This post is directed mostly at young adults, especially those fresh out of high school, who are considering college. If there’s ever a time you learn from someone else’s mistakes, please, please let it be now! Going to a for-profit school and wracking up nearly $80,000 in student loan debt was the biggest mistake of my life. My mistake will haunt me for up to 25 years and will probably cost me close to $200,000 in total repayment. Don’t let this happen to you!
IS COLLEGE WORTH IT?
You need to ask yourself what it is you really want to do. If you’re not sure, or think you might switch majors, it’s okay to put off college for a few years. Work different jobs, find something you like and you can take this time to save up money to pay out of pocket when you do decide to pursue a degree.
If you find yourself wanting to have some kind of job where your portfolio is what gets you hired, a degree might not be the smartest option. If you’re good enough at your craft and passionate enough to pursue your ideal career, you’ll probably be more successful than most of the schmucks who went to art school and wracked up six figure student loan debt.
Perhaps a certificate would suffice? Brainbench is a site where you pay to take a test and receive a certificate should you pass. W3Schools offers a lot of online tutorials and you can also pay to take a certification test.
College is no longer the guaranteed path to a successful career. I have a Bachelor of Fine Arts degree and have worked only a few FREElance gigs (yes, some of those were unpaid, lured into the fallacy that it would “be good for my portfolio”) and I’ve worked a part-time minimum wage job since I graduated in 2009. Is a BA now the equivalent of a high school diploma? My brother went through a welding bootcamp offered by Gateway Technical College and wound up with a job starting at $10 an hour. More than I have ever made! I don’t know the price of it but I’m guessing it was much more affordable than my degree!
UPDATE: I need to share with you CLEP – College Level Exam Program. You can learn about a subject then pay about $80 to take a test (plus whatever fee the college charges) and you get credit for the class should you pass. I’ve never heard of this program before a friend recommended it, but I wish I had!
I also need to add that you should highly consider taking Advanced Placement (AP) courses while you’re in high school!
WHERE ARE YOU GOING TO COLLEGE?
No matter where you go, I highly suggest attending a community college first. Community colleges are usually much more affordable and this would be a great time to gain the credits for fundamental and general education courses that will transfer to the college or university you really want to attend.
I highly suggest avoiding for-profit schools like The Art Institutes, University of Phoenix, Kaplan, DeVry, etc. Generally, if you see commercials on the television, they’re for-profit and probably using taxpayer money to fund those annoying commercials. These schools pump out 100s of graduates every quarter at each of their many campuses across the country and there just aren’t enough jobs for all these graduates. These schools are usually way over-priced.
The going rate for The Art Institutes is over $86,000 for tuition ALONE! We’re looking at $100,000 when you think about other fees, housing, supplies, and textbooks! Yet, their graduate employment statistics (which can be found on their site) reflect an average salary of $30,000 or less! These schools are student loan debt traps! Many of the students that wind up at these schools end up dropping out and still owe five-figure debts! Don’t fall for it like I did!
Consider going to a college near your home to save money on housing expenses. School housing is generally more expensive than if you were to find a place to rent near your college with a couple roommates.
HOW WILL YOU PAY FOR IT?
The best way to pay for it is out of pocket. As I mentioned before, it’s not a requirement to attend college directly out of high school. You could take a couple years to work and save up money to pay out of pocket. You may even find yourself a job that offers tuition reimbursement! If you wait long enough, maybe tuition prices will come down with all the attention the student debt crisis is getting these days. No one ever said you had to complete college in four years, so take it slow and try to pay as you can afford it!
Also consider waiting to attend college until you are considered an independent student. As a dependent student, your parents income and their expected financial contribution will factor in how much federal aid you receive. You are more likely to receive more financial aid if you are an independent student. Independent students are generally 24 years of age or older, married, or have dependents (children).
You should also look into grants and scholarships. Winning scholarships may not be easy but it’s important to always be on the lookout for ones you qualify for and to never stop applying for them while you’re attending school. Check out your financial aid office for information on grants and scholarships. Check your local library for books on grants and scholarships.
Consider Public Service programs, such as AmeriCorps for tuition assistance. The award is equivalent to the Pell Grant offered in that year, which currently stands at $5,635, but be aware that the amount will change depending on funding. Perhaps consider a degree program where you will find yourself working in a qualified position to be eligible for Public Service Loan Forgiveness.
