Thursday, May 7, 2015

Getting That Valuable College Degree While Avoiding Student Loans is a Great Plan for Those Approaching Adulthood

Properly preparing for and then attending college is a good thing. Graduating from college with a worthwhile degree is an even better thing. Having no debt or as little debt as possible upon graduation is a great thing.

Much of the debt students owe upon leaving college is avoidable. The student didn't have to enroll in an expensive out-of-town college, the student didn't have to withdraw prior to graduating, nor did the student have to not take college seriously, perform so poorly or choose a low paying field of study. Those were all choices and related to getting in position, sustained effort and developing the habit of improvement.

Most importantly, that student could have and should have known more about the financial hardships which can seriously and negatively impact the quality of adult life for those graduating with burdensome student loans outstanding.

Some valuable tips for students attending college are provided in Things They Wish They'd Known About Student Loans. Here's a sampling:

"The problem with a lot of the advice that teenagers and their families get about higher education debt is that it’s totally, utterly bloodless.

The federal Department of Education takes its shot in its role as the de facto provider of advice to people borrowing their first federal student loans and repaying them. That counseling is mandatory for borrowers, but because the topic is dense and the department’s content is devoid of anecdotes, it’s tough to make the lessons stick.

So in my column last week, I asked readers to share their own stories and offer the most important thing they wish they had known before they borrowed money and began to repay it. The comments painted a troubling picture of clueless teenagers, frazzled parents and college administrators who may not always take students by the shoulders and question their debt levels. . . .

THE CHECKUP The one complaint that I heard repeatedly was this one: Given the hopscotch manner in which students take on debt each year, loan by loan, it is much too easy to lose track of your running total. Shannon Doyle, a financial counselor with Lutheran Social Service in Minneapolis, says families often come into her office with no idea how much a student owes and with mistaken ideas about how parent loans can be combined with student loans after graduation.
She advises students and families to keep score on three pages of a spreadsheet that they update each term. The first one should have federal student loans, divided into subsidized ones (where the government covers the interest while the student is enrolled) and unsubsidized ones (where the interest accrues during school). The second page is for private loans, if any, from entities like Sallie Mae, and the third is for any loans the parents take out themselves. . . .

My conversations with Ms. Doyle ended with a plea of sorts to the schools: Please, do your best to provide a running total of debt on the financial aid statements you send out each year. “There should be no barriers to students knowing how much they have borrowed,” she said.

THE DAILY INTEREST Before Kim Liao’s enrollment at Georgetown, the story of her family had been one of downward mobility. Her father had died, the family had struggled and there was pressure on her to work part time as an undergraduate — not to pay her way but to send money home.

She considers herself lucky to have graduated with just $22,500 in student loan debt in 2006, but that didn’t sit well with her. What really flipped the switch in her head was when a phone representative at her loan servicer told her that she would be paying $2.23 in interest each day. “So you start out with zero dollars to your name, and you’re going negative by that amount every single day,” she said.

For people repaying their loans, it may be worthwhile to confront that figure when they make their daily spending decisions. “The calculators will tell you how much interest you’ll accrue over 10 or 20 or 30 years,” said Ms. Liao, who paid her debts off much faster than that and now works for the Federal Reserve. “But the fact that I was spending $2.23 each day without actually buying anything for myself resonated with me so much more.”

Summing Up

Worthwhile knowledge is essential.

Learning with an open mind about important and relevant matters is an essential element of acquiring worthwhile knowledge.

College degrees are helpful to an adult's job opportunities and standard of living.

Borrowing more than what is absolutely required to attend college and then unnecessarily delaying repaying what is borrowed can be harmful to an adult's standard of living.

Students and their families should take the time and make the effort to be prepared and forewarned about the perils of student loans and unnecessary accumulated debt levels.

It's not that hard to become knowledgeable about the perils associated with borrowing prior to taking on debilitating debt.
That's my take.

Thanks. Bob.

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