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 TheMint.org, 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!