avoiding too much student debt

Picking the “Cheap” College Over More Expensive Options

Michael Lux Blog, Student Loans 0 Comments

Picking a college can be one of the most — if not the most — important financial decisions anyone makes.  The right school can lead to the right job and can result in decades of work satisfaction and income.  The wrong school can lead to a lifetime of student loan debt the survives even in bankruptcy.  It is hard to overstate the significance and lasting consequences of this decision.

The Case for “Cheap” College

It is easy to get lost in the idea of a beautiful campus, highest quality eduction, and success stories.  To many, picking an expensive college option feels like they are betting on themselves.  After all, lots of smart people do it every year, so it must be a good idea.

What the campus tours don’t tell you is how many students are there because their family is footing the bill.  They don’t tell you how many others can only afford to attend because of scholarships.  And they certainly don’t tell you what life would be like saddled with a mountain of student debt.

Attending a less expensive college means less student debt.  Every semester we get emails from students asking how to find tens of thousands of dollars in student loans to pay for the next tuition check.  Students asking this question would be well served to investigate transfer options and to think long and hard about whether or not they are making a very expensive mistake.

The Most Expensive Mistake(s)

The most expensive mistake that can be made in higher education is borrowing money and not finishing your degree.  You get all of the bills but none of the income.

The second most expensive mistake is paying too much for your education.  The basic rule of thumb is that total debt at graduation should be less than your expected starting salary.  If you don’t think you will be able to find a job that pays 100k when you graduate, don’t go 100k into debt.

The people with huge student debt piles often find the biggest chunk of their paycheck goes to student loan interest, then to rent, then what is left pays for food an other expenses.  Note that first item again: student loan interest.  Imagine what it would be like to have the majority of your paycheck go towards student loan interest.  Your mountain of student debt is largely unchained.  You can’t pay more to attack the principal because you are barely making enough to get by.  Each month, you barely get by and your lender profits on the boatload of interest you are paying.

It’s About Economics, Not Fairness

Many students work very hard in order to get into their dream school.  They study hard, work hard, and earn admission.  They deserve to go.

Unfortunately, fairness really doesn’t enter the personal finance equation.  Telling a high school student that they can’t afford a 100k degree because it will only get a 50k job is devastating.  Watching a recent grad barely keep their head above water hurts even more.  What may feel like crushing someone’s dreams could be the best advice they were ever given.

Beating the System

For students who didn’t have the fortune to be born into wealthy families, there are other ways to get the education without the debt burden.

One of the best ways is to attend community college for a couple years and then transfer to the more expensive school to finish out the degree.  The resume looks just as impressive, and the bills are far more manageable.

For students in fields requiring a graduate degree, attending a less expensive state school is a very wise decision.  The graduate school and graduate school connections will be far more important than the undergraduate school.

Another great way to save some money is to go to school part-time and to hold down a full-time job during school.  It is a ton of work, but it is a great way to show future employers an excellent work ethic, and it helps keep the cost of school in check.

Bottom Line

Millions of Americans are living their own student loan crisis.  The cost of college has skyrocketed compared to relatively stagnate entry-level salaries.  Until parents, guidance counselors, colleges and the students themselves recognize the issue, the student loan crisis will continue to get worse.  If a college doesn’t justify the cost: go elsewhere.