As you prepare to send your child off to college, the concept of student loans may make you cringe, and for good reason, too. Personal student loan debt in the U.S. is higher than credit card and auto debt combined.
Read that again. Alarming, right?
Now for another meaningful statistic: according to a WSJ article, the ability of young adults to save 20% for a down payment on a home varies drastically. For those with a college degree and student loans, it takes 10 years on average. College degree and no student loans? Just five years. Talk about a whopping five-year difference!
How to Avoid Student Loans
- Reduce the amount the student needs to pay. Scholarships and grants are still readily available for students who excel academically or through extracurricular activities. Keep options open by applying to schools that offer varying financial aid packages. Career prospects may be similar for students attending top tier and second tier schools. Also consider outside private scholarships. (For related reading, see: Not the Valedictorian? You Can Still Find a College Scholarship.)
- Get a job. There are so many benefits to working, especially during the undergrad years. For starters, your child can use the position as a resume builder. Students with a job history during college will have much better career prospects after graduation. Working also enhances time management skills.
- Employ creative strategies. As a parent, your natural inclination is to provide everything for your kids. Unfortunately, many of us are not in the financial position to pay 100%, particularly higher education costs. Please remember that you cannot jeopardize your financial future to pay for every financial need or want of your child. But you can offer help on creating a repayment plan before your son or daughter incurs student debt. Have a thoughtful discussion up-front about how much money you can provide each year, and let them know any shortfall is their responsibility. Spell out the terms, and draw a clear line on when your financial support will end. You’ve raised them this long…set them up for success, not failure. (For related reading, see: Paying for College: Why Parents Should Prioritize Retirement.)
A Personal Take on Paying for College
While these concepts are great in theory, it’s important to practice what you preach. Here’s a personal story related to student loans.
Frugality and a strong work ethic are a core part of my DNA. I started working at an early age and have always been a saver. Generally my parents had stable positions with good pay and we always lived within our means. They saved for retirement and even set aside college funds for my older sister and me. My parents had those necessary yet uncomfortable conversations with me about financing college and laid out clear expectations from the beginning. (For related reading, see: College Tuition: 8 Mistakes Parents Should Avoid.)
For me, going to an in-state public university was the least expensive option and my parents would have covered the full cost if I went this route. However, I yearned to get out of my hometown and wanted to attend a smaller private school. Fortunately, I was offered a scholarship worth about half the starting tuition cost. The scholarship plus my parents’ help meant I was on the hook for the rest, about $15,000 in student loans.
It took a lot of perseverance, but part-time work throughout college allowed me to pay off student loans while in school! I graduated with my undergrad degree debt-free and immediately entered the workforce full-time.
Even though your kids are older, you have more influence than you think. Sit down and have the tough conversations now because the decision to take on student loan debt does matter.
(For more from this author, see: 6 Ways to Make Sure You Achieve Your Financial Goals.)