Lessons on How NOT to Pay for College June 2, 2010
Ian Welham on what happens when parents and students make college funding decisions based more on emotions than reason
Did you see Ron Lieber’s “Your Money” column in the New York Times on Saturday? If not, I’ve included a link to it below.
This is important for all parents of collegebound students to see. The article tells the tale of a recent New York University graduate who amassed $100,000 in student loans, and her struggle to make payments.
Mr. Leiber argues that the student loan system is following the same path as the mortgage crisis, and is on the verge of a similar meltdown.
What struck me was his estimate that 206,000 college students graduated with more than $40,000 in student loan debt in 2007-8 (the latest figures available). That’s a nine-fold increase over 1996 graduates. If we assume no percentage increase in the last two years, that means system has churned out 616,000 grads with enough debt to stunt their financial well being for years to come.
How is it possible that so many people find themselves in financial distress? The root cause is born of good intentions: parents willing to do whatever they can to get their kids into the best possible college—regardless of whether they can afford it or not. As Mr. Leiber points out, they are sentencing their children to decades of payments, stress, “limited capacity to buy a home and a debt burden that can repel potential life partners.”
Naturally, we all want the best for our kids. But when it comes to financing expensive college educations, it’s dangerous to make decisions based on emotion over reason. Nary a week goes by that I don’t meet a family setting themselves up for financial stress and strife. Their strategy to pay for college is, “we’ll just get some student loans and get by somehow.” There’s no thought to how the student loan debt will get paid back. They believe that somehow it’s all going to work out. This breaks my heart because as the article eloquently proves, it never does work out.
If you don’t want your student to be forced to run up crippling levels of debt and you’re open to a smarter way to pay for college, we can help. If you need help finding a top-notch college that won’t break the bank, we can show you colleges as good as any Ivy League school at 50% less cost.
Here’s the link to the article: http://www.nytimes.com/2010/05/29/yourmoney/student-loans/29money.html?src=me
