Being A Student Without A Student Loan

MYTH:  You Have To Go Into Debt To Get An Education

Can you be a student without a student loan?  Some people say it’s not possible, while others prove them wrong every year.  Granted, the percentage of those diving head first into student debt is astounding, but with savings in America being low to negative, it comes as no surprise.  I think America needs a paradigm shift.  Americans have super inflated the value of a degree, therefore declaring it worthwhile to go into loads of debt to get one.  I think a degree is important but I do not think it is important enough to swim in the sea of bondage it creates, giving you immediate stress upon graduation.

Stress can be so overwhelming that it can cause you to make decisions, that should be considered with care, to be made in haste.  For instance, because of the added pressure, you may take the first job offer you get instead of waiting for the one you deserve the most.  Student loans hang out for a LOOOOONG time too.  What if there was another way?

College Planning VS Student Loans (which one is the more responsible choice?)

1. Planning is thinking first, and acting second.
2. Getting a loan is acting first, and planning second.

Don’t pick one based on what everyone else is doing.  Pick the one that makes the most financial sense.

The most responsible answer is so obvious. (I am slightly biased, but having a plan is common sense, is it not?)

“By failing to prepare, you are preparing to fail.“  – Benjamin Franklin

“Be assured that it gives much more pain to the mind to be in debt, than to do without any article whatever which we may seem to want.” – Thomas Jefferson

(Thomas Jefferson knew the pain of debt first hand.)

What Are Your Options?

1. Working to save for tuition while in high school – Now I realize that working in your teenage years may not be very desirable.  It is also important not to work too much so that you have enough time to study hard for high school, but if you save for 2 years, you could save almost half of what the average students have in student loans upon graduation.  ($22,500)  (Saving $100 a week to fund an ESA or other Educational IRA’s for 2 years will give you more than $10,000 without counting interest.)  Maybe you could talk to your parents about matching what you save to help you out if possible.
2. Parent funded savings account for college - (not as popular but I think it is the BEST method!) I personally think that this is the best option if it’s not too late.  As a parent, I think that everything I can do to set my kids up for success should be done.  If you can’t afford it then you’re not obligated but if you can then why not right?  For the record, if a parent has not done this but later feels guilty and wants to fund their kids college debt is not the way to do it.  You shouldn’t weaken your own financial situation by going into debt.  This is why a plan is important, and why we need to start thinking about these things before it is too late.
3. Scholarships And Grants – This option should always be applied to any college plan.  There are FREE scholarships and grants all over the place to be taken advantage of.  If you fill out hundreds of applications you will receive some monetary assistance!
4. Pay-as-you-go plan – In a “microwave, get rich quick, must have it now society”, this option is frowned upon.  We want everything now with little to no effort, but the true key to becoming successful in anything is slow and steady.  Because of debt we have convinced ourselves that having something now is more important that being able to actually afford it.  I am currently taking a class each semester until we can afford for me to go full time.  (which will occur after completion of baby step 3: Fully Funded Emergency Fund of $15,000)
5. Take a year or two off after high school to save – I can already hear the groans and boos, but hear me out.  It seems as though teens choose a degree just to choose a degree instead of choosing one to take advantage of their passions and abilities.  Let’s face it, most teens have no idea what they are truly good at or what there passionate about with so little life experience.  Perhaps this is why it is so easy to find a student who has a degree in something they are not using.  (They have that piece of paper though right?)  The piece of paper only has value if it can be used.  Otherwise it is useless!
6. Go for the education instead of the piece of paper – Education is more important than diploma. Education to me is about what you learn not how much you learn.  The system in place wishes to diversify your talents when I believe your studies could be more centrally focused around what you want to become an expert in.  I think we learn a little of everything in high school for a well rounded education.  In college it’s time to specialize.  How is a science class going to make me more successful in the world of finance.  You can always take the fill in classes you need for a diploma later after you have become an expert in your career of choice. (This option can not always be used for specific career paths, like doctors, lawyers, and other high tech specialists.)
7. Pick a cheaper school to lower your tuition costs – Pedigree isn’t what it used to be.  While some would disagree, a degree is no more valuable just because you paid more for it.  Pick a school close to home and you can save tons of money.  Debt is not worth what you pay for it!
8. Read, read, and read some more – No matter what you should do this.  Keep that brain stimulated and learn everything you can while you can.  You don’t have to go to college to learn, you just have to possess a desire to excel.  You might not be able to be a doctor by just reading but there are SO MANY other careers where you can.  With technology and the internet, the possibilities are no longer conventional.  Become an expert in your field!

“The man who does not read good books has no advantage over the man who cannot read them.” – Mark Twain

College Planning Is Part Of The Total Money Makeover

Planning to send your kids to college one day doesn’t have to be a difficult task.  In The Total Money Makeover parents can plan for their kids college costs once they get to baby step 5, right before paying off the house.

Dave Ramsey suggests that you use tax-favored plans.  He says that you should first save in an Educational Savings Account (ESA), which will allow you to save $2,000 (after tax) per year, per child.  That’s about $166 a month per child.  (If you don’t have car payments this should be EASY huh?)

If you want to save above that, OR you do not meet the income requirements for an ESA, you can use a 529 plan that leaves you in control of the mutual funds at all times.

Avoid plans that:

• freeze your options
• change based on the age of your child

He also suggests that after you’ve done all that, you could move to an UTMA or UGMA plan.  (Uniform TRANSFER/GIFT to Minors Act) What you should know about these plans:

• One way to save but not the best of all other options
• Account is listed in kids name
• Parent or guardian manages account until:
  • UTMA – child is 21
  • UGMA – child is 18

Three “NEVERS” of College Saving

1. Never save for college using insurance
2. Never save for college using savings bonds
3. Never pre-pay for college tuition
   

Do you have any student loan stories?  Would you have done it all differently if you could do it again?  Share your thoughts…

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