Re-Consider College Costs §
Suppose you're gonna borrow $100,000 over 4 years for college.
That's roughly $25,000 per year if you graduate in 4 years. Or if you borrow $20,000 per year and take 5 years to graduate, that'll also add up to $100,000.
Now, you've graduated and need to start paying your loan back.
If the interest rate was at 6 percent, you have to pay roughly $1100 per month to pay it off in 10 years. If you want to stretch the repayment out over 20 years, that's $716 per month.
If the interest were 9 percent, that's around $1266 per month for 10 years, or $900 per month for 20 years.
Considering when a college student first graduates, their pay will be low and they'll have rent, car payments, auto insurance, food, utilities, and other expenses (they'll probably want to eat out and have fun, too!)... How many do you think can afford to pay $700 to $1200 per month for the next 10 to 20 years on top of everything else?!?
While there are those who borrow $120,000 to $150,000, it's also reasonable to assume a student will borrow only $50,000 total because they have savings or work money or scholarships or parental help. Still, they're looking at payments in the range of $350 to $600 per month over the next 10 to 20 years.
The typical college graduate might start out at $20,000 to $40,000 per year before taxes. You can't file bankruptcy to get rid of it, and your wages can be garnished if you get sued over the loan. (College graduates used to file bankruptcy quite a lot - medical doctors were notorious for it - so they changed the laws so lenders wouldn't start charging even higher interest rates to make up for defaults.)
There are ways to re-think college costs, however. Especially if you don't have wealthy parents. (Note: Personally, I think one should not expect parents to go into debt to put children through college. If they're typical of many parents out there, they're likely already under a mountain of debt, and they've likely not saved enough for retirement or coming health issues. In this economy, just one lost job would be devastating to them.)
Ways To Work Around College Costs
1. Work a part-time job through high school and save up. Put work-earned money in a Roth IRA. Retirement account savings are NOT considered on the FAFSA (Federal Application For Student Aid), but you can take out your contributions anytime.
2. Work full time, school part time. Takes longer, but you will graduate with less debt. Some companies - especially state agencies and universities - provide tuition reimbursement as a benefit! There are also tax credits for education that can make part-time college painless to your wallet!
3. Work part time, school full time. Studies show students who work about 10 to 20 hours per week actually have higher GPAs - they learn how to organize their time.
4. Live at home during college, and for the first few years after college. Once you're out of college and working, pay your parents rent and help with expenses to show them respect and to help them along in their life so they won't be as much of a burden on you.
5. Go to a community college for the first 2 years. Your degree from a 4-year university will be the same.
6. Move to California and work for a year before applying to a community college. California residents pay about $20 per semester unit.
7. Go for a public university. They tend to be cheaper.
8. Watch out for grant money front-loading. Some private universities sometimes give incoming freshmen grants in the first year or so, but withdraw grant aid in the last years. It's called front-loading. By the time you're a junior or senior, you've got a vested interest in staying to keep your credits and the relationships you've built.
9. Work at other skills. Wait until you're 24. The financial aid forms count parental contributions even if your parents don't contribute.
10. Consider vocational training. You can get certified in good mechanical, technical, computer or health services fields and be working and making a living.
11. Apply for scholarships early. Gear up early in your study and grades and volunteerism.
12. Take Advanced Placement or honors classes and take and pass A.P. Exams. The exams are often the same cost as a college textbook, and if you take enough of the tests, you may quickly find yourself saving a whole semester off the cost of college!
13. Consider the military or public service. Members of the military typically get resident tuition rates and money for college. Public service like teaching via AmeriCorps can lead to loan forgiveness.
14. Re-consider college. Not all college graduates come out swinging with big salaries. Many with bachelor's degrees in the arts and humanities and social sciences don't make much more than people with vocational training - but the cost of college was the same for them as it was for accounting and engineering students. Remember, there are a lot of white collar office workers who have only high school degrees and they don't have student loan "mortgages" holding them back.