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Student Loan Prevention: Part 2

Last week, Squared Away published the first five of 10 strategies to help parents and their college-bound kids limit their borrowing through student loans.  As promised, readers can find the remaining five ideas below.

On a complexity scale, finding a college is comparable to buying a house, and some of these debt-cutting strategies are extremely difficult to put into practice.  In addition to the financial challenges involved, the emotional aspects of parent-child dynamics and the college application process are daunting.

But the soaring cost of an undergraduate education has made student debt prevention a top priority for most families.  Here’s more help from college financial advisers.

  • Get Practical

Deborah Fox of Fox College Funding LLC in San Diego said the days of majoring in English, philosophy or history are over – or should be.  Given the financial pressures of college, she said, students can’t afford to “just study what’s interesting to you.”  When weighing future earnings for graduates with such majors, the numbers just don’t add up, especially if the English degree is from a high-cost institution like Columbia University (high cost among private colleges) or the University of Illinois at Urbana-Champaign (expensive for in-state students).

Fox asks her clients to identify skills the college-bound teenager is good at.  When entering college, they should already have a handful of potential occupations in mind.  Then they can focus on relevant internships, jobs, courses and life skills that will help them get a job when they graduate – and begin paying back their loans.  Freshmen should immediately begin testing their theories about the work they’ll want to do – “possibilities they could get excited about,” she said.  She tells clients’ kids to “start exploring them immediately, shadow [people in their field], take someone out for coffee.  Find out what is the day-to-day work like.”

Fox offered up the example of her son, Tyler Fox, who thought he wanted to be a microbiologist specializing in genetics.  An opportunity to participate in a research project at Carnegie Mellon University cured him of that.  “He said, ‘Mom, that was an incredible experience … but I would not want to be doing that eight hours a day,’ ” she said.  Tyler pursued a career in a different field that used skills he excelled at but that would keep him in “the real world:” computer information systems.  After receiving his degree, she said, he had nine job offers.  He accepted an offer from Intuit.

  • Vocational School Is Cool

I can almost hear a parent saying, “There is no way my kid is going to vocational school.”  But read on: high-tech manufacturing companies struggle to find workers who can fill highly skilled, well-paying jobs that require the computer expertise that comes naturally to so many young people.  High-quality technical jobs are also going unfilled in fields such as health care.

Vocational schools, Fox said, are a great option for “students who flat out should never go to college, because it’s not the degree they need to work in the professions that appeal to them.”

The Boston Globe recently reported that General Electric pays to train machinists to replace retiring employees at a Massachusetts aircraft engine plant.  The article also noted that U.S. Secretary of Education Arne Duncan once “made the stunning pronouncement that he finds more and more graduates of four-year universities going to community colleges ‘to get that technical training to get a real job.’ ”  How cool is that?

  • Summer Fun

Students who work while they’re in school or during the summer can make a significant dent in what parents shell out – and borrow – for college.  The cost of incidentals, from shampoo and cell phone bills to – let’s be honest – beer can add up to thousands of dollars per year.

And research indicates that some work doesn’t hurt grades.  A 2008 study of 55,000 college students at four-year institutions showed that working more than 20 hours can eat into study time: they had “significantly lower” grades.  However, students who work less than 20 hours suffered no ill effects.

  • Living at Home

Living at home can slash the total cost of an education, whether at a community or commuter college, which includes top institutions such as the University of California at Irvine.  Yes, it’s great to get away from home and learn to live independently.  But compromises are required if keeping a lid on debt is the top priority.

In today’s high-cost environment, campus living is a luxury for more families.  The national average for room and board is $9,047 – the extra debt required for this totals more than $36,000 over four years.  According to the College Board’s 2011 report, room and board equals tuition costs at a four-year, in-state college and equals roughly one-third of the cost at public colleges out of state or private colleges.  That’s a lot of dough.

Room and board costs also vary widely among institutions, from $15,341 per year at Howard University to under $4,000 at Northwestern Oklahoma State University and Rust College in Mississippi, according to U.S. News’ annual report on colleges.  Advisers said parents should also remember to tally the total cost of college over four years – don’t focus only on the first year.  Room and board and fees are a big factor in the four-year cost: they can increase more every year than tuition costs.

  • Talk Money

Money is such a taboo subject, especially between parent and child, that teenagers often have no understanding of what student debt can do to a family’s financial planning – or to their own lives after college.  It’s critical for parents to have open conversations about the cost with their college-bound teenagers.  This is part of what Deborah Fox calls “managing expectations.”  “Students have very unrealistic expectations [and] their parents do also.”

If that’s not realistic, parents may be able to find a professional or someone outside the family to talk to their teen about college choices.  Teens may be more willing to listen to a neighbor closer to their age who learned the hard way about the downside of borrowing too much for college: they have to pay it back.

“We don’t have enough discussions as parents,” said Fred Amrein, a college-funding specialist outside Philadelphia.  “It’s sad that it’s gotten so expensive,” he said.  And he knows: he has shepherded two of his three daughters through college.

  • College Data Resources:

To get a handle on how much aid is provided, by institution, the U.S. Department of Education recommends its College Navigator (on the left side of the web page) as the easiest tool to use.  Here’s what’s available, according to the department:

  • the number who received aid
  • the percent who received aid
  • the total amount of aid received
  • the average amount of aid received

To find out more requires data mining.  Information and raw data are available by clicking here.  (Click “Look up an institution.”)

To browse a smorgasbord of information from the Department of Education’s website, start here.

If any readers dive into these websites, let us know how it went!  Comments are welcome at the end of this blog post.

Readers can sign up for Squared Away’s weekly alerts by clicking here.

3 Responses to Student Loan Prevention: Part 2

  1. Joe Ruf says:

    I recently read an article about a young middle class young lady who was graduating from “the private school that she HAD to go to” with $100,000 in student loans: $900 per month, $10,000 after taxes per year. How can any institution allow that type of debt burden to occur? Where is the University? In bed with their lenders??

    I put two children through school and I picked the schools they should look at. What does anyone know about choice? My kids graduated with no debt.

  2. When I went to university back in the day (10 years ago), student loans didn’t go very far, probably because of my budgeting skills. A large percentage went toward leisure and alcohol. I’m still paying my student loans back even to this day.

    I’m betting nothing has changed much since then.

  3. CJ says:

    This “Student Loan Prevention” segment you guys have ran, has been extremely helpful. As a soon to be student I have been researching this topic, and another nice resource I found is: http://studentloansforcollege.org/financialaidforcollegetips.html

    I appreciate resources that are not just all about how to get a student loan, spreading awareness about alternatives is great for income students.

    Thanks – CJ