Know the cost of your entire education and heavily weigh it against what most graduates are making these days. Factor in the poor job market, don’t over-estimate.
It’s extremely important to educate yourself about student loans! I can’t stress this enough. DO NOT SIGN for anything unless you fully understand what you’re getting in to! Consider student loans a last resort.
Borrow wisely. Smart borrowing would limit you to 1/3 of the cost of your education to ensure you will be able to afford repayment.
There’s tuition assistance for active duty members.
There’s also the obvious GI Bill. I’m no expert on this subject, but there’s a lot of valuable information available at the military.com website. The best option when using GI Bill benefits is a public school. All tuition and fees are covered for in-state students. For most colleges, an in-state student has resided in the state for 12 consecutive months but it is important to know your school’s requirements to avoid increased tuition rates.
For private schools, the current GI Bill maximum benefit is $18,077.50 per academic year. Be very cautious about choosing a for-profit school as yearly tuition often exceeds that amount, as noted above. For-profit schools market hard towards veterans because they have to meet a 90/10 requirement. 90% of their income can come from federal sources, the other 10% has to be from non-federal, which the GI bill counts towards this 10%. As I’ve mentioned in previous posts, that means most of their profit is coming from taxpayer funded federal dollars. So all those fancy-schmancy commercials you see on tv are your taxpayer dollars at work!
Check out Frontline’s Educating Sergeant Pantzke video. Consider yourself warned about for-profits.
It’s also possible to transfer your GI Bill benefits to your spouse or children. I must note that when transferring benefits to a spouse, they are not eligible for housing allowance or the book stipend while the other spouse is active duty.
There is also the Military Spouse Career Advancement Accounts program (MyCAA) which is currently limited to a maximum assistance of $4,000. It’s available to spouses of active duty service members in pay grades E1-E5, W1-W2, and O1-O2. I have personally used the MyCAA benefits to get a certificate in web design. Be cautious in choosing a school and a program. Most of the colleges in my search were for-profits and the certificate programs were well above the $4,000 mark. I managed to find one that covered the full cost, including books and fees. It’s important to be impervious to their attempts to charge you extra for services they initially told you would be free! My experience with Allied American University makes me never want to take an online course again. It certainly wasn’t worth $4,000.
STUDENT LOAN INFO
Student loans are not good debt. No debt is good debt. They are risky and predatory and that is why it is important to know what you’re getting in to!
Do not take out extra student loans to buy a car, a flat screen tv, or to fund a vacation. Educational expenses only!
Know the difference between Federal and Private student loans. If you have to take out student loans, take out federal ones first. Federal loans are either subsidized or unsubsidized. Subsidized loans do not gain interest while you are in school, unsubsidized loans do. Private loans generally have higher interest rates and they also gain interest while you’re in school. It is important to pay any accrued interest while you are attending. Once you enter repayment after your grace period, any unpaid interest will be capitalized. That means it will be added to your principal balance and you will end up paying interest on that unpaid interest. This will continue to balloon your balance. Payments go to interest first and it may take you years before your balance is reduced by a significant amount.
Do not get a co-signer (and never be a co-signer). The co-signer is just as responsible for the loan as the primary borrower. If you can’t pay, your co-signer will have to or they will face default with you. It can be difficult to get a co-signer removed from student loan debt. Just don’t do it.
Don’t let your parents take out a Parent PLUS loan. These loans have very few repayment options and many wind up in default. Our parents are older and may have their social security garnished! Don’t let them take out loans to pay for your education!
As I mentioned before, borrow wisely. Your payments should be affordable if you only borrow about 1/3 of the total cost of your education. I’d hate to see anyone wind up paying 50% or more of their income towards their student loans!
Default is bad. Federal loans can garnish your wages, up to 15%. Private loans can do this as well but need to take you to court first. Default can tack on additional fees up to 25% of your balance. You can rehabilitate your loans but it usually takes 9 months of payments to your lender’s pockets.
Student loans are very hard to discharge in bankruptcy. You have to prove “undue hardship” which is difficult to do unless you can prove you can never work again or that you’ll never be able to pay off your student loans.
THE BOTTOM LINE
PLEASE avoid student loan debt like the plague! If you have to get student loans, borrow wisely! Educate yourself about them to avoid making the same mistakes I did! If you have children who are thinking about college, educate yourself and share what you learn with them. 25 years is a long time to be weighed down by insurmountable debt!