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University Student Debt, and How to Control It

Discussion in 'Off The Beaten Track' started by GarrAarghHrumph, Sep 15, 2010.

  1. GarrAarghHrumph

    GarrAarghHrumph I can kill you with my brain

    My undergraduate school is on the front page of Yahoo this morning, under the title, "Getting a Degree Debt Free". http://financiallyfit.yahoo.com/fin...llege-student-beat-tuition-costs?ywaad=ad0035

    A former student wrote a book about how he graduated without debt. He did some smart things - first, he went to community college by choice, to save money. Then he transferred into the best public university in his home state. He did some other things as well, such as working, etc. And apparently, he invested in local real estate (wow). I'm getting a copy of the book from my library so I can see how he managed that last one.

    I also graduated debt-free from this same school, but my method was a bit different. I was able to win a full tuition scholarship based on academics*, and in my sophomore year, I became an RA, so that my housing was free. I also worked.

    A friend of mine did it by joining the National Guard. Of course now days, Guard service means that you pretty much WILL be deployed overseas, so that did extend her time to her degree, but she got it. And she graduated with military experience on her resume, which helped her get her first job.

    Being able to pay for university now is a major, major issue for a lot of families, and I'm seeing more and more students graduate with student loan debt so huge that, in my calculations, they won't be able to pay it off, period. More and more students are proving me right on that one by defaulting on their student loans. I thought I'd ask if others had come up with clever or interesting ways to keep their university costs down, and limit their debt.

    *A lot of states offer such programs now. If you graduate in X percentage of your class, or score over X on your SATs, you can go to any public college, or community college in your state tuition-free.
  2. PDilemma

    PDilemma Well-Known Member

    I understand all of the reasons that it is becoming more difficult to pay for college, but I also think people are not managing money well or making the best choices about paying for school versus spending on other "necessities" may be part of the problem in some cases.

    My cousins decided that their amazingly talented son had to stay home and start at community college to save money. Because of scholarships he was offered at four year schools, their share would have been about $700 a month. They just absolutely couldn't afford that--but they pay nearly $500 a month so the whole family can have cell phones with unlimited internet, gps, etc...and they bought the same kid a nearly new car with payments of around $250 a month. Add into this that the kid has had a job for two years and spends every dime he makes himself on whatever he wants--he ordered his fourth iPod Touch from Apple this week. It seems to me that in this case, they could have lowered the phone plans to something cheaper, either not got the kid a car or got a cheaper one, and made him continue working and pay a share of the costs--and the kid could be at the four year school he wanted to be at.

    And I look at some of the families of the kids I taught in the last few years and am guessing that a lot of them could make other choices as well and be better able to pay for college. If your kid has a new Mustang and is on his second or third jet ski---I'm thinking you could have made some different choices and had an easier time funding his education.
  3. made_in_canada

    made_in_canada INTJ

    I don't understand the notion that it's the parents that need to pay for education. If parents are able and want to help out fine, but I would never assume that it's their responsibility. My parents haven't paid for a cent of my education and I'll probably come out of it with $10,000 to $15,000 in debt. That to me is manageable. I do work full time though in addition to going to school full time (barely) and I have pretty frugal living. It'll take me a bit longer to finish my degree but that's okay.

    My sister in law on the other hand paid for her school only by student loans and lived in res and didn't work at all while she was going to school. She has $40,000 in student loan debt from 2 years of school. She ended up dropping out so now is working in a daycare and trying to pay it off. She also wasn't in a program that was going to give her a large income if she had completed it. That to me was just stupid and now she's barely getting by because of her debt.
  4. UMBS Go Blue


    In 2006, Harvard upped the ante among Ivies and top research universities by awarding more financial assistance to undergraduates, so that students from lower-income backgrounds can graduate with little debt, if any:

  5. PDilemma

    PDilemma Well-Known Member

    I get your point, too. But when the parents are saying that they expected to pay or help pay and can't and, therefore, limit the kids' opportunities while spending a lot of money on things that are not necessary....sorry, I don't get that. And in the upper middle class world I was teaching in, I saw a lot of that. In the example of my cousin's kid, I'm thinking that with the scholarship he was offered, if they cut back on one thing (cell phones with all the bells and whistles for themselves and three kids would be the easiest thing to ditch, I would think) and made their kid pay half of his own expenses--no problem paying for the school he wanted. Instead, they keep their luxuries, he continues to spend his paycheck on luxuries instead of contributing to his own future, and his options for that future get limited. It's not a national crisis in that case. It's bad choices or mixed up priorities or whatever you want to call it.

