I recently came across the Student Loan Borrower Survey from LendEDU. LendEDU published it in January, 2016 after sending a team to various US colleges to find student loan borrowers. They interviewed 477 undergraduate and graduate students and concluded that current student loan borrowers know nothing about their student loans. Here are the five most disturbing results from the Student Loan Borrower Survey:
- 71.07 percent of students surveyed do not know the basic risks of a cosigner
- 72.95 percent of students surveyed thought Sallie Mae was a person, not a company
- 7.90 percent of students surveyed know their current interest rates
- 97.90 percent of students surveyed do not know which loans accumulate interest in-school or during deferment
- 6.10 percent of students surveyed know their repayment terms
The LendEDU team concluded, like many other researchers, that the key to understanding the mechanics of student loan debt is education and financial literacy. I’m all for education and financial literacy but I see a larger problem that is not being addressed. The real problem is that student loan debt is being rammed down America’s throat as the norm. We’re conditioned to believe that it’s perfectly fine to owe tens of thousands, or even hundreds of thousands of dollars for a college degree. Don’t believe the hype. The road to a college degree need not be paved with debt.
The phrases “student loan crisis” and the “rising cost of education” are clickbait these days. I really don’t understand how we’ve sunk this low. Paying $80,000 for a liberal arts degree is not a rational plan. Owing $150,000 for a law degree when so few jobs for lawyers are available is ludicrous. And many practicing lawyers are miserable. It’s sad.
The Good Old Days Are Gone
When I was growing up, a middle-class couple could scrimp and save, and send a child to college. News flash—those days are over. Mr. Groovy and I were part of the last generation that could honestly say college was affordable.
I entered Brooklyn College in 1976, just when its tuition-free policy ended. But tuition was minimal and I earned scholarships and qualified for the state’s Tuition Assistance Program. I worked part-time on campus for four years and lived at home. My parents covered my books and other living expenses. So I managed to get a bachelor’s degree without any student loan debt.
Mr. Groovy went to Buffalo University for his undergraduate degree in 1979. He doesn’t remember what tuition cost the first year—but he distinctly remembers that his last semester in 1984 (yes, he took the partying track for five years) cost five hundred and forty dollars! And that was for 16 credits. Mr. Groovy’s parents helped a little with tuition and living expenses and he worked part-time in a movie theater during the semester (and full-time during the summers). He also took out some student loans but the amount he borrowed was very minimal by today’s standards. For five years of undergraduate study, his student loans totaled less than $6,000.
Mr. Groovy and I grew up in an era when for the most part, each generation was able to do a bit better than their parents did. Not anymore. Nowadays, kids are coming out of college with debilitating debt. They start their adult lives with an anchor weighing them down. In a crazy way it’s a bit ironic—a new graduate is finally free from the rigors and the grind of attending school for sixteen consecutive years, but he can’t escape the debt. For some it takes another sixteen years to get out of debt. How many stories do we see about student loan debt holding back millennials from getting on with their lives. Enough already. Let’s stop the madness!
What Prospective College Students Can Do Today
With a little planning one can find ways to to go to college frugally. Here are five things you can do to get your degree with little or no debt:
Go to school locally
Living at home will save a lot of money on room and board.
Work and get scholarships
Many students still work their way through school even though the cost of college is now higher. They also take community college courses and then transfer to a more expensive university in their junior or senior year. Applying for scholarships and grants is another route to a college degree. Dave Ramsey even recommends applying for 1,000 scholarships. Brian at Debt Discipline points out resources for identifying and applying for the many niche or “weird” scholarships out there. Who knew there’s even one for redheads like me?
Consider a hitch in the military
Few things are more honorable than serving your country. And putting your life on the line for us entitles you to some very nice higher ed benefits. The current GI Bill, for instance, provides up to three years of tuition and fees for active duty service members and those who have been honorably discharged.
Become an Advanced Placement and CLEP junkie
Lila (Jaime) Donovan wrote a super post for our site about funding a college education the frugal way. She discusses Advanced Placement tests and the College Level Examination Program (CLEP) among many other frugal techniques. These tests allow you to get credit for classes in lieu of taking them. Ed Mills over at Millionaire Educator maps out a route to hack your way to a college degree in twelve months for $7,500. He illustrates how to fulfill two years of college credits for $1,280 in CLEP testing fees.
Start planning early
If you’re not convinced you can obtain a degree the frugal way then you surely need to understand the wide array of financial options available for funding a college education. In Radical Personal Finance episode 357, Brad Baldridge claims the average family spends more time planning a vacation than on planning for a college education. He discusses many ways to fund a college education strategically. Parents need to understand which income periods are used for the FAFSA application, for example. They’re likely to get a better aid package for their college bound student if they can defer income.
Friends, this entire issue of college loan debt would disappear if the government got out of the loan business. Schools would be forced to lower their prices. Sororities, fraternities, and state-of-the-art gym facilities on campuses would be a thing of the past. But that’s not going to happen.
Some parents will insist that the “college experience” and “finding oneself” are integral components of becoming an adult. They’ll work three jobs to pay for a child’s schooling and extra-curricular activities. Our friend’s son, for instance, was a member of the Texas Cowboys at UT Austin. His hat, boots and the rest of his cowboy outfit cost $2,500. Twenty-five hundred dollars! The only good thing about this story is that our friend could well afford this extravagance.
I’ll leave you with a few sobering statistics from the College Board Trends In College Pricing 2015.
“[T]he average published tuition and fee price of a full-time year at a public four-year institution is 40% higher, after adjusting for inflation, in 2015-16 than it was in 2005-06. The average published price is 29% higher in the public two-year sector and 26% higher in the private nonprofit four-year sector than a decade ago”.
I encourage you to do your homework if you’re planning on funding a college education. Check out Brad Baldridge’s blog at Taming The High Cost of College. Search Fastweb‘s powerful database for scholarships. Google “College Student Funding Resources + [name of school you’re interested in]”. You may be surprised by the results. But whatever you do—start early and plan!