Article: To succeed after college, avoid taking out student loans

[Took]

I've always found it strange that so many people need student loans - or so much in loans. There are eighteen years between birth and college to save. The average student loan debt is $30k or so. That's about $1700 a year that you need to set aside to fund college.

Yes, for a lot of people, $1700 a year is impossible to come up with. But for a lot of people, it simply means making a few sacrifices. Driving a cheaper car. Taking fewer vacations. Skipping the new furniture for the living room. Going out to dinner less often. Saying "no" to expensive sports/dance/etc. And, of course the sacrifices of choosing a college you and your kid can afford - which might mean two years of community college and/or living at home.

It isn't like college costs should come as a surprise.

I agree. My parents were not rich, but between their saving some, my scholarship, and our family's somewhat frugal habits, I was able to go to a private college with NO loans or debt. I worked hard there and learned a great deal. I got a job right after college and worked for two years, saving a bit as I went along and living fairly cheaply. I did not buy a new car, have cable t.v., or spend money for new furniture, a fancy phone or computer, etc.

Then, I went to grad school on scholarship (partly earned because I got a very solid undergrad education which I took full advantage of), and I lived cheaply and within the stipend offered and took no student loans again.

I now have two advanced degrees and teach at a c.c. I earn a decent and very stable living with solid benefits. My reasonably frugal lifestyle while I was younger meant I had no debts to pay off and have a good life now.

Furthermore, I have all of the social and intellectual benefits of an excellent education and a mind ready to learn for the rest of my life.

BTW, my degrees are in English.

 

[disykat]

My parents have said that they would give up their Disney trips numerous times - I would NEVER take that money from them. .

I had to comment on this from a parent's perspective. They may really WANT to do that for you. Weird as it is, I am looking forward to paying as much of my kid's college expenses as possible.



I agree with those who are sort of amazed at the amount of loans people take out while still spending and not having the student work. While there are lots of people living month to month who really can't afford any extra, there are also lots of people out there simply choosing to spend their money on other things.

My sons have been mowing lawns since 12, plus will have several summers of employment in before heading to college. Summer employment and, depending on their course load, part -time work during the year, is a "given" for us. As for DH and I, we have money saved for them and also plan on paying our house off this year (way early) and diverting that money straight to tuition. We have chosen not to move to a larger/better house, vacation less, etc. specifically because we want our kids to have a college education with as few loans as possible. We have also expected our kids to save their money towards their college - no cars, trips to Europe, etc. for them! They both want to go to college and understand they have to make choices accordingly.

Despite being pretty prepared, we still anticipate sticker shock. However, I won't be out buying a new $30,000 vehicle and vacationing in Europe while complaining about how I'm going to come up with $$$ for my child's college expenses.

 

[DawnM]

That is difficult. The more I hear about how CA is doing, the less I am inclined to move back.

I am still not clear as to where your son could be going to school for the price you gave. Are you including room/board/tuition/living expenses? Or is he going to a private school?

Dawn

DawnM,

Yes, the CA state schools do have racial quotas. While I am sure those quotas are great for those that qualify, it lessens the chances for others to attend. Many of my son's classmates have started the community college route and they complain about how few class choices they have. While the costs are much cheaper, most of these kids are finding that it will take 3-4 years to get core courses in. Due to all of the budget cuts, many of the state schools have a waitlist for transfers.

 

[dawnball]

And are you clipping the "and go to a reasonably priced school" part of why it should be possible to pay for your child's education for a reason? Sure, if you go to a $50k a year school, its going to be rare to be able to afford that. Or go to grad school - again, as I said upthread.

Because my point is that it's impossible to predict what school is the best fit for my child in the future. I don't even know what state I'll be living in when she graduates high school, let alone how that school's public universities stack up for what her desired major is.

She might want to stay at home and do two years of community college, then go to a state school. She might want to be an aeronautical physicist, which would limit her options significantly. She might get massive merit grants, or she might not. For all I know - she'll decide that organized education is for the birds and become an inventor. Or study drama, music or dance and hope to make it on broadway.

I can't predict what she might do. I can save what seems like a reasonable pile of money for her education - and it might be way too much, or it might be not enough. But to say that it's unreasonable for people to be off by 30K on what they predicted college expenses would be (after schoolarships, grants, etc) in 18 years and that they should have put away just $1700 more each year?

