I ran across this video a few weeks ago on CNN. Go ahead and watch it, and then I'll comment.
I've mentioned before on this blog, that my husband (and I, although the debts were not for my schooling) came out of graduate school with $60,000 in student loans. This was back in 1986. We lived extremely cheaply and only paid for tuition out of our student loans. We were able to earn enough money during the summers and through my job (as a lowly secretary at the university -- so nothing amazing) to pay for our actual living expenses. And, I might add, we never went on food stamps. I'm troubled by this growing trend. But that is another subject for another post.
It is easy to forget while buried in school and taking out student loans, that the day will come when all that money (with interest) has to be paid back. Typically your re-payment begins 6 months after graduation. This date arrives faster than you can imagine. Most loan repayment amounts are several hundred dollars per month, but if you've got debt for graduate school they are often well over $1,000 per month. That is a hefty portion of your brand new salary. Can you really make enough money to live on after your student loan payments?? And most student loans stretch over at least 15 years. That is a long time to be paying back this money.
Repaying student loans is no different than any other debt repayment. Set up a debt snowball and pay it off as fast as possible! But it is best to have a plan before getting into the student loan quagmire. Here are a few ideas to contemplate:
* Go to a local college or university. As a state resident, your tuition is usually about half of what it would be if you are from out-of-state.
* Become a state resident before you attend the school of your choice. A friend of ours who was planning to attend the dental school in Las Vegas moved here a year early, got a job and established residency. He saved himself $15,000/year or $60,000 total.
* Get a bachelor's degree at a college that will not require you to live away from home or pay high tuition. Save student loans for graduate degrees, not a basic college education.
* Apply for any and all scholarships possible. Keep on top of these year to year so you don't lose them. Many students lose these only because they didn't renew them on time.
* Are any grants available for your program? You never have to pay back grant or scholarship money.
* Do everything necessary to be at the top of your class. Top students are often given research or teaching jobs that pay most or all of your tuition.
* Choose your school wisely. Do you really have to have your degree from Harvard?? Think about the debt you will incur (as this fellow in the CNN video didn't). Ask a mature adult who is good with money if this seems like too much money for your educatiaon.
* Determine if your chosen career path is worth the tuition money you will spend. Last fall I heard a caller on the Dave Ramsey Show tell how she and her husband had over $200,000 in student loans for chiropractic school, and now he hadn't been able to find a decent job and they were getting very very frightened for their future. Dave Ramsey informed her that (despite claims from chiropractic schools) these types of doctors do not make the same amount of money typically that an MD does. He felt this couple had way too much debt for the earning potential of a chiropractor. Do your research and make sure it is accurate. Talk to people who are in your field to find out accurate salaries.
*Consider the location of your school. Is it an expensive place to live? Will your school debt be much, much greater because you have to live in New York City or Boston? The mid-west is typically pretty inexpensive as are parts of the south.
I'm certainly not against education in any way! In fact we tell our children that a bachelor's degree is a minimum and that a masters degree (at least) in their field will probably be necessary to compete in today's job market. But don't fool yourself or "blue sky" these kinds of important decisions. Student loans can add a significant financial burden that will follow you for half of your working life if you're not careful.
Like always, plan ahead and live frugally. You'll always be glad you did.