As lawmakers argue over student debt relief this summer, millions of parents are trying to figure out how much to borrow to send their kids to college this fall.
Once a simple calculation made by families at kitchen tables, college pay is now a confusing and obscure puzzle. Almost all schools accept more than two thirds of their applicants. But few ask families what they can afford without loans. That means almost everyone takes out loans to pay for their degree.
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Google “Is It Worth Graduating?” and 44.5 million contradicting responses come back. Almost no one explains exactly why debt makes this question so difficult.
After destroying cheap public degrees for the past 40 years, free market lawmakers turned college into a profit center. As tuition fees skyrocketed, Congress made it easy for lenders to make predatory returns by lending money to students and parents.
Although studies show getting a degree is the most reliable way to reach and stay in the middle class, student debt prevents millions from living the American dream. Higher debt means that young households have lower incomes and fewer assets than previous generations. For parents, this means working longer and delaying retirement.
When families borrow more than they can comfortably repay, they risk losing the life premium that comes with a degree. Here are five reasons to avoid college debt:
#1. Countless lenders vigorously compete to loan parents money, the newest destination in the student loan industry.
Thanks to historically high college costs and relentless cuts in government subsidies for students, parents now account for nearly 25% of new graduate loans. More than 70% of borrowers who are over 60 years old are paying student loans they took out to help children or grandchildren pay for college.
Colleges offer so many credit products with terms so confusing that the system is intentionally designed to be frustrating. Unlike subsidized loans, the government rarely gives PLUS parent loans. To enforce repayment, officials seize wages, seize tax refunds, and withhold Social Security checks for decades, condemning some families to generations of debt.
# 2. Most student loans are not “good debts”.
Good debt is money borrowed to build wealth or increase income. Government-subsidized loans fall into the “good debt” category, while most private and PLUS loans from parents do not. Families who borrow beyond federal government for subsidized credit risk losing a dangerous game.
Nearly 60% of students in debt never graduate, leaving many families in the bondage of student loan service providers. “Those who need credit drop out much more often than their non-credit,” reported University Business in 2020. In other words, colleges take the money that families borrow, spend it, and then refuse to refund a penny when students are forced to leave campus without a degree.
# 3. Parents borrow too much money to send children to status schools in the hopes that the investment will pay off.
For most students, the pay rise that comes with degrees from super-selective schools is “generally indistinguishable from zero,” a study by economists Stacy Dale and Alan Krueger concludes. Later studies have shown that degrees from highly selective colleges help two groups the most – women and low-income students.
However, women’s higher wages have less to do with elite college degrees than with the fact that they postpone marriage, children, and longer working lives than comparable women who graduate from less selective schools, the data shows.
Low-income students with elite college degrees benefit the most. But only a few of them get the chance to enroll. Children whose parents are in the top 1% of income earners are 77 times more likely to attend Ivy League college than children whose parents are at the bottom.
# 4. Saving for college is easier than people think.
Contrary to popular belief, saving for college seldom affects most families’ chances of receiving financial assistance. While saving up can feel like a moving goal for college, it’s important to start setting goals and sticking to them.
Investing a little in a college savings plan every week – the cost of a McDonald’s family meal – adds up to nearly $ 33,000 in 18 years at today’s returns. If the stock market continues to boom and interest rates rise, these investments will get even stronger.
# 5. As F. Scott Fitzgerald famously said, “Let me tell you about the rich. They are different from you and me. “
Wealthy experts who argue that degrees are not worth the investment rarely encourage their own children to skip college. They have the means to pay excessive costs and often enjoy entry advantages that benefit families without financial need.
College graduates will earn 66% more than those with just high school degrees over the next decade. According to a study by Georgetown University, at least 65% of new jobs require graduates beyond high school.
Getting a college degree – with low debt – is crucial for anyone looking to build wealth and advance financially.
source https://collegeeducationnewsllc.com/5-reasons-to-avoid-student-debt/
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