It's nonsense.

Now, do I think that students should take on $100K worth of student loans without a realistic career plan/budget in mind? No. I don't think that they should take out $100 in loans without a plan, let alone $100,000 - I'm just not willing to judge people who chose to take out loans based on nothing more than the dollar value of their loans.

 

[DawnM]

I don't really think it is nonsense at all. It is an average, a predictor of sorts as a ballpark for parents' savings.

I don't know what state we will live in either, but I do know that I have 3 children and if they live at home and go to our local 4 year school, we can cover tuition. Anything beyond that they will most likely have to cover.

If they choose a school that is 54K a year because they are extremely bright AND qualified to pursue a dream of something more than I can offer, I would surely try to help them go. We do have options. I can go back to work, we can downsize our house (which actually we plan to do anyway), etc....

But a basic savings based on calculated averages is a good and solid start.

Dawn

Because my point is that it's impossible to predict what school is the best fit for my child in the future. I don't even know what state I'll be living in when she graduates high school, let alone how that school's public universities stack up for what her desired major is.

She might want to stay at home and do two years of community college, then go to a state school. She might want to be an aeronautical physicist, which would limit her options significantly. She might get massive merit grants, or she might not. For all I know - she'll decide that organized education is for the birds and become an inventor. Or study drama, music or dance and hope to make it on broadway.

I can't predict what she might do. I can save what seems like a reasonable pile of money for her education - and it might be way too much, or it might be not enough. But to say that it's unreasonable for people to be off by 30K on what they predicted college expenses would be (after schoolarships, grants, etc) in 18 years and that they should have put away just $1700 more each year?

It's nonsense.

Now, do I think that students should take on $100K worth of student loans without a realistic career plan/budget in mind? No. I don't think that they should take out $100 in loans without a plan, let alone $100,000 - I'm just not willing to judge people who chose to take out loans based on nothing more than the dollar value of their loans.

 

[crisi]

I think you are missing my point.

If you and your kid CHOOSE to go to an expensive college, fine. But there are affordable colleges out there and it isn't "preposterous" that someone could put their kid through a four year undergrad without loans. And if you (or your kid) chooses an expensive school for undergrad, I can't work up a lot of sympathy for your loan load. Nor can I work up a lot of sympathy for someone complaining about the expected family contribution on Monday, and then talking about buying a new $40k SUV on Wednesday.

 

[Colleen27]

I've always found it strange that so many people need student loans - or so much in loans. There are eighteen years between birth and college to save. The average student loan debt is $30k or so. That's about $1700 a year that you need to set aside to fund college.

Yes, for a lot of people, $1700 a year is impossible to come up with. But for a lot of people, it simply means making a few sacrifices. Driving a cheaper car. Taking fewer vacations. Skipping the new furniture for the living room. Going out to dinner less often. Saying "no" to expensive sports/dance/etc. And, of course the sacrifices of choosing a college you and your kid can afford - which might mean two years of community college and/or living at home.

It isn't like college costs should come as a surprise.

That 30K is the average debt, though, not the average cost of college. It isn't $1700/year that needs to be put away, it is $1700 MORE than is already being saved.

The average cost of a 4 year degree is coming up on 80K now. That's not such a simple thing to save, even over 18 years, particularly for those with more than one child.

 

[dawnball]

Interesting article. The theme is that student loans affect student's after-graduation lives more than they expect.

http://www.dailyfinance.com/story/t...g-out-student-loans/19454252/?ncid=webmaildl6

I'd be more impressed if the article weren't misleading about what its sources said. Or quoted the primary sources in the first place instead of poor quality secondary sources.

