How to Get a College Education without Student Loans

Student loans have increased at a surprising rate.  Many universities have been too aggressive, in my opinion, in recruiting college students without the smallest effort in qualifying them as to their ability to pay for the degree, complete the program, or get a job afterwards.

Many graduates have so much debt they cannot even pay the interest charge!  We can criticize the student’s thinking and ask, “Wow, what were they thinking?”  We can examine closely the reasons why these students signed on the dotted line and took on more debt than their education could pay for.  We can take surveys about how many are able to get a job in their field of study, even though we know this will be a disaster. But all of these questions do not solve the problem. For example, I recently interviewed a young man after he received his second Master’s degree, asking him “where are you going to be employed?”  His response? He will get another degree because he cannot get a job right now and continued education will defer his loans three more years — he said he would worry about it then.

Sometimes parents step up and co-sign on loans, guaranteeing payment.  But this added burden at the time when many parents are preparing for retirement is not right.

Now that the problem has grown into a gigantic mess, we need to look for solutions.  One solution is to make higher education  accountable.  When a student defaults on a loan, the university would have to pay a portion of this debt — this might be a good incentive to make sure a student candidate is really qualified to attend a particular school.  My thinking is that colleges and universities are the ones that began this fiasco.

Another solution might be to file bankruptcy. I have examined how shutterstock_222388387 (640x427)a student might file bankruptcy and push this debt off.  It is extremely difficult.  Some students are successful when they file some kind of hardship.  If they can’t pay the interest and they can get a job and they can show they have sincerely tried, then some are finding relief.

But I think I have a better solution. After having coached hundreds of people over four decades I have a lot of experience with people and their spending habits.  If a new college student can see that they can easily get loans to pay for tuition and living expenses, and they have no personal money management habits, they are in trouble.  They will make poor financial decisions.  The solution is to create a solid spending plan that will be used during a student’s educational period, executed, say, over three or four years. This spending plan, if done correctly and tracked accordingly can help delay or in some cases, even eliminate the need to take on student loans.

In some cases, students may have to work and go to school in order to avoid getting into student debt. Some students work part-time and go to school full-time. Others do the opposite, working full-time while taking minimal credits. Okay, they might be in school longer, but like me they probably won’t have debt at graduation AND I gained valuable hands-on experience in accounting all while getting my finance and accounting degree.  I was in college taking accounting classes and applying what I was learning in my daily job activities. I found that my friends at the university were memorizing information to pass tests, but I was applying my new-found knowledge almost daily.  I am convinced that my 10 years of college study was better for me, than if I took all my classes in 4 years and was not applying my education to real-life situations.

I wish every new college student would build a spending plan and not be afraid to get a job, if needed, to make ends meet so that they could avoid having to borrow to go to school. I realize that in some university settings where academic pressure is high in order to keep scholarships, etc. this does not work. But in many community colleges and basic university settings getting a job (even a summer job to pay for tuition) does work and prevents unneeded borrowing. In addition, if parents want to help their children but cannot pay for an education out-right, it’s always a good idea to do a matching program of some kind, where for every dollar a kid saves, the parent puts another dollar in to the college savings fund. This can go a long way to avoiding student debt as well.

For more information on how to build a spending plan for your college student, call me: (801) 292-1099, ext. 2.