Each year, more than three million new students enroll in college in the United States alone. The most recent studies from the US Department of Education show that the average student graduates with over $20,000 in student loans after just four years. This represents more than $5,000 per year, per student. Over $15 billion in new student loans each year. It’s amazing.
CNBC recently published a brief titled “The Price of Admission – America’s College Debt Crisis” which addressed this issue as the next possible financial crisis for American students and their families. They showed several students who recently graduated and have over $50,000 in student loans and a couple with accumulated student loan debt of $250,000. If we continue to allow our students to accumulate these kinds of loans, even before they enter the labor market, the rate of bankruptcy and default will certainly skyrocket.
First part of the solution
Parents and students need to sit down before making their final decisions on which college to attend and actually look at those loan numbers and project them for the full four or five years of college. Then just place a simple amortization chart on the total balance for ten or fifteen years and show the student what to expect in terms of monthly payments. I think it could have a positive impact on their final decision.
High school guidance counselors and college admissions staff should also take a more realistic approach to advising students on their options. It’s fine to go to a private college at $40,000 a year if they offer great financial aid, but if it requires the family to take out loans of $10,000 to $15,000 each year, a less alternative expensive should perhaps be proposed.
I doubt college admissions staff would do this as it would hurt their enrollment. But high school counselors should meet with parents and students and ask if they can run these higher-cost schools or if they should focus on state and community colleges. I think students and parents are so caught up in the prestige of being accepted and attending our private institutions that they simply overlook, postpone or ignore the future financial reality.
Second part of the solution
If we are unable to achieve a satisfactory resolution to the first part above, we must take proactive steps to help our students and their parents maximize their financial aid. This includes learning what can be done to protect assets and income from college financial aid forms, thereby reducing the Expected Family Contribution (ECF). There are many options here, including life insurance, annuities, retirement plans, small business, and a variety of other resources, but families need to know what they are and what’s best for their families. individual needs.
Students should have a long-term scholarship research and application strategy to help with scholarships of $500 or $1,000 on an annual basis in an effort to reduce student loans even further. Resident assistant positions, on-campus work opportunities, and graduate assistant positions all help reduce debt.
Parents should also spearhead efforts to help their students find ways to reduce college costs and expenses. From textbooks and meal plans to off-campus housing and discounted recreation, money can be saved every semester.
With five of my own children, I learned a lot from them and saw firsthand how a little foresight and effort can cut those college loans down dramatically. Just think that if every student could reduce their student loan debt by just $5,000 during their four years of college, there would be $15 BILLION less in student loans each year after graduation. . I know it is unrealistic to expect every student and family to cooperate, but the fact remains that it is possible.
So if you know of any families with school-aged children, share this article with them and encourage them to start taking proactive steps in the right direction. By starting high school early, they can save thousands, if not tens of thousands, of dollars on the high cost of a college education.
I’ve also written a book that will help others learn from my successes (and mistakes) and guide them on the right path before the loans start piling up. Families can also download a FREE College Savings Kit by click here or by visiting my website listed below. Please help me help others and help our future leaders of America.