    The other problem is that financial aid is determined with the assumption that parents will pay a share unless a student is over 24, married or has dependents. This makes it difficult for traditional students to have access to need based aid that is not from loans if their parents aren't helping.
  6. mpal2

    mpal2 Well-Known Member

    1. What Pdilemma said. I really think this is something that needs to change. Students who don't have parents helping really get shafted on this. OTOH I think this came about because there were too many taking advantage of aid when they were actually receiving parental help. It's a tough one to monitor.

    2. I expected my parents to pay for college because they expected me to go. I did help out by getting scholarships and limited amounts of student loans. But it all depends on the family.

    My BIL would have loved to have help from his family but they had the attitude that once he became 18 he was on his own. I highly disagree with this on so many levels. His parents are very warped and IMO not very supportive. I kind of put them in a category of people who shouldn't have had kids in the first place.
  7. made_in_canada

    made_in_canada INTJ

    ITA PDilemma, I was speaking more in general terms. Although in your example, if the kid wanted to go then he could definitely be more proactive in paying for it himself.
  8. nerdycool

    nerdycool Well-Known Member

    I don't know if this is what he did, but I see two options that would have been pretty manageable for a youngling with drive. One would be to buy a land lot or two and build a storage facility on it. They are becoming more in demand so there won't be a shortage of renters, aren't too expensive to build and they're pretty low-maintenance. A former co-worker owned some, and he says he pretty much just watches the money roll in, and has very little work associated with it.

    The other option would be to buy a small older house/rental unit and rent it out. There's more work associated with this, but if the building is in good repair, it could be manageable.

    As for me, I can't say I graduated without debt. In fact, I graduated with about $25,000 in debt. But it could have been a lot more had I chosen either of the first 2 schools I got accepted to. My first pick was an expensive private school, and though I got good grades in high school and was ultra involved in activities, I still didn't get any scholarships. Since the tuition was about $20,000 a year, and my parents weren't going to help, it got nixed right away. My decision came down to a good state school in Montana and a good small private college in North Dakota. The tuition for both was roughly the same... about $12,000 a year. And again, I didn't get any scholarships from the state school. But I did from the private school. So I went to the private college in North Dakota, and graduated in 4 years with less debt than I would have if I went to the state school, where it probably would have taken at least 5 years to graduate.
  9. genevieve

    genevieve drinky typo pbp, closet hugger Staff Member

    So you think the only students who should get financial aid are ones who are shouldering their entire education responsibility themselves?

    So you were one of the students taking financial aid while receiving family support?

    Not trying to be snarky, just trying to understand where you're coming from.
  10. PDilemma

    PDilemma Well-Known Member

    I think mpal was saying that for those who aren't getting parental help, it is too difficult to get adequate aid because the system assumes parental help and determines aid based on the parents' financial status. They end up with tons of loans, too often. I don't think the point was that those getting parental help should not qualify for any assistance.
  11. Aceon6

    Aceon6 Hit ball, find ball, hit it again.

    I had 80% aid my junior and senior years. Most of it was work study and loans. My mother worked a just above minimum wage job, but they still expected her to be able to pay the 20%. There was no way she could do that, so I was on my own scrounging for book money and other expenses. As I understand it, those rules have changed and folks making less than 400% of the poverty level are not expected to contribute any more.
  12. Veronika

    Veronika gold dust woman

    I came out of college with about $13,000 in debt. I worked through high school and went into college with about $5,000 in savings, and I actually came out of my freshman year with money left over. That changed when I transferred to a larger, more expensive (state) school.

