Steve Marr.org

            Student loans now push one trillion dollars! That’s enough money to fund an 11 week vacation for every American worker.  While no individual student is responsible for that debt, the average student graduates with between $25,000 and $27,000 in debt. Some graduate with over $100,000 in loans and amounts between $40,000 and $60,000 are common. A $100,000 student loan is equivalent to a house payment with no house. The average student debt is equivalent to a car payment with no car. In addition, 47% of students fail to graduate, leaving them with loans averaging $20,000 and no degree.

            Many graduates, degree in hand, can’t find good paying jobs in today’s market.  The normal challenges of paying for rent, car, and living expenses are difficult enough.  Student debt compounds the problem that much more.  Then, you have to add penalties and extra fees to loan payments when student borrowers fail to pay on schedule or defer payment.  It becomes a formula for economic disaster.

            Here is one horror story from Studentloanhjustice.org:

“I graduated from law school in December of ‘97. I have paid on my student loans off and on over the past 9+ years and have paid back an estimated $75,000 on a loan that, when I graduated, was a little of $100,000. When I last checked the payoff amount it was over $135,000 and that’s with paying $75,000+ over the past 9 years. I owe more on it now than when I took them out!! One of my loans is in default; they claim I owe them $23,000+ (which somehow jumped from $17,000 in a span of about 30 days).  My two other lenders are close to defaulting and I am unsure if I should just let them default…”

            You cannot discharge student loans through bankruptcy like other obligations. These loans follow you permanently, placing you in a modern day debtors’ prison.  Graduates with higher paying jobs have significant difficulty paying down loans; those waiting tables fare worse.  King Solomon rightly taught, “The rich rules over the poor, and the borrower becomes the lender's slave.” (Proverbs 22:7, NASB) Those caught in the student loan debt trap understand this reality far too well.

            Many students fail to understand the implications of these loans and future repayments.  Colleges have a built-in bias to recruit and keep students.  Increased students generate more income. Many parents fail to give financial guidance about these matters.  Perhaps they don’t ask enough questions and adopt the philosophy that “whatever my child wants is okay.”  Others assume they can repay later, after they land the job that a college degree is supposed to make possible.  Take a ministry student as an example.  A student who graduates with $40,000 in debt will have a difficult time paying off the loan on a starting ministry salary.

            Long term planning is a must. Starting any project without adequate planning is a road to disaster.  Before deciding on a college, determine what the total cost is for a student to earn a degree. Jesus taught, "For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it?” (Luke 14:28, NASB) Today’s figures reveal that four years at a public university will cost about $65,000, while it takes over $100,000 at a private school. Anyone who plans to spend this kind of money needs to carefully pray about it and think it through.

            Tuition, room and board, car, food and daily living expenses are fairly easy to project. The hard part is to identify where the money comes from to pay for it. A summer job or part time work isn’t enough. Parents or grandparents may want to help so families need to sit down and talk through a comprehensive financial plan.  Parents need to determine in advance how much total money they are able and willing to spend on their child’s college education.  I don’t advocate that parents borrow money to pay for a school bill. Parents need to be able to use money from savings and current income.  Better to say, “I can provide $25,000 total for college or $5,000 each year for four years” than to run out of money by the third year. Take time to understand how grants and scholarships work.  Apply for anything that your student qualifies for.

            Most 18-year-olds don’t have the experience or maturity to adequately understand what college debt means in their future.  Help them. Each student needs to realize what the entire financial plan looks like to complete a college degree. This includes knowing when student loans are due and what the repayment schedule will look like.  Isn’t this what happens you buy a car?  You receive a document outlining your monthly payments.  How will a student plan to pay a $400 to $600 loan payment each month after graduation?  Hoping to get a good job that will cover it is not enough in today’s shrinking job market.  If parents provide material support, they have the right and responsibility to furnish input, especially when their student doesn’t understand the far-reaching implications. 

            Sound planning may also provide more cost effective options. For example, community colleges charge about half the tuition of universities. Students can take required classes for a bachelor’s degree for much less money. Many first and second year courses in universities are taught by graduate students who are as competent as community college faculty. Often, you can save money by staying local and living at home.

            The College-Level Examination Program®, also known as CLEP, is the most cost effective way to earn college credit. Check out their program that consists of a series of examinations. You obtain self-study materials, and then take the tests. If you pass, you earn credit that most schools accept while saving a lot of money.

            Consider a combination plan to reduce your cost.  Combine CLEP, community college classes and complete more specialized degree requirements at a university.  Make sure you carefully research credit requirements and understand which CLEP and/or community college credits will transfer to the school of your choice.  A combination plan like this enables you to graduate with a college degree for as little as $20,000.  That means a student can graduate with a degree without taking out a large loan. 

            Changing a major can add a year or two to a program resulting in increasing the cost and adding more debt.  Aptitude counseling can prevent uninformed decisions about a major.  As Paul instructed, “Test everything.” (1 Thessalonians 5:21, NIV) The time for a prospective nursing student to discover a dislike for drawing blood is not in the fourth year of nursing school. In the past, people used apprenticeships to train young workers.  Those who lacked an interest or ability in the work were weeded out.  Sometimes working part time or as a volunteer or finding some other way to gain experience in a field of interest will help validate a career choice. Focus clearly in advance. Each year a student loses costs money and postpones post graduate wages.

            Some students struggle in one or more difficult classes. Rather than risk failing a math or economics class, hire a tutor for a few hundred dollars.  If it saves a credit and prevents adding or repeating a class, it is money well spent.

            Another part of guiding students is to help them understand the job market as well as expected salary levels. The average starting salary for a student graduating from Georgetown University with a law degree is $150,000.  A student can handle some debt with that starting pay. However, starting salaries at most churches or ministries are much less.  Graduates heading into these jobs can handle little or no debt. 

            In today’s poor job environment more students are going on to graduate school or earning an extra degree.  The reasoning is that it may be better to stay in school than to face not getting the job a student prepared for.  However, staying in school on borrowed money because of limited jobs is a poor decision.

            Some schools provide a rich experience. Students may learn leadership, decision-making, and responsibility. Christian schools offer a rewarding atmosphere for learning and growing spiritually.  However, they cost more.  A student must balance all factors, including the financial ones, when making a decision that will affect the rest of their life.

            I have heard many stories about students buried in debt.  They graduate from college to live at home.  They barely make ends meet with a low-paying job that offers little spending money.  They look forward to a rough repayment road ahead. For those trapped, there is no easy way out.  Don’t allow your student to get caught in this contemporary prison and don’t encourage anyone else to get caught.

            Today is not a time for ignorance.  Burying your head in the sand about these issues is the same as burying your life in long-term debt.  Nothing in our economy suggests that living with large debt makes financial sense.  Research.  Plan.  Find counsel.  Look for creative options.  Evaluate long-term implications.  Do the math.  The gift of a good education should position you to live responsibly and productively.  It should not put you in a debtors’ prison.

Steve Marr, Your Christian Business Coach

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