Post-college debt?

[The David]

I'm looking into private colleges right now. If I go, I'll have to get a lot of loans. Is there any advice you can give me? For example, what would be a reasonable debt for someone making 30k a year?

[alexander.kharlamov]

What you have to remember is college debt is "good debt". If you take student loans, your best bet would be to consolidate them soon after graduation. This way, you lock up a fixed interest rate of your loan, that is usually very good (i.e. low). I'm not sure what the rates are right now, but a year ago I was able to lock up a rate of 4.125%.

If I put money on my savings account, the interest will be 5% - that's why college debt is "good debt", as compared to, for example, credit card debt, where usually, your rate will be something like 15-20%.

Also, remember that average earnings for someone with a college degree are, generally, much higher than for somebody without one. So, basically, you'll be making an investment in yourself, that is going to pay off later, when you'll be able to work a job that pays a lot more. And you'll do that while getting a very good rate on the loan.

So, I guess what I'm trying to say is: go for the private college! Don't worry about debt, it's "good debt." Focus on getting education that will allow you to get a job of your dreams.

[The David]

What about 50k (in debt)?

...for an English major?

[andrew]

I don't know if I'd say any debt is good, but it sure isn't as bad as most.

I'd suggest community colleges and financial aid as much as you can do, 50k is a lot of money to be in debted to. Though you could pay that off qucik if you get a good job and don't have a family.

[Wreck]

Dave Ramsey (and many others) frown on any debt at all. I agree with Kiyosaki and others who believe that debt for a college degree is an investment for your future and if you have to borrow to get your degree, then that's just the way it is.

However, I think someone should come up with a formula for amount borrowed vs. potential earned income. Maybe 10% of your potential income for the first 5 years? As mentioned, student loans get really good rates - as long as you pay your bills. But miss a payment or defer too long, and they'll stick you with credit card like rates. A good friend of mine is experiencing this first hand.

The biggest thing to remember is, you don't want to be a slave to this debt. Be sure that the amount you borrow vs. the amount you can potentially earn is such that you can pay off the debt quickly and easily.

[Cassie]

I completely agree with Wreck. Be smart about debt if you're borrowing, and make sure it's not going to be a huge burden to pay back. Don't be sucked into biting off more than you can chew, so to speak.

If you apply yourself, it doesn't matter what school you go to. You'll be successful.

I'm going to a 20k per year fancy private uni now on scholarship and grants. I have to say I'm disappointed overall with the quality of education though.

[The David]

Does anyone know anything about DePaul University?

[duhshuh]

If you're looking at minimizing your student loans make sure you do your research! There really are