    My parents could have paid for all of my education, but they chose not to. They paid tuition, part of books, and got me a computer and let me use an old car. The problem was, they did not have a realistic plan for me--they thought that I could earn $3,000 a summer if I worked full time. This was not possible (working a regular job and not working the pole), so I went into debt. (I did have a part-time job all through college, but that was so I could pay for rent and food.) I do blame my parents for poor planning, and they still try to say that it was my fault that I went into debt.

    The problem is that the cost of university has gone up exponentially since the late 1960s, and a lot of parents don't plan for that when they set up a college fund.
  13. Anita18

    Anita18 Well-Known Member

    I think most of it is getting your priorities straight and doing your research. For some people, it would be cheaper going to a good private school because there are so many now who give aid (even free tuition) to lower-income students. Many people assume that it's automatically $35,000/year when that's not true. You have to get all the packages together and compare them directly.

    And of course you also have to consider your job prospects afterwards. My sister works at a nonprofit doing work on student debt and she noted that the local art school (which is one of the best in the country) graduates students with the highest per-student debt in the state. Most of these kids will have a hard time paying it back, because being a designer or illustrator just doesn't pay very much. If I had unlimited funds, I'd go there in a heartbeat, but I don't have unlimited funds and feeling financially secure is more important to me.

    Right. The system certainly isn't perfect. Heck, some parents can even game the system if they know how to. My uncle makes A TON of dough (way more what my parents are making) and even he managed to get aid for his kids' private college educations, while my parents couldn't get aid for me. At least until my sister was also going to a private school and they were paying for both of us. :lol:

    I suspect it had to do with home prices - we live in CA so our houses are automatically worth 3x what his NJ house did.
  14. Erin

    Erin Well-Known Member

    My way of finishing school debt-free wasn't particularly creative, but I generally think that this solution is not rocket science - keep your expenses to a minimum, work part-time jobs during the year, and full-time during the summer, and keep your GPA high to qualify for scholarships. In my case, I had an academic scholarship that covered tuition, but I also lived with my parents, worked in a variety of jobs while I was in school (TA, coaching gymnastics, Staples), and generally didn't spend a lot of money. I was also fortunate enough to go to a school that had a Co-operative education program, where you could spend the last two years of your degree alternativing work terms in your field of study with school terms, so during my work terms I was making a reasonably decent salary working full-time and getting good work experience and contacts. Some could argue that I had it easy because of the scholarships, but I had to work pretty hard to keep those up and I can feel good that I didn't put my parents out to any expense aside from the incremental cost of living with them (food and a bit of extra electricity).
  15. jeffisjeff

    jeffisjeff Well-Known Member

    My personal experience is that the Ivies definitely are better at helping even middle class students avoid excessive debt than most other private universities. They offered me much more aid than other universities and a much lower % of that aid was in loans. Then, in my junior and senior year, I got an internal scholarship that shifted much of my loans to scholarship (without increasing the total aid provided). My grades were good, but not exceptional, and I never applied for the scholarship, so it seems that the university must have had quite a few of these kinds of scholarships to offer (it was alumni sponsored).
  16. genevieve

    genevieve drinky typo pbp, closet hugger Staff Member

    Thanks, that makes sense.
  17. KCC

    KCC Well-Known Member

    I used a combination of scholarships, work-study programs (I did everything from being a janitor to re-writing a lab book for a professor), and a enrolling in a co-op program. The co-op program alternated semesters of classes with semesters of a modestly-paid internship that gave me cash and good work experience at the same time.

    Even though I alternated work with school starting mid-way through my sophomore year, I graduated with my class in 4 years by taking heavy loads during each class semester. The alternating semester plan helped me with burn-out and the experience was critical when I was looking for a full time job. Came away with ~$4,000 dollars in debt, but it was at a really low interest rate and was quite manageable.

    When I related my story to my sister-in-law, she said that she would never allow her sons to be janitors. Instead, they work at Starbucks -- so much more prestigious, but they need a car to go to/from work. Her boys live in San Diego, where living expenses far outweigh tuition expenses.

