Student loans can make it happen

16 Jan

Are you or your parents freaking out about the possibility of student loan debt?

The media have been having a field day the last few years with horror stories of students who are graduating with student loan debt  of $100,000 or more.

The over-sensationalism of this issue has actually had a negative effect on many of my students and parents over the last several years–to the point where they are determining to work first, THEN go to college with the projected savings.

There are several facts that students and parents should face in regard to post-secondary education, its benefits, and this student loan issue:

  1. Most students have some student loan debt leaving college. Nationally that figure is about 70 percent of college graduates. In California, the percentage is 55 percent — and the average loan debt is $21,382 (the average is about $18,000 for the California State University system–a good deal!). The cost of repayment for this amount will be about $200 per month — less than the cost of the average car payment, with that car depreciating by the moment.
  2. It is very difficult for a young person to save enough money to fund the cost of a college education, especially since college costs are increasing on a yearly basis. A minimum-wage job would have gross pay of $13,720 a year. Subtracting money for taxes, transportation, and living expenses, I have computed that it would probably take nine or more years to earn enough to pay for four years of college.
  3. Financial aid in the form of grants could decrease if the student works first. If a student qualifies for federal and state grants but chooses to work, access to those grant funds could completely disappear.
  4. When students work before going to college, they often are detracted from savings by the lure of a nice car or apartment and rack up debt that would make college challenging financially.
  5. A college graduate’s income will be significantly higher than a young person’s income who went directly into the work force.

Completely free rides are about nonexistent these days. Typically, the student is expected to commit to about $5,000 in student loan debt per year. That repayment plan will not be difficult with the post-college salary the graduate will earn.

Be wise about your college decision:

  • Lay out your financial aid offers side by side before deciding on your college.
  • Be diligent to submit every single scholarship application for which you are eligible.
  • Read the fine print on the colleges’ financial aid pages. Some schools will cancel out GRANT money if you get scholarships, while other schools will cancel out loans. This was the main reason my daughter chose UC Berkeley over UC Santa Barbara.
  • DO choose Work Study if you can get it–it won’t count as income against next year’s financial aid package and you won’t have to pay taxes on it. It’s like working for a grant.
  • Be careful not to incur other debt during college (live cheaply and don’t take on a car payment).

And go for the degree: it will pay off in the short and long term.

 

I’m super-excited that my book, 50 Life Lessons for Grads, will be out in April–a great gift for both high school and college graduates. Here’s a link for pre-orders:

https://www.amazon.com/Life-Lessons-Grads-Graduates-Succeeding/dp/1683970462/ref=sr_1_2?s=books&ie=UTF8&qid=1516145049&sr=1-2&keywords=50+life+lessons+for+grads

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