The Importance of Student Loans for College

According to the American Student Assistance website, as of October 2012, the average student loan debt for the class of 2011 was $26,600.  Let’s think about that for a minute. That means when a college student graduates, they have no job and $26,600 in debt! That is not a very wise plan.

For most people, student loans are only important for getting into debt and stifling your ability to build wealth. The current mentality in the United States is that you have to have student loans to get through college.That is an incorrect belief.

Here are some ideas as to how to get through college with little or no student loan debt.

Choice of schools is very important

Not everyone can afford to go to an Ivy league school.  According to the average tuition for a private 4 year school is $29,056.  For a public out of state college it is 21,706. For a public in-state college it is $8,655.  And for an in-state public 2 year college (community college) it is $3,131. The cost of books is roughly $1,200 at each school.

Get scholarships

Very few people can get full scholarships; however, there are thousands of other scholarships available each year. Apply for as many scholarships as possible. If you can get 2-3 scholarships of $500, that can reduce your tuition by 5-10%. These small scholarships can add up.

Work your way through college

MANY people have done this. If you are working 20 hours per week at $7.50 per hour, you will gross $150 per week. You will be taxed roughly 10-20% depending on where you live. Let’s use the 20% figure, so you will net $120 per week. If you take $40 to pay for gas, car insurance and miscellaneous expenses, that leaves $80 per week to save. If you save that $80 for 52 weeks, you will have $4,160 to apply to your tuition.

Let’s get more into some numbers. First let look at in-state versus out-of-state  tuition.  $8,655 compared to $21,706. That is nearly $13,000 per year!  do not go to an out-of-state college  just to be different or just because your friends are going there.  If you cannot afford it, don’t go. Now let’s look at in-state community colleges compared to in-state 4 years schools.  $3,131 compared to $8,655. That is over $5,000 per year.

If you go your first 2 years to a community college to get your basic credits (be sure these credits are transferable) instead of a 4 year college, you will have cut over $10,000 off of your total cost. You should be able to get a Bachelors’ Degree by going 2 years to a community college and 2 years to and in-state college for about $23,572 plus books which should run around $4,800. Your total cost should run around $28,372. Now let’s look at how to get that much money without taking out a loan.

I used the figure of saving $80 per week if you worked part-time through college.  What happens if you work full time in the summer?  You would add roughly another $800 per year. That would mean you would be applying $4,960 per year toward your tuition. That totals $19,840, but you still would need to find $8,532  If you started working in the summer between your junior and senior year in high school, you could add another $4,960. That would leave $3,572. In some cases, you can “test out” of classes. My wife did this when she returned to college to get her Bachelors’ Degree. You pay a fee and take a test, if you pass you get credit for the class.  Doing this can help save  some money.  Finally, you could get scholarships or go an extra year to pay for your college.  If you go one more year, you would make another $4,960 which would cover the $3,872. Many people go through college in 5 years instead of 4.  I know this is not ideal, but it is one way to get through college without debt.

Another way to go through college with little or no debt is to find a full time job out of high school and go to college part time. Many times a business will pay for or help pay for college if you agree to stay at that business for “X” amount of years after you get your degree.  Going to college part time will obviously increase the length of time it will take to complete, but you will finish with little or no debt and it will be well worth it.

I realize that there are some cases where these ideas will not work but I think that is a relatively small amount. In those cases and all cases for that matter, you should apply as many of these ideas as possible. Like I said in the beginning of this article, using these ideas the total cost of college should average $28,372.  To have $26,600 in student debt is silly.

Anyone should be able to implement some of these ideas, it may be just getting one or two scholarships, but every little bit helps. For those who cannot implement enough of these ideas to get through college without debt, student loans are important. I still say that for the majority of college students, student loans should not important.