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Why College Loans Are a Joke…

Allow me to take you back in my life 45 years to see what it was like when I went to college.  Then I will overlay that with what I hear from my coaching clients all across the nation about paying for their children’s college educations.
When I was going to college, I worked full-time and went to school part-time.  I paid as I went. It took me 10 years to graduate.  I learned far more and far better than the other 4-year students I sat beside in class.  When I took an accounting class, I was able to use this newfound knowledge daily at my full-time job, not just to  pass a test in class.
Now I realize not everyone can work full-time and go to school for 10 years, but I recommend just about doing anything to stay in school including working full- or part-time, doing matching funds with your child, applying for scholarships, and so forth over EVER getting a student loan to go to college.
This is especially true in the early years when your child may not even
know what their major is going to be. Even more especially don’t get a college loan if the student cannot make enough money to pay it back within four years of graduation. Don’t start life in debt!!!! I am serious as I can be.  Loans are easy to get, but so hard to pay off, and federally insured loans are not dischargeable in a bankruptcy.
The huge problem I see happening over and over again is the lending institution knows they might have trouble collecting on a student loan so they get parents to sign as co-borrowers.  This is horrible for a parent approaching retirement to have this added worry on their backs. In addition, the lending institution knows it has NO RISK because of the federal guarantee!  You and your student are the ones taking all the risk.
Okay, now to overlay all my opinion on top of what I hear in my office constantly from coaching clients who think they are obligated to give their child a college education.  Parents, please stop heaping this pressure upon yourselves!  I know you’re getting stress as you listen to what all your friends are doing for their children.  You are listening to where the children of your friends are are going off to college and feel you have to compete.  Regardless of why parents feel they are responsible for their child’s education, it isn’t necessarily so, ChildHomeworkespecially if you cannot afford to pay for it! I certainly did not feel like this toward my own parents.  They always told me if I wanted a college education, it was my responsibility.  I have six siblings and of the seven of us, there are two associate degrees, five college graduates with one Master’s Degree.  All of us paid our own way.
Parents probably feel they need to provide college education for their child because of the higher earnings they will achieve over their lifetime.  They reason, “my child will have a better life style, or higher standard of living with a good college education.”  I agree with the logic, just not the method of paying to get it.  Help your child achieve a college education by providing a free place to live, or an automobile, or feed them every Sunday.  Do everything possible to assist them, except for paying for their education outright, if you cannot afford it, or by getting student loans.  Don’t let the pressure of, “Everyone else is getting a college loan” get to you. That may be true, because almost every student does borrow for tuition these days, but stop the madness and pay for it as you go.  Remember, if you will have no way to retire if you pay for your child’s education or get into further debt because of it, I urge you now to rethink your plans.  Here’s another way to look at it from a fellow Money Mastery blog writer: Are You Trading Your Retirement for Kids’ College Ed?.
 Some parents rationalize they can just keep earning and spending like they always have and still pay for their ADULT child’s education.  They don’t consider that their health might change.  They don’t contemplate their employment changing.  They have not yet had to take care of their aging parents with added time constraints.
I talk a lot about how emotional money is. Well, consider this scenario:

  1. A parent signs on their child’s college loan.
  2. But then parent loses their job.
  3. Then the student can’t earn enough money to pay the loan.
  4. Just then a younger sibling is starting college and there is no money for them.

Now you have set up a nice little scenario for resentment in the family… tension grows and relationships are strained for many years.  Is the college loan worth all this? 
Parents should help their child with education much earlier in life by teaching them to value education, to save for their own education, and by helping them build their character.  If the child refused to save when they made $25 cutting grass, what does this say about their values, about their character?  What kind of a student will they be?  If they don’t value money now, they will certainly not value any money you give them for an education later, and they will certainly not feel compelled to pay money back if you co-sign on a loan for them. Of course we all love our children, but sometimes the best way to show it is to teach them character and values when they are younger and then throw them out of the nest when the time is right and pray they fly! 
For more information about how to build a Spending Plan for your child that will help them prepare for college, visit Money Mastery today! Money Mastery Spending Plan and Sign Up Page.

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