I hear Pomp and Circumstance being played by the band; I see mortarboards being thrown in the air. I feel the excitement of my two college aged boys. Then reality smacks me dab in the face and I realize to make this happen it is going to cost about $150,000 per kid for a college education. This sum isn’t for an Ivy League University or private college.
After reviewing our personal budget and trying to decipher FAFSA applications; we refused to take out student loans. Seeking Ft. Worth or Dallas local professional help and advice on this decision was not easy to find. For starters, limiting education options to either in state schools or even community colleges for lower tuition rates would help keep our hard earned IRA’s and 401k’s intact.
Sure, we would like to give our kids the best of everything but the cost of higher education have gotten out of control and prohibitively expensive. But parents and students are still biting off way more than they will ever be able to chew or hope to digest.
It’s not about a cost differential of a designer purse or pair of sneakers over a generic product, it’s about a life charting detour if taken too lightly. And is this exorbitant cost worth it anymore? Is it worth it to deplete savings and annuities?
It may take a lot more tough love to say “no” to your child about college choices.
A college degree is a very valuable thing and of utmost importance. This is especially true today but at what cost? We have become really good consumers when it comes to almost everything else… but not so much when we think the purchase is a “necessity” for our precious kiddos. Money is a hard master but an excellent servant.
Students are graduating from college with literally hundreds of thousands of dollars in debt; often with a degree that is not very marketable in a vile economy. We generally lack mathematical and engineering type skills that are in high demand in the ever expanding technology field. Marketing and management degrees seem to be held by the local barista’s at Starbucks.
We bought into the dream that a college degree and the “college experience,” was paramount; but we didn’t factor in the marketing genius most universities have deployed the past 25 years. As much money on campuses goes into stadiums, student recreational facilities and gyms that entice enrollment than money invested into the faculty or curriculums.
And when our children ask for something, we strive to provide it for them or at least encourage them to obtain it without taking an unemotional, detached view or assessment of the alternatives. And this is driving many families headlong into financial hardships, debt and even bankruptcies. Financial planning for college should begin at the birth of a child, with Coverdale or Educational IRA’s and tax advantageous 529 plans.
It is typical today for a university student to graduate with the equivalent amount of debt that could have easily purchased their first home!
Student loan defaults are exploding; the student cannot pay the debt and the net results are horrible credit ratings and even bankruptcies… but student loans are not always dischargeable. Facts support that many students cannot even make the first payment on their student loan debt post graduation. The interest rates on these loans are typically very attractive and low compared to other forms of consumer debt (eg. Credit cards). They are hyped and marketed, rarely with adequate disclosure and lack of guidance or counseling.
And while the allure of greater lifetime earnings for a college degreed employee, it often is not enough or comes soon enough to pay off the loans required to get the degree. Sounds sort of like a scam? The scam part is that the cost of college and tuition has way exceeded the rate of inflation by as much as 10% per year in some areas. And the default rate on student loans last year exceeded 7% in the first year! This does not include private student loans or those that are behind on their payments… imagining the looming debacle for our children.
Collection calls and threatening letters make life miserable and can literally ruin and destroy ones future. Suicides have been attributed to debt overload. Why are we encouraging and allowing ourselves and our children to do this?
A single old neglected student loan of just $2,000 from 20 years ago can exceed $30,000 today due to fees and interest. They do not just go away. Learn about Forbearance or deferment or loan forgiveness but seek the advice and guidance of a professional and/or a CPA as serious income tax implications can result in almost every decision when a loan default occurs. There are also government agencies that can assist with counseling and guidance.
Do not take the route of loans over prudent affordable college choice. Tough love today is much less tough than a foreclosure or bankruptcy in the future.
What hurts your kids hurts you much worse.
Baby Boomers are not alone in handling this this challenging process… look out Gen X and Y, your turn is next!