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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.
Final Thoughts
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!
I am so glad my young relative is starting out in community college – especially since he is a little directionless just yet. I don’t want him up to his neck in debt, like I am. I’m grateful for my good income, but it is still hard.
When I was younger a 4 year degree was for many a directionless youth. It just didn’t cost as much. Also, community college back then had more of a stigma, at least in my community. But now so many of them are technical and geared towards licenses. Not too long ago I read about this great opportunity at a technical/trade school. They were offering very generous scholarships. I know the work involved heights – I think it was for electrical line-men (and women). Many of the labor markets with aging, about-to-retire workers, will be in need of skilled workers.
My wife went to SUNY Buffalo and I went to SUNY Stony Brook. State Universities are still relatively affordable these days. While I still think a college degree has a lot of value…you have to take into account the costs. You can’t just go into it blindly and hope for the best. Those student loans many are facing these days are scary. It’s like a mortgage.
In some states the State Universities are a good deal. But that’s relatively speaking. It’s still hard to graduate with no debt unless you get scholarships. I think a degree has a lot of value if you pick the right one.
Let’s compare my brother in law with my sister. My sister felt the need to go to a “more-prestigious” graduate school, despite scholarships to another school. My BIL used to military to pay for undergraduate and graduate school at an excellent, private college. My sisters has hundreds of thousands of dollars in student loans – and she hasn’t worked in a couple of years (good thing she got that “better” degree). My BIL has sizeable investments, he probably could retire now, but is staying in the military for a few more years to earn a better pension.
You can bet that I will be using these real life examples to teach my children about their options. My hope is that they will be smart about maximizing the benefits of college, while minimizing the costs.
I have been asked about how our “plan” accounts for the children’s college. As of right now, we’re not saving towards their future education. We have discussed helping them a bit with expenses, but believe that they will make more of the experience if it’s not fully funded by mom and dad. We want them to save up beforehand and work part-time during college.
I see how that better degree came in handy for your sister. Your BiL is doing it the right way.
Good for you in how you’re dealing with your children’s education. If they have to rely on their own resources they’ll want to make their money go farther. You certainly do have some appropriate examples as learning tools. It’s a shame about your sister, though.
I went to college in 1988 and my parents helped me cash flowed my education. I had under $5k in loans which I quickly repaid.
It’s still possible today, but it starts with research and education.
Going through the process with my twins (redheads we’ll be applying for that scholarship) high school teach the process of applying for college admission and aid, but not the details about cost and return on invest, possible jobs after graduation potential salary etc.
These need to be included in the discussion. We can have teenagers be making financial decision based on the food court or prettiness of the campus.
I forgot you had redheaded twins. Are they rambunctious? I had to develop a tough skin with all those comments about my red hair (and freckles).
Good luck with the process. Teenagers are not too young to learn about the cost of education and potential ROI, but I don’t think that’s ever going to be on the high school curriculum. Making them part of the discussion is helpful for them and you.
It’s a scary place the world is turning into – when education comes at a high price, this isn’t a sustainable path and it’s really scary to think even those stats in the last decade… what will it be in 10, 20, 30 years from now?
One of my sisters is about to graduate high school and head off to university. In Australia things are getting ridiculous too, she said she is looking at $40k for her bachelor degree (not including books and all that fun stuff). Our government has a system called “hex” though which means they paid for your uni and then once your income hits $55k you pay the government back through higher taxes. At least that’s a slightly better arrangement.. but there are rumours that the government is going to de-regulate the university fees, that would be a true atrocity for every young person for the rest of time.
Jasmin
Jasmin that sounds quite complicated. I wonder if people intentionally keep their income under $55K – especially if they’re in line for a job or a promotion that would pay only a little bit more. I wish your sister luck – I hope she’s studying something rock-solid where she’ll be able to use her degree.
Going to school in the UK, I now have a healthy appreciation for what I had then. So fortunate to come out with no debt and a really good education. Although even in the UK today, the times they are a changin.
We are saving hard for our kids and their education. This post serves to remind us that we have a lot of work to do to help them with options. It is clearly not easy but that’s also a reminder to dig in and do everything we can to help their journey.
You date yourself with “the times they are a changin”. I love it. So true.
It’s admirable that you’re doing everything you can to help your children. I often wonder if I’d be able to stand by my own convictions if I had a child. It’ easier to say, not having children, that I would not co-sign a loan or do anything to endanger my retirement for the sake of putting my kid through school. And I’m not implying that you’re putting yourself at risk at all – but I see so many parents doing that. Don’t they (and their children) realize it will be worse down the road, when the kid have to take care of mom and dad?
Yeah, it’s important to have checks and balances ( forgive the pun) in place to mange what we will fund and won’t fund. All part of the plan. We keep these funds separate from our overall planning when it comes to portfolio withdrawal rate.
If our kids needs to carry a small loan to supplement what we provide in funds, then that is fine. And to a certain extent, I am hoping they can learn about debt management through that process.
The statistics up top are frightening for sure, our education system is failing on the personal finance topic long before college.
Going into college assuming you will find a high paying job and be able to easily pay off your debt is a tough trap to overturn – as you mention in your post, it is ingrained in peoples thought process from parents and guidance counselors to the future students.
I made a TON of mistakes getting my degrees, and am still paying for them to this day. Looking back, I am ultimately responsible, but was not setup to make a good decision
We have a family member who has stopped/started college multiple times and still hasn’t finished his associate’s degree. He’s is being encouraged by his close relatives to at least finish the associates’s. I think that’s a mistake. If 4-5 years have gone by and you still don’t have a 2-year degree (that’s not worth much more than a high school degree), give it up for now. He has full time work experience and he’s a good, hard worker. He’s smart and he’s not lazy. I just don’t think he’s cut out for school right now. If he continued to work maybe he’d find something that would motivate him to go back to school, maybe not. But he’s not my kid and no one agrees with my opinion so I keep my mouth shut. So not only will he have student loan debt, he’ll be an older young adult, with very little work history and a mostly useless degree (if he finishes).