The 80.7% of students will graduate without a job as per the BLS? I'm not sure from reading his source article that was intended to be a BLS statistic. The BLS the source article links to doesn't even have that figure in it, and the article implies that the BLS doesn't track any such figure. I suspect based on the other numbers I've seen that it really means "80.7% of college seniors don't currently have a job" or something similar. Because most researchers won't count you as "employed" until your first day on the job. So you might have a job offer or a signed contract - but that doesn't make you employed. Certainly NACE is implying that news is better at http://www.naceweb.org/Research/Job_Outlook/2010/Job_Outlook_2010.aspx

The Nellie Mae study can be found here: http://www.nelliemae.org/library/nasls_2002.pdf

The Experience survey "of recent college grads" had 336 participants, only 148 of which were graduates. http://www.experience.com/corp/pres...annel_id=about_us&page_id=media_coverage_news

The Finaid numbers? They're accurate, but he fails to point out that the total average TOTAL debt load for those who pursue an advanced degree/professional degree is $47K. All kinds of useful information at http://www.finaid.org/loans/ - The numbers are actually much lower than I'd expected after reading the article posted here.


The College board revises lifetime earnings down? Cites a source that cites "what I found with google" that says NO SUCH THING.

It's a badly researched article that reflects the bias of the writer. Which isn't surprising since he's a Junior in college who's publishing a book on how to go to college without taking out any student loans.

Now, he's publishing a book, and its not via a vanity press, so I give him a lot of credit for doing that. I just hope that the research is higher quality than this. And I happen to fully agree with him that your eyes need to be wide open and you need to look at all possibilities before signing a loan of any amount, for any reason.

 

[MrsPete]

Find me an option for paying for medical school with no debt, then! I'd be forever grateful !

If you qualify, the military will pay for your medical school. And remember, you're giving the most extreme example; the vast majority of college students aren't medical students.

If it's a choice between a reasonable loan and not going to school, or not getting the degree you want, I think for most people it's better to take the loan.

Not really the point of the article. It's more like, go to college but look for less expensive alternatives.

My mom was a single mom without a college education; she wasn't excatly pulling in the big bucks. We never took vacations and rarely went out to eat . . . Should I have just not gone to college or opted for a different field because my family did not have the means to send me to school? That doesn't sound fair. It that was the case, how do families get lifted out of the cycle of poverty. For me, it was student loans or not going to school. I choose the loans and would do it again.

I came from a similar background (though mine was an alcoholic father who abandoned us/moved out of state to avoid paying child support and a mom who went back to college while I was in high school -- no income whatsoever in the family). How'd I get out of this cycle? Like you, education. But I didn't borrow. I worked (usually at multiple jobs, which prevented me from taking a full schedule at times), I was an RA (because it gave me a free room), and I lived frugally. These things, combined with a little financial aid and a couple small scholarships helped me get through.

Its 90% of my coworkers, too. They have boats and nice cars and go on vacations - the moment a bonus arrives they spend it redoing the kitchen or going to Vegas. Their kids play hockey and spent $5k a year on ice time and have iPhones - and they stand by the coffee maker with "I'm not sure where I'm supposed to come up with $10k that the college says is my contribution! That's so expensive. "

Except that we don't play hockey down here in the South, I could say the same thing.

I think you are missing my point.

If you and your kid CHOOSE to go to an expensive college, fine. But there are affordable colleges out there and it isn't "preposterous" that someone could put their kid through a four year undergrad without loans. And if you (or your kid) chooses an expensive school for undergrad, I can't work up a lot of sympathy for your loan load. Nor can I work up a lot of sympathy for someone complaining about the expected family contribution on Monday, and then talking about buying a new $40k SUV on Wednesday.

Crisi, I always seem to agree with you! You and I have the same theme here: College doesn't have to be so expensive that you must take out loans. Options exist, but you must make the right choices to make that happen. That's also the theme of the article -- which, judging from the responses, I don't think most people read.

 

[undertheradar]

That is difficult. The more I hear about how CA is doing, the less I am inclined to move back.

I am still not clear as to where your son could be going to school for the price you gave. Are you including room/board/tuition/living expenses? Or is he going to a private school?

Dawn

Yes, he attends a private lutheran school. His cost is as a commuter student, he lives at home. The cost is just tuition. His books this year wear $2100 for 2semesters.
When folks are addressing applying to state schools, there is an individual application fee for each campus within the state school system. This also controls how many schools we applied to, as lower income students apply for free.

 

[crisi]

That 30K is the average debt, though, not the average cost of college. It isn't $1700/year that needs to be put away, it is $1700 MORE than is already being saved.

The average cost of a 4 year degree is coming up on 80K now. That's not such a simple thing to save, even over 18 years, particularly for those with more than one child.

