Paying off student loans has become a huge problem in the U.S. In fact, this problem is causing financial strain for millions of us. As of the first quarter of 2018, total student loan debt now exceeds $1.5 Trillion. Ant the average U.S. household with student debt owes $47,671, according to NerdWallet’s 2018 household debt study. That's insane! But What if You could avoid student loans completely?
In this article I'll show you the massive consequences college debt has on your life, and give you tips on how to avoid college loans altogether.
Student Loans Have Serious Consequences
Over the last couple of decades, borrowing money for college has become the default way that students pay for higher education. But most students don't think about the future consequences of taking out those loans.
They've been told that college is an investment in their future. They're told they will earn much more money with a college education, and paying off student loans is a necessary evil if they want to be successful in life.
But the fact is, starting out life and a career in a financial hole is not good for anyone (except maybe the banks).
What many of these students don't realize until they start paying down their student loans, is that college debt ends up taking a serious toll on their future happiness, well being, and freedom.
Worse yet, a lot of these students never graduate. Many of them get the loans but quit before they get a degree. The consequences are doubly difficult for these people, as they don't typically make as much money as they would if they had the degree.
Paying Off Student Loans Limits Your Freedom
Paying off large amounts of student loan debt gets in the way of living the life you want. It diverts money that could be used for other things.
According to a survey done by the American Institute of CPA's, of people with student loan debt:
- 41% reported that they have delayed saving for retirement
- 40% have delayed buying a car
- 29% have put off buying a home
- 15 % even said they delayed getting married because they were still paying off student loans.
Most of the people surveyed said they had no idea it would be so hard to pay off their college loans. In fact, 60% said they actually regretted taking out student loans.
College Debt is Hurting the Economy
Not only is this huge level of college debt affecting the personal finances of millions of people, it's also affecting the economy as a whole.
Here's what happens when the average Joe is bogged down with student debt:
- There are less new cars being bought.
- Less houses are being purchased.
- Fewer businesses are being started.
- More people feel anxiety and depression because they are having problems paying off student loans.
- People are contributing less to their retirement funds (or not at all).
- Many are stuck in careers they hate just because it pays the bills.
- People are having less kids because they can't afford them.
As you can see, the overall economy suffers due to huge amounts of student loan debt. The sad thing is, this can easily be avoided with a little planning.
How to Avoid Student Loan Debt Altogether
Students and parents have to learn to start thinking differently when it comes to financing a college education. Here are some solid tips you can use, plus a great resource at the end to help you completely avoid student loans in the first place.
Go to a Cheaper College
You don't have to go to Harvard, Yale, or Stanford to get a great college education. Most state schools are relatively cheap and have good programs to help you establish a good career when you graduate. The cost is usually one half to one fourth the cost of a fancy private school.
Plan Ahead for College Expenses
It's surprising to me how few people actually do this. Too many parents don't think about college expenses until their child gets to be 15-16 years old. At that point, it's all but inevitable that student loans will be needed to pay for college.
If your a parent, start saving money for college early and regularly. Saving money consistently will add up to a huge college nest-egg over time.
If you're a student, get a part time job during your high school years. If you know your parents can't pay for school, you can earn enough money to do it yourself.
Work While You're in College
You can also work while you're in college. It may not be your ideal situation, but if you really want a college education, you can do it. Most experts recommend working less than full-time. 20-30 hours a week is recommended.
Go to Community College First
Most young people want to go to a four year college to get the full college experience. However, it's way cheaper to go to community college first, then transfer to a four year college.
The great thing is, more and more states are subsidizing community college tuition. In my home state of Tennessee, recent high school graduates get to attend community college for free as long as you meet a few basic requirements. Check with your state and local community colleges to see what's available.
Colleges Want You to Use Student Loans
You have to be careful when dealing with college admissions staffers. At many colleges they tend to push student loans because they are easy, guaranteed money for the school.
Admissions staff are usually on your side, and will help you get what you need to finance your education. However, you need to realize there is a conflict of interest there. They know that it's easier to qualify you for a loan than it is to get grants and scholarships.
So be careful when they present you with financing options. It's easy to end up paying off student loans for 20 years after graduation if you don't know exactly what you're signing up for.
You have to stop listening to so called financial experts who say that student loans are “good debt“.
We have to realize that any time the government gets involved in helping people finance anything on a large scale, it fundamentally changes the market. The result is that the easy money becomes a bonanza for the colleges, and millions of people paying off student loans for decades.
It's Never Too Soon to Make a Plan
So if paying for college is in the future for you and your child, remember, it's never too soon to make a plan. There are tons of strategies you can use to pay cash for college if you know where to look.
One of my favorite resources on avoiding student loan debt is an awesome book by Zac Bissonnette:
Question: Did you take out student loans to pay for college? Has paying them back hampered your life in any way?
Leave a comment and tell me about it.