, he did not borrow wisely. He chose to attend an expensive college that he could not afford, and he will be the first to tell you he made a mistake.
But he won’t say his debt should be cancelled. And my daughter, who worked hard to pay hers off, will feel this is a slap in her face. They both had choices and have lived with those choices. No one forced either of them to go to a college that required them to take out student loans. It was their choice and they take responsibility for it.
Students who have worked hard to pay off their debt or made a choice to attend a college they could afford are outraged by the thought that others will not have to pay back their debt. It’s unfair and communicates the wrong message. Why should those who worked hard to pay their debt off have to pay for those who will not?
College is expensive and the cost of an education is rising every year. But teaching your children to make wise financial choices is a crucial part of parenting. Not every student needs to go to an expensive college. There are less expensive alternatives, colleges that allow students to work while they attend, and scholarships available to help pay for college.
Forgiving all student loan debt teaches future students that it’s not important to make wise financial choices. It teaches them that everyone deserves a free ride and hard work is not rewarded. We are raising a generation of new leaders that will soon forget that hard work and sacrifice reaps reward. Why work hard if you can get it for free? Why pay off the debt you incurred due to unwise financial choices if the government is going to step up and forgive it?
If I’m honest, I would love for my son’s student loans to be forgiven. But I know, as a parent, that is not the best for him, and he would agree; he borrowed the money and he should have to repay it. We must teach future generations there are consequences to actions and this includes incurring debt that you cannot repay. It simply comes down to the fact that we all have a free will and can choose to spend more than we can repay or save and borrow wisely. It’s something my parents taught me and because of wise financial choices, they paid for what they could afford and saved for what they could not.
At some point, everyone is responsible for their own choices. Those students who worked hard and paid for college without incurring debt should be rewarded. Those who incurred debt, should be held accountable and required to repay it. It’s a tough pill to swallow but a lesson we all need to learn in life.
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Rising college costs put the student loan debt at an all time high. Paying for college is one of the greatest challenges when it comes to securing a college education for your children. While it seems that getting accepted into a college is the biggest hurdle, once they have received the acceptance letter, you can stop worrying about that and start worrying about how to pay for it. With tuition costs rising every year (nearly 500 percent in the last 60 years), most families find it difficult to cover college expenses. Financial assistance from the college is available to a lucky few, as are private and federal grants and scholarships. However, the vast majority of students will end up taking out student loans in order to pay for their education.
Picking which loan to take out is key. A loan, regardless of what kind, is something that will need to be repaid—which means your children will be in debt before they even start working. So, before you start applying for any and all student loans, find out more about the reality of the debt management post-graduation. This infographic clearly lays out the past, present and future of student loans and consider how it would impact your children’s financial outlook.
Last night in the #CampusChat discussion we were talking about moving into college and what to pack. One participant stated she took her whole life with her to college because she never planned to move back home after college graduation; and to her credit she did not.
Most parents believe (or hope) that once their student goes off to college they will only be temporary visitors at home. We often talk about getting into college, but rarely discuss what happens after graduation. Unfortunately, in today’s economy, many students are forced to move back in with their parents after they graduate. For those boomerang students, the top two reasons are no job or job prospects and too many student loans exceeding their expected income.
These reasons alone make it important for parents to be involved in the financial decisions that their students make related to the college they choose and the loans they choose to incur while attending. Of course your student may WANT to go to an expensive private college, but can you, as a family, afford it? Is your student prepared for the ramifications of taking out massive student loans and not being able to repay them?
After the student returns home three scenarios usually play out.
Scenario One
Your student returns home and still can’t find a job with their college degree. After weeks of depression and frustration, they make the decision to attend graduate school. Since it’s expensive, they opt to take out graduate student loans to supplement the financial aid and provide living expenses. After they complete their graduate degree, they are able to gain employment and begin paying back their loans.
Scenario Two
Your student finds a minimum wage job, defers their student loans and still can’t find a job related to their college degree and major. They end up working in a field that is completely unrelated to their area of interest, in a job they do not like, and are still unable to pay back their student loans. They borrowed too much and will probably never crawl out of the hole they dug for themselves.
Scenario Three
Your student returns home, finds a minimum wage job, defers their student loans and saves every penny they make while living at home. They are able to begin paying back their student loans with their savings and continue the job hunt while working full time. Many times, those temporary jobs end up being avenues to find college degree employment either through networking or company advancement.
With scenario one, if your son or daughter opts to pursue the graduate degree path, it’s critical they do their homework, research interest and payback rates, and degrees that are worth their investment. If they don’t, they could end up as the student in the second scenario with too much debt and no job prospects.