Unfortunately, there are no easy answers for lowering the cost of post-secondary education. There are multiple cons, and likely unintended consequences, for every suggestion I’ve seen/heard bandied about.
I’ve long believed people should give more thought to military service. Tuition assistance while on active duty, the Montgomery GI Bill/Post-9/11 Bill, access to free CLEP exams, etc. make it very appealing. Plus, individuals get a chance to serve their country, learn a skill, and apply that skill in real world situations.
I agree with you about opportunities from military service. Imagining myself as a mother, though, I’m sure I’d have difficulty steering my child in that direction. But I certainly would encourage it if the desire came from my child. It’s a tough, tough world out there for youngsters these days. As you said, there are no easy answers. Thanks for your input, James.
Those are some truly disturbing statistics! While it isn’t easy, there are lots of ways to reduce or eliminate student debt, as you mention, but teens and their parents really need to invest the time in planning for college rather than assume a heavy load of student debt is what’s required.
That comment from the podcast with Brad Baldridge sticks with me, about most families spending more time on planning a vacation than they do on planning for a degree. One benefit of getting older is not having to deal with this but I sure have empathy for anyone trying to figure out a way to get a degree without becoming financially incapacitated.
One innovative approach: get a job with the University! Our daughter (21 yrs old) just got accepted on the University Police Dept. As a University employee, she now gets free tuition! We realize we’re lucky – the student debt problem really has gotten completely out of control. If I had to do it today, I’d go to Community College for 2 years, then jump to “full cost” University. Thanks for another great article.
That’s great for your daughter, Fritz. Congratulations! I assume that’s a full time position?
I’m totally with you on the community college start. Another avenue I didn’t mention is employee tuition assistance which many corporations offer. Usually you have to pay the costs up front and then get reimbursed because you’ll be required to get decent grades. But some employers are very lenient about the subject – if it’s remotely helpful to your job, they’ll cover it.
Reading this, I do feel lucky to pay a lot of taxes on my salary. It makes most people graduate without debt (or little debt, like my wife did)
The downside is that there are less opportunities to save really a lot starting from your gross salary.
Free education isn’t really free when someone is being taxed to cover it. I’m glad that your wife got to benefit from it. There must be many who are heavily taxed and have nothing to show for it.
I agree the going rate for schools is getting ridiculous, and even more so for “out of state” tuition. Three semesters of out of state tuition made up 1/3 of my total debt. That’s just ridiculous.
Yes, I could’ve sat out a year and gotten in-school rates, but I didn’t trust myself to do that. 🙂
We plan on saving enough to cover a state school or similar for undergrad for our 2 kids, but that won’t cover living expenses, or anything else, just maybe tuition and books.
We also plan on looking into as many scholarships and other non-orthodox routes of covering college as we can find.
In New York we paid through the nose for school taxes and we didn’t have children. Wouldn’t it have been nice if we had the opportunity to get transferable tax credits and assign them to someone from outside NY to get “in state” tuition? I know I’m comparing apples to oranges but my point is, not everyone in state takes advantage of in state tuition. So why should all “out of state” students be penalized?
I think there are many non-orthodox opportunities, especially based on heritage, or industry – like if anyone in your family is or was a member of a union. It just takes a lot of digging to find them.
It’s so complicated, isn’t it? Schools are working so hard to keep students in for the full four years. In fact, if you look at many schools’ graduation rates now, they’re based on five years. I took several AP classes, basically all that were offered back when I was in high school. Didn’t matter, though. The way my liberal arts school and my major and my education endorsements were set up, I still needed the hours in something. I couldn’t imagine going to college without a scholarship. My parents chipped in some, and I worked all through high school and college (at least two jobs!). But it never would have covered it all and that was from 2004-2008.
I’d be looking for scholarships too now, whether as a student or a parent. Do you think you were always goal oriented or did you cultivate that? I didn’t know too many students who worked two jobs through high school and college. It may not have been great fun then but I would think it built the work ethic you have today. You’re certainly not afraid to take on more work or side hustles. I admire that.
Hey Mr. Groovy went to college up the road from me back in the 80’s 🙂 With one finishing up her Bachelor’s degree this year and one entering his senior year of high school – we are “in deep” right now in terms of college finance. My daughter is finishing in 3 years – due to AP and community college credits from high school. I did this too back in the 80’s. My son has the same plan but has recently decided to try for an ROTC scholarship. After visiting schools, he sees how ridiculous the price tag is and wants to see what other options he has. Great post to get folks thinking!
I see you passed down your smarter decisions to your children! Excellent!
Did you know there are many Buffalo transplants in Charlotte? I don’t know the precise reason but they seem to flock here. There’s even a restaurant owned by a Buffalonian that serves beef on weck. Of course I never heard of it but Mr Groovy told me all about it, and also about the wings from Duff’s.
So glad you mentioned the military benefits. It’s not a route for everyone, but service provides really good education benefits. When I lived in Fayetteville, I knew lots of soldiers and ex-soldiers using their benefits to get their education, and plenty of officers who had gone through undergrad on ROTC scholarships.
The ROTC scholarships are amazing. I just took a look at the requirements and they’re pretty basic – high school GPA of at least 2.5 and a minimum of 920 on the SAT or 19 on the ACT. Another method, for someone who has a technical interest, is to enlist and get a trade certificate while learning OTJ.