Headline: Tuition can Lead to Institution.

Date: 11/22/2020

Body:  It’s not news that student loan debt is a serious issue.   I read this article on Yahoo Finance:

Former Treasury Secretary Larry Summers is ‘skeptical’ about student loan forgiveness (yahoo.com)

Is the size of student loans significant within the U.S.?

In a word, yes!!  In a few more words, the New York Fed reported, in October 2020, that student loan debt represents a $1.55 Trillion drag on this nation’s future.  For a bit more context, as of 2017, the average undergraduate student has $7,200 of student loan debt.   The average Graduate student had $25,700 in student loan debt.  (This is up 47% from when it was measured in that same 1995 study.)  And, due to shame and related guilt, I feel pretty confident in saying that this is likely an undercount of the true debt.   Houston, we have a problem.

What caused this problem?

I could not find any good relevant research for this question, so, I will speak from my own experience.   I think the problem sprouted from good intentions, the best of intentions.  Growing up, it was taken as an article of faith that my sister and I would graduate from High School and go immediately on to college.  The conversations began when I was 6 or 7  years old that I had to save money so that I could “go to college.”   My father went to the Naval Academy, and MIT for Graduate School, so, his point of view is relatively easy to see.   My mother was the first in her family to have graduated from college (grandma followed 9 years later.)   So, she had to really fight to gather her education and prized it highly.   When both were growing up, the twin ideas were:

  1.  Go to college and get your ticket punched for an easy life.
  2.  Go to college and avoid the draft, and possibly a premature death.

So, the power behind their devotion to education is pretty easy to see.

But, in the haste to follow these two tacit edicts, alternatives were not conceived of, let alone discussed.  Due to visual problems and other health issues, the military was out of the running for me.  (Though the Marines did try to recruit me 6 times.)   The possibility of community college was not discussed (though, in retrospect, would’ve been another excellent choice.)  I really don’t want to even compute the amount spent on my education: Fortunately, we were in a position where this was possible.   For many, it is not.

What are the Funding possibilities?

You could get a variety of aid, but, each comes with its unique pitfalls

You could apply for and get scholarships, but it requires a great deal of effort on the part of the matriculate to find the offerings and make the application.

You could apply to the Federal Government for a Grant or Loan.  In either case, the paperwork is pretty onerous, and often, parents are often uncomfortable having detailed discussions of their finances with their adult children.

You could get a part-time job while at college, working in the Library or doing something else.   These are often not hard to get, but once obtained, juggling a full-time school schedule with a part-time job and time to recreate, can itself be exhausting and perhaps impossible.  Grades could slip, and the dream could expire.

You could take out private student loans.   Often, repayment of these loans is deferred until the student has graduated.   Finance companies are quite happy to extend these loans, but, beware:

  1.  College loan debt is NOT discharged in Bankruptcy.
  2.  The interest charged can be stratospheric.  Per Nertwallet, it can vary from 3.82% to 14.5%.    This rate of interest can torpedo a promising financial future, as during the deferral period, the interest accrues and is added to the loan amount once payments commence.

The Verdict

The verdict once again depends upon case-by-case facts and circumstances.   At the end of the day, I think that if you have a defined plan of what you want to do, and it requires a BA or BS, going to a 4-year College or University can pay handsome dividends.   But, if you’re like so many of my friends were (and some still are) and have no definite plan, please consider a trade school or more cost-effective education at least initially.   If you finish 2 years and feel inspired, then it is only 2 years at the expensive 4-year school.  If not, take your certificate and skills and join the work world, until you crystallize your plan.  There is a gigantic need for trade-educated personnel, and the opportunities to start a business later, are nearly limitless. 

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

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