Advise your student wisely about debt, college value, and degree prospects after graduation. It’s not just a decision on which school they “like”. It’s a decision that affects the rest of their life and could have overwhelming negative consequences. Parents are key role players in this decision. It’s our job to point out the possible ramifications of their decisions and allow them to have input. But (and this is is hard) if they won’t listen to reason, you might have to be a parent. I know because I had to take that role with my daughter and her college choice. I had to be the “bad guy” and kept her from attending her first choice college. Today she thanks me. At the time, she wasn’t very happy with me–but she fell in love with her second choice college and graduated with minimal debt.
Being a parent can be extremely hard; we have to balance guidance with “helicoptering” and know when to take a stand for the well-being of our kids. It’s a difficult job on the best of days and downright frustrating on the worst of them. Helping them with the college choice as it relates to financial consequences is one of those “take a stand” moments.
The Wall Street journal posted an article today, “Tough Times for Colleges–and College Towns”, about the tough times that colleges are facing.
The outlook isn’t good. Bain, which markets its consulting services to universities, and Sterling Partners, which invests in education companies, examined the balance sheets from 2006 to 2010 of schools in their report. They found many schools operating on the assumption that the more they build, spend and diversify the more they will prosper. They have become overleveraged, with long-term debt increasing at an average rate of about 12% a year and average annual interest expense growing at almost twice the rate of instruction-related expense.
Schools have been trying to plug the gap by jacking up tuition at rates that aren’t sustainable. The result is a fiscal hurdle that dozens of second- and third-tier public and private schools won’t be able to clear. Hundreds of schools—including some of the most prestigious institutions in the country—have tightened their belts.
It looks like the colleges are struggling, much like the students and families. Unfortunately, you know that the financial problems that colleges are experiencing will be passed along to the students by either tuition hikes or reductions in merit aid. That is not good for students and their families, especially the ones who make too much to quality for need-based aid.
What does that mean for this year’s crop of seniors? You better investigate the financial outlook of your college choices carefully and do some digging on their past merit-aid distributions over the last several years, especially if you are counting on that to pay for college.
Continue reading College Debt = Higher Tuition and less Merit Aid
Here’s an infographic outlining the Obama Plan to help student’s with their student loan debt. But is it enough? In my opinion, the only way to look toward the future is to educate our kids about debt and make wise college choices that allow them to graduate with little or no debt. It’s not a “new deal”…just a band-aid.
Created by: Online University
It’s been in the news lately and it came up in a #CollegeBound chat yesterday: graduating with too much student loan debt. I wanted to lend my voice to the topic today and give parents something to think about and use in the future.
As I have said previously, I have a unique perspective in the college admissions process. As a parent, I’ve experienced all the frustration first-hand: the decisions about choices, the dilemma over financing, and the anxiety related to waiting for the final decisions. Something I haven’t talked about is how to handle making the final college choice when the acceptance letters and financial aid packages arrive. This can make a difference in the amount of debt your child graduates with and how it affects their life after college. Especially if you are unable to contribute to financing that education.
Case in point: my daughter’s decision to attend her “plan B or 2nd choice” college. After being accepted to her 1st choice/reach school, we waited for the financial aid award to arrive. In the meantime, awards from the other colleges she had applied to filtered in. She was offered a full-ride scholarship at one school, 80% of her financial need was met at two of the other colleges with grants and scholarships, and some small grants and loans from the rest of her college choices. Her 1st choice college met 0% of her financial need. Her heart was broken.
Here is where parenting comes into play. She wanted to attend her 1st choice college–her heart was set on it. She had been dreaming of it her whole life and any other option was out of the question. But, in order to attend, it would require financing the expensive education with loans (student and parent). While every fiber in me wanted to say YES, my common sense knew it would be a financial disaster. I sat her down, explained why she couldn’t go to her dream college, and she listened (while crying, of course). It might have broken both our hearts at the time, but it was the BEST decision for her in the long run.
To make a long story short, she fell in love with her Plan B college. It was smaller and offered a much better environment for her academically and socially. Most importantly, the college WANTED HER; as evidenced by their willingness to give her financial aid. They valued her contribution to the student body and from the moment she set foot on campus, she felt wanted. But the real payoff came when she graduated with only a small amount of college debt, being able to easily pay back the consolidated loans. Had she attended her 1st choice college, she would have graduated with close to $100,000 in debt, burdening her for years.
The bottom line:
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