With tuition costs rising with inflation, and financial aid options such as grants and scholarships shrinking even at traditionally affordable state institutions, students are borrowing larger and larger amounts in order to pursue their dreams of a college education. Estimates place the average cost of a student’s loan debt at over $16,000, with one in 10 students at private institutions owing more than $40,000. This may not seem like an unreasonable amount of money, compared to what your fellow students are borrowing, and many people feel that the cost will be made up in increased opportunities after graduation. However, this debt may lower the college graduate’s standard of living for years to come. Studies show that graduates burdened with student loans are far more likely to live from paycheck to paycheck, run up debt on credit cards, and postpone saving for other life goals such as buying a house or even raising children. Even bankruptcy will not forgive a student loan debt, and default will virtually destroy your credit rating for many years.
Before you start your professional life with tens or even hundreds of thousands of dollars in student loan debt, it pays to plan ahead and take measures to make sure your family isn’t overwhelmed by the high cost of college. Factor financial planning into your college prep, and you can get a handle on your debt before your debt gets a handle on you.
The best way to cut college costs is to apply to a good cross section of colleges that vary in price, and be cost-conscious even at this application process. Don’t assume that the higher-priced universities will make up the difference in need-based scholarships and grants. This may have been the case for our parents’ generation, but for many schools, those days are over. It’s tempting to simply go to the school with the best reputation and hope the financial aspect will work itself out somehow. But don’t let the stars in your eyes blind you to the bottom line: every dollar you borrow in debt will still need to be repaid down the line.