WRAL SmartShopper

WRAL SmartShopper

Thursday thoughts: Gigantic college loan debt

Posted June 3, 2010

There was an interesting article in Tuesday's NY Times about students being buried in college loan debt. The main subject of the article is a 26 year old NY University grad with $97,000 (yes, you read that correctly) in student loan debt. To top it off, she earned an undergrad degree in religious and women's studies and she makes $22 per hour working for a photographer in San Francisco.  Now, if she had graduated with a medical or law degree with that kind of debt load, she might have a chance of paying it off during her lifetime while still enjoying a life. At this rate, she will work very very hard for a very very long time to unload her tremendous debt burden. As the article points out, federal bankruptcy law makes it quite difficult to simply get rid of the debt. Click HERE to read the article. I hope she finds Dave Ramsey's Financial Peace University soon!

If you have kids in college or will be sending them anytime in the near future, don't let your child be the subject of an article like this.  As the article clearly indicates, the schools and financial aid offices do not have your child's best financial interest in mind. They want to enroll students. The lenders waited too long after too much debt was accrued to cut her off and you can't depend on them to put on the brakes.Her mother even co-signed for some of the loans knowing the debt burden her daughter already had.

As parents, it is up to us to educate our kids about debt and the long term effect of taking out large student loans. As a former human resources manager, I have hired hundreds of people for jobs requiring college degrees (many in RTP and a number making over $100,000/yr). In nearly every case, a degree from a private college held no more advantage than one from a public university. Think very carefully before co-signing any loans or credit cards for your college age students and monitor their finances while in school. Yes, they are in college. That doesn't mean they are financially savvy enough to make these decisions on their own. You are still their parents and your responsibility does not end when you drop them off at State, UNC, Central, Duke, etc. Seriously - do you want them moving back in with you when they are 30 because they defaulted on $60,000 of student loans? Think about it.

Financial education starts at home, with you, the parents. Don't wait until it is too late. Check out the sites in the box above for more information and articles on teaching your kids about financial responsibility and paying for college without breaking your bank or theirs. I especially like, a personal finance literacy site with fantastic hands on tools to help teens understand how money works in the real world. It includes games and scenarios as well as helpful information for parents. I plan to go through the site with my oldest daughter this summer. She will be entering middle school in the fall and is fully capable of understanding these important concepts.

I'd love to hear your thoughts on this subject.  Please share your frugal ideas about paying for college or any thoughts on financial literacy for our young people. As I always say, it's your money - spend it wisely!


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  • Faye Prosser - Smart Shopper Jun 4, 2010

    Red Bird - I totally agree. Many savings gurus say the same thing (like Dave Ramsey). Although we will be helping the kids pay for college, we are definitely funding our retirement first. I still stress that early and thorough personal finance education is the key to keeping our kids out of deep college debt.

  • Red Bird Jun 4, 2010

    The best advice for parents is FUND YOUR RETIREMENT FIRST!! Your children can save, work, apply for scholarships and if necessary get student loans to pay for their education. You cannot borrow for your retirement and you will not be able to retire if you are saddled with the burden of repaying college education debt for your children. My oldest child worked her way through college,received some scholarship money and has college loan debt, but with a masters degree in a health profession, she is able to pay off her loans quickly, my middle child joined the military is funding is education while serving, my youngest attained an associates degree at a community college paying as she went by obtaining scholarships and working. She has now transferred to an in-state public university, debt free, working and using the savings she accumulated while in community college to pay her way.

  • Faye Prosser - Smart Shopper Jun 4, 2010

    Thanks for the info SomeRandomGuy. Congratulations to your daughter!

    DeM - Kudos to your daughter on negotiating a better price for the jeans. It never hurts to ask.

  • DeM Jun 4, 2010

    Financial responsibility is not seriously taught in schools, and really should begin when kids are quite young. It's very difficult to get a teenager to think about saving and conserving in an age prone to peer pressure and materialism - so it must start sooner.
    But I must add a plug for my daughter, 11. She bought a pair of jeans that she wanted for quite some time yesterday, and it was the last pair. She noticed that a belt that was supposed to come with them was missing. She asked me if I thought that she could get a discount on them. And I told her to ask - which she did - and she got them for half price! She was so proud of herself, that I imagine she's bragging at school about how she negotiated her bargain. Hopefully her frugality will stay with her. I can't imagine $97,000 in debt.

  • SomeRandomGuy Jun 3, 2010

    My daughter graduates HS next Friday-and to answer your question-NO they don't teach that.

  • Faye Prosser - Smart Shopper Jun 3, 2010

    Thanks to all of you for your comments.

    For those of you with high schoolers - do they even teach the basics of real world personal finance in school these days - checkbooks, bank accounts, savings, interest, rent, household budgeting, etc? Is it required (as it should be)?

    Sunnydaze - great ideas. I enjoy listening to Clark, as well. I met him when he was here last year at the DPAC. Very nice man.

  • sunnydaze Jun 3, 2010

    One way to save that one of our children did is to go to a community college for 2 years. The money-saving guru, Clark Howard recommended it on his radio program several years ago and we found it very helpful. He said he attended community college for one year and no one ever asks all the schools you've gone through, just which one your degree is from. Another way is what our other child did--to go into the military and get an education paid for. In his case, it's a very fast education in a very specific niche that he can work in for life, in or out of the military.

  • SaveEnergyMan Jun 3, 2010

    College is an investment and should be treated just like buying a house or taking out a big loan. If your future income is likely to be less than $40,000 per year, then a $1 million house is not in your future. Likewise with college. A $40,000 per year job does not require a degree from a college charging $40,000 per year tuition.

    High school counselers and college admission people apparently don't care about your future, just that you get into college and make that tuition payment.

  • SomeRandomGuy Jun 3, 2010

    She needs to find a cheaper place to live and start throwing as much money as she possibly can at the student loans. She also better not expect to see a federal tax refund for a very LONG time. With the amount she owes, she better also get ready for 15% of every paycheck to be gone due to garnishment.

  • readme Jun 3, 2010

    It's economics 101. It's too easy to borrow money for school, which makes it easier for colleges to charge more and keep prices high with no low-cost alternatives. College prices have increased at a faster pace than incomes, and that is why. Government subsidies don't help even if they are PC. Couple that with our society's new expectations that almost everyone get a college degree or you are a failure, even if you aren't really cut out for it or actually need it in your future job.