    I do think that comparing one's debt level to an expected income level is a good exercise. (Why don't banks do this???) I encourage high school grads to design a budget for how they would like to live at age 25, and I help them to calculate student loan payments for $10K, $20K, and $30K loans, assuming a 10-year payback. We get their expected income level from the Bureau of Labor Statistics. It is eye-opening for many of them, because their budget for travel and entertainment usually goes away completely.
  18. reckless

    reckless Well-Known Member

    A number of schools outside the Ivies now have plans to cap student debt on graduation. My alma mater, Grinnell College, capped the student's loan amount at $2,000 per year (plus some students have to do work study equivalent to another $2,200 per year). So the max amount the students will graduate with is $8,000 in loans. On top of that, it has become tradition for alumni classes celebrating major reunion years to raise funds toward paying off student debt. Even before the debt cap was adopted, those gifts were wiping out the debt of 30-40 students each year, approximately 1/10 of the graduating class. The eventual goal is to have students graduating without any debt.

    Now, I should add that the cap is on "need-based" debt, which is determined by a formula that expects parental contribution for students of a certain age. Schools have to make those assumptions and stick to them because otherwise families that can afford to pay something toward school will claim they cannot, which will further deplete endowments that have suffered significantly from the economic downturn. I definitely understand and sympathize with the students whose parents refuse to pay, but I think those generally are the exception not the rule.

    "Need-based" debt also is used for the cap because it does not want to encourage families to take out extra loans because the school will pay them off.
  19. GarrAarghHrumph

    GarrAarghHrumph I can kill you with my brain

    In general, I advise students to take out in student loans only the amount equal to their expected first year of salary. Total. If they take out twice that, as I often see, IMO, they'll face significant amounts of trouble paying it off. If they take out more than twice their expected salary, I tell them I'd not be surprised if they went into default. And defaulting on student loans is extremely serious business.

    I've seen students from private schools like Drexel take out $100,000 in loans. Even a petroleum engineering student would have a hard time paying that off.
  20. Hannahclear

    Hannahclear Well-Known Member

    When I was a senior in high school, I had my heart set on going to a Boston-area university that was quite expensive and moderately selective. I got in, but did not receive enough financial aid.

    I got a full merit scholarship at my safety school, which my parents insisted I take.

    I HATED going to school there, but I got three semesters in for free. I then went to a state school for a semester before moving out of state to join an AmeriCorps program. The year I was there, I established residency in the new state and when the program was over, I applied to the state uni there. The AmeriCorps money paid for most of my junior year and my parents gave me the money for my senior year.

    Really, I made out quite well.

    Now that I have a baby, I'm thinking of college. What do you guys think of those 529 plans where you lock in today's prices? That's the way I'm leaning, but I'd be interested to know if anyone had experiences with them.
  21. Prancer

    Prancer Cursed for all time Staff Member

    Well, I don't know about that--seriously, I have no idea what the stats are on that--but I would be surprised if there weren't significant numbers of people who fall into that exception, mostly because I think there are a lot of parents who don't refuse to pay but can't pay, regardless of what the forms might say.

    Look at it this way--if those students who graduate with loans find the debt crippling, why wouldn't their parents find it the same if they were footing the bill? Yes, the parents are likely to be making more money than a new graduate. But a household that can fork over five figures, even low five figures, every year for tuition without hurting is pretty rare. Given the amount of debt and the lack of savings that the average household carries, putting a child through college can break the bank.

    Sorry, but I have little sympathy for him. If he really wanted to go to that college, then the onus is on him to make it happen. If he continues to spend his money on bigger and better iPods, then he doesn't want to go to that college enough.

    I'm in the camp that believes that parents don't owe kids college. If the kids want to go and the parents want to help, that's great. But if they don't, well, then it's time for their kids to grow up a little and take responsibility for themselves.

    Community college hasn't killed anyone yet; it's an opportunity. It's up to him to make the most of it, and if he doesn't, that won't be his parents fault for not sending him to the school he wants.

