The Downside to Student Loans
By Kimberly L. Jackson, M.Ed., August, 2011
This seems to have been the week to hear and read horror stories about people who in their pursuit of undergraduate or graduate degrees took out a mountain of student load debt, achieved their degree but have not been able to find a job that allows them to pay off the $25,000; $50,000 or $100,000 + in loans.
I am against student loans. I’ve had them, I still am paying on one, I believe they are a good option in paying for a college degree. What does concern me is the naive way students sign their names on the loan paperwork and not think about the repercussions when repayment begins. This is a good example of "for every action, there is an equal and opposite reaction”. It’s also a good example of lack of financial education.
I’m not looking to place blame on the institutions of higher learning or on the student. What I do want to do is remind everyone that paying for college means planning, sacrifice and maybe working a part time job you would not normally consider (for both the student and the parent). What do I really believe needs to happen? Required financial planning!
Financial planning needs to be required of every student that chooses to take one or multiple loans to finance college. Will loan counseling take more time for colleges? Yes, but since students should be first priority then colleges need to make this a priority. Should the student think about life after loan disbursement? Absolutely, as should parents of those dependent age students.
Before taking out all of the loan dollars available, students and parents should be asking themselves how expenses can be cut to free up money now to pay for tuition, if another job is a better option to pay for college costs or even a question as simple as “how large of a monthly payment can we afford when paying back student loans”? Talking to a professional in a college financial aid office is the first place to begin. Once a person or family understands the amount of loans that will need to be repaid then find a financial planner that can help come up with the plan of how to work these repayments into the monthly budget. Why is this important? Because student loans are never forgiven, not even in bankruptcy. They follow a person until they are repaid.
It is better to have all of the information in the beginning about loan repayment vs. being caught with a startlingly bad surprise once the celebration of a college graduation has passed.
