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How to Avoid College Debt

By Dr. Kuni Beasley
Printed in Practical Homeschooling #106, 2012.

With good planning you can get a college education and avoid college loans.
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Dr. Kuni Beasley

Some months ago I was listening to a radio program where Dave Ramsey was talking to a housewife who had a huge college debt. This mom graduated from a Christian college and was seeking advice about her debt. Dave appeared to be flabbergasted at the size of the debt and questioned the wisdom of taking on debt to attend a Christian college (which costs more…a LOT more).
College debt is and will be the burden of the next generation and, perhaps, beyond, if students and families don’t start seeking some wisdom in this.
Magnitude of the Problem
Student debt currently exceeds $1 trillion. That is more than:
  • Total credit card debt in the US
  • Total automobile loans in the US
  • Total national debt of the nation of Canada
  • Twice the national debt of the failing nation of Greece
What does this look like in real life?
If you choose to take out loans for college, you need to figure the real costs are going to be about $25,000 per year for a state college and $50,000 per year for a private college. If you get a small scholarship ($10,000/year—private colleges do this a lot) and a Stafford Loan ($5,500/year), you will end up borrowing close to an additional $10,000 a year in “private loans” for a state college and $35,000 a year for a private college!
If you choose the latter, here is your financial future. Monthly payments on government loans start six to nine months after you stop attending college full-time, but interest on some of these loans is building while you are still going to college. Meanwhile, interest and repayment starts right away on private loans. Keep in mind that in the following chart, years 1–4 (or even 1–6) are while your student still is in college.
Figures were rounded off for simplicity and the estimates were conservative.
You just paid off a mortgage and have no house to show for it!
Vanity Colleges
There is a prevailing belief that where you go to college somehow determines your success in life, pre-positions you for medical or law school, or has some sort of mystical effect on job opportunities. I will just ask some simple questions to bring us down to reality:
  1. Do you have a family doctor?
  2. Do you have a family lawyer?
  3. Did you pick them based on where they went to college?
In the two most important professions where college education is the most important credential, the vast majority of people don’t even consider where these people went to college. Quite frankly, if it is not important when you choose your doctor, how important should it be to your student?
Virtually every college in the country will provide your student an academically sound undergraduate education. You need to understand this and so does your student.
However, some people are convinced that where you go to college makes a difference. The real difference was illustrated above, in the table of loan payments.
Obamacare & Your Loans
You probably didn’t know that the Federal Student Loan program was buried in the reconcilement version of the Obamacare bill, allowing it to be passed with a simple majority vote by senators and representatives, many of whom didn’t even know it was in there. What does this mean? All federally insured private lending ended. Now all federal student loans are made by the government.
It means that the interest will be paid to the government, ostensibly to help pay for Obamacare. It also means that the government can bring more power to bear to collect loans with the world’s largest collection agency, the IRS.
With interest from Student Loans seen as a means to fund Obamacare, expect student loans to be increased and pressure applied to colleges to make more and greater loans available to students, significantly increasing student debt.
Tips to Avoid College Debt
  1. Get sound advice. This means a professional, not someone who calls himself a “College Planner” whose solution is to buy an insurance policy, start a financial plan, or mortgage your house. A simple way to determine if they know what they are doing is to ask them to name the Ivy League colleges and the Service Academies. If they can’t rattle this off, they don’t know what they are doing. Also, your best friend’s next-door neighbor’s brother-in-law’s co-worker who drove by a college once is also not an expert. You’d be surprised how many people make million-dollar decisions based on something they heard from someone who knows barely more than they do.
  2. Have a college strategy—a REAL one, not just some random thoughts. You should have a strategy starting in the ninth grade that includes elements of accelerated graduation, college credit while in high school, College Board testing, and college selection. If your strategy does not include taking the SAT and ACT early and often, you might need to reconsider your plan.
  3. Don’t take any loans! In my opinion, there is no college in the country worth more than $15,000 out of pocket (or loans) a year, no matter how pretty the campus or how great the “environment.” There are ways to attend lower cost colleges, earn real scholarships, and avoid debt altogether if we just follow the simple principles in the Bible! (Luke 14:28). But that’s another article.
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