    Difficult, yes, but not necessarily impossible; one of my friends went to court and got herself emancipated from her hideous family for just that reason. And again, if you have the grades and you have the drive, you can get scholarships.
  22. rfisher

    rfisher Will you rise like a phoenix or be a burnt chicken

    If you work for a year or two and file your own income tax, your parents are out of the equation. I went to radiology school, worked and supported myself, then went back to school. I paid for every penny of my college education.
  23. PDilemma

    PDilemma Well-Known Member

    There are some additional circumstances going on with this that are not financial that make me feel a bit sorry for him. But that's another story entirely.
  24. Prancer

    Prancer Cursed for all time Staff Member

    That used to be the case, but isn't any more.
  25. jlai

    jlai Title-less

    I think this is the problem: parents don't have money because they're not saving for it.

    Which leads me to my rather unpopular conclusion: I found Americans in general don't set aside enough money for the most important things in life like retirement or college but dump much of their money on fixed assets (e.g. housing, cars, stuff in general). That leads to liquidity issues during tough times.
  26. numbers123

    numbers123 Well-Known Member

    I went to a state university for 2 semesters before attending a nursing diploma program. I had worked summers during high school and saved money for all my "fun" money and room and board for those 2 semesters.

    The I returned home to go to the diploma nursing program. Mom and Dad paid for the first semester there and from that time on, I paid for everything. I worked at many different jobs, mostly full time while going to school. Of course tutition was cheaper back then and as a nurse it was assumed I would have no problem getting a job. The year I graduated was a year of nursing overage and jobs were few.

    But they did pay for all four years of college for my brothers and sister. They had the means to do that. I would hope that if my parents didn't have those means, my sibs would have worked to pay their college degree themselves.
  27. rfisher

    rfisher Will you rise like a phoenix or be a burnt chicken

    Even if you don't live with them? If so, I'd declare emancipation. You'd probably be better off in the long run.

    My niece got married right out of high school. She had a full academic scholarship and her husband had worked for Wal-mart since he was 16. He was 21 when they got married. He sold all those stock options they gave employees rather than money, continued to work and not only paid all his college expenses but their living expenses as well. Between the two of them they put both of themselves through school, graduated with no debt, owned a house which made a nice profit when they sold it and moved to where they now live. It can be done if the student wants it to happen.
  28. jlai

    jlai Title-less

    My parents paid for my college. They lived very cheaply and paid through the nose for my school. I wasn't proud of it but I was a foreign student at that time and I couldn't work off campus or qualify for US government aid. That had a real impact on me and I felt kinda depressed about myself throughout college.

    After I graduated and got a job I supported my parents in return.
    Allen and (deleted member) like this.
  29. attyfan

    attyfan Well-Known Member

    IMO, this is an older problem than many think. Fifty years ago, for example, my dad (who worked in the aerospace industry) was banking his overtime so he could send my sister, my brother and myself all to college -- and we weren't even in kindergarten at the time. Many of his friends thought he was crazy ... especially for planning to send his daughters to college ... and they didn't save anywhere near as much. When I reached college age, the market had dropped out of aerospace, but the money was there for us. Many of dad's friends were not able to help their kids (sons as well as daughters) because they hadn't saved enough.
  30. mpal2

    mpal2 Well-Known Member

    :) PDilemma explained it. That's exactly what I meant.

    Just a further explanation to my original comment: my parents always assumed they would help for college just because it was so important to them that we go. They were both the 1st in their families to get college degrees. They did it on their own without help and they really wanted us to have an easier experience. College was always the expectation. My sister dropped out halfway through and she got a lot of crap from my parents until she went back. They did save up for it because it was always their goal for us. By the time we were old enough for college there was enough to get us mostly through an undergrad degree. We had to take out financial aid at the end.

    Another reason why I needed my parents help is that I didn't have a car for the 1st 3 years of college. My summer earnings didn't go to a car because that was my spending money for the entire school year (books, food, entertainment, etc). Maintaining my GPA for the scholarship money was worth more than I could make at an on-campus job so I did a lot of studying in place of working.

    I didn't start taking out financial aid loans until my senior year and grad school. I had a car and a job then so I stopped getting money from my parents for school. It really annoyed me that the financial aid system assumed parents helped students and based it on their income. I just don't see where that's necessarily in the best interest of the student.
    Last edited: Sep 16, 2010