You are right Colleen, but it still isn't 'preposterous' that anyone could do it - given a reasonably priced school (not a $50k a year school), a reasonable income (not a single mother) and saving starting when your child is born. I know plenty of people with two car payments each more than $300.

$80k is only $300 month. Pricey, yeah. But think about how long it would take to pay off $80k on the other end. And that's the issue in the article. If its hard to pay for upfront, its an onerous cost for someone right out of school.

 

[MrsPete]

When folks are addressing applying to state schools, there is an individual application fee for each campus within the state school system. This also controls how many schools we applied to, as lower income students apply for free.

I think the application fees are out of control! It's $70 to apply to some of our state schools! What could possibly justify that cost? They have to be using it to build a new parking deck.

It's not all that easy to qualify for free application fees, and the number of fee waivers one student can receive is limited. This program is administered through the high school guidance office (not from the individual colleges), so it's not like students can go to this school and that school without someone knowing that they're applying EVERYWHERE.

At school last fall we had a one-week "event" in which ANY STUDENT, REGARDLESS OF INCOME could apply to many state schools FOR FREE. The event was very poorly attended, which makes me think that application fees must not be a very big deal for many people. I'm hoping they keep -- and hopefully enlarge -- this program 'til my sophomore daughter is ready to apply. I'd definitely take advantage of it and have her use it! The savings might only equal 1-2 textbooks, but that's 1-2 textbooks!

 

[dawnball]

That 30K figure comes from http://advocacy.collegeboard.org/sites/default/files/Trends-Who-Borrows-Most-Brief.pdf - which is a digest of http://nces.ed.gov/pubs2009/2009166.pdf


Yes, it's nonsense to infer from those figures that parents should be saving 30K for their children's education. Or even 30K MORE than they were already saving. I'm not saying at all that people shouldn't be saving for their children's college education or how much they should be saving. That's a complex question and one answer does not fit all.

But saying that 17% of people who go to college have to take out 30K in loans, so we should all save 30K more - simply doesn't make sense. It's even not an average amount of indebtedness. It's the 25th percentile of those who took out loans. You may as well pick the 90th percentile of those with 4 year degrees ($44,500) or the total cost of some exorbitantly expensive private school like I did. It's not a number that can meaningfully be applied to the population as a whole for a savings target.

The meaningful application is "Think about how much money you're committing yourself to repaying, and how you might go about doing that."

I don't really think it is nonsense at all. It is an average, a predictor of sorts as a ballpark for parents' savings.

I don't know what state we will live in either, but I do know that I have 3 children and if they live at home and go to our local 4 year school, we can cover tuition. Anything beyond that they will most likely have to cover.

If they choose a school that is 54K a year because they are extremely bright AND qualified to pursue a dream of something more than I can offer, I would surely try to help them go. We do have options. I can go back to work, we can downsize our house (which actually we plan to do anyway), etc....

But a basic savings based on calculated averages is a good and solid start.

This may be the base of our disagreement. 30K has absolutely nothing to do with average parent contributions or average post-college indebtedness. Or average post-college PARENT indebtedness, which NONE of these studies track.

 

[MrsPete]

Yes, it's nonsense to infer from those figures that parents should be saving 30K for their children's education. Or even 30K MORE than they were already saving. I'm not saying at all that people shouldn't be saving for their children's college education or how much they should be saving. That's a complex question and one answer does not fit all.

If we accept that students seem to need 30K more for their education -- and for the purposes of this particular post, I'm just accepting that as a fact, which may or may not be true -- I don't know that I'd say, "Parents should save this much more."

Instead, I'd say make a couple frugal choices, and you'd have the $30,000:

- Choose a less expensive college
- Live at home, or at least in a dorm instead of an apartment
- Work -- so many parents post about their trouble paying for college, and the student working is usually not mentioned at all.
- Students can skip luxuries like spring break trips -- really, HOW do college students take cruises, go to Disney, etc? Meals out, etc. are also luxuries.

With a couple frugal choices -- well, a couple of the right frugal choices -- that $7500/year will be saved, and the loan can be avoided.

 

[dawnball]

If we accept that students seem to need 30K more for their education -- and for the purposes of this particular post, I'm just accepting that as a fact, which may or may not be true -- I don't know that I'd say, "Parents should save this much more."

Instead, I'd say make a couple frugal choices, and you'd have the $30,000:

- Choose a less expensive college
- Live at home, or at least in a dorm instead of an apartment
- Work -- so many parents post about their trouble paying for college, and the student working is usually not mentioned at all.
- Students can skip luxuries like spring break trips -- really, HOW do college students take cruises, go to Disney, etc? Meals out, etc. are also luxuries.

With a couple frugal choices -- well, a couple of the right frugal choices -- that $7500/year will be saved, and the loan can be avoided.

I'd say that those are all excellent cost-cutting strategies that should be considered. Also, if you're going to go to the $$ private school, you can frequently pick up gen-eds or free electives at the local community college (near school or at home during summer break).

Looking for in-major job opportunities that aren't on campus can also be a good way to make money. It's easy to not look past the work-study office, but in many majors - paid interships can be found with a little effort. They're also an excellent way to have -real- references when you graduate which should increase your earnings potential.

Make every class count - do you have enough free electives to get a minor in something you're interested in? Or that broadens your employment opportunities? An art major with a journalism minor, for example, is usually more employable than one without.

College is a big committment. 80K or 200K - it's probably the biggest thing that student has ever purchased, and its important that people in their lives (parents and otherwise) help them make a choice they're happy with for longer than it takes to get the diploma.

 

[chicagodisneyfan]

The above would be terrible!

I went to my dream school (would never have gone to community college), had the whole college experience, traveled through Europe, did not work (my parents believed my studying was my job), went on spring break etc.

The friends and contacts I made my freshman year have gone on to help me later in life - to sacrifice that to save a few bucks at a community college would have been to shoot myself in the foot.

My parents paid $60,000 for my college education, I had about $10,000 in loans. Well worth it!

 

[crisi]

And given that your parents could afford $60k - I'd agree. I did the whole college experience (for a lot cheaper - I'm older and went to a state school) with the backpacking through Europe and the dorm (I did work through the last three years of school) and it was great. My Dad picked up most of it, I had a scholarship for my last year. I hope to be able to do the same for my kids. But had I gotten out of school with $40k in debt like my husband did, I'd be in a very different place in life right now. I'm not sure that the whole thing would have been worth delaying a home or marriage or kids.

 

[MrsPete]

And given that your parents could afford $60k - I'd agree. I did the whole college experience (for a lot cheaper - I'm older and went to a state school) with the backpacking through Europe and the dorm (I did work through the last three years of school) and it was great. My Dad picked up most of it, I had a scholarship for my last year. I hope to be able to do the same for my kids. But had I gotten out of school with $40k in debt like my husband did, I'd be in a very different place in life right now. I'm not sure that the whole thing would have been worth delaying a home or marriage or kids.

Again, I agree with Crisi. If you can afford "the whole college experience", WONDERFUL. But is it worth borrowing against your future? Is it worth delaying marriage? Home ownership? Motherhood?

How does that old saying go? The one about how you must cut your coat from the cloth you have?

 

[MAH4546]

[*]Be careful with picking a major. This is not to say that your major solely determines your career path, but if you spend 4 years getting a liberal arts degree without intending to go right to grad school, then you are in for a rude awakening when you enter the job market. I have several friends that picked a major because they were "interested in it" without looking at the earning potential. It is important to be happy in your career, but you also need to pay the bills.

That entirely depends on the school. An English major at the University of Chicago is going to get a job at a Wall Street firm will before, say, a finance major at the University of Indiana.

As somebody who has been on hiring committees were I've worked, we don't care what you majored in, we care how prestigious your degree is. Harsh reality, but that's life.

 

[DawnM]

Again, this depends greatly on WHAT you want to do when you get out.

DH went to a very good school because it was necessary. I went to a private school (not prestigious) and it really didn't matter as I went into a field that did not require a certain school.

Dawn

That entirely depends on the school. An English major at the University of Chicago is going to get a job at a Wall Street firm will before, say, a finance major at the University of Indiana.

As somebody who has been on hiring committees were I've worked, we don't care what you majored in, we care how prestigious your degree is. Harsh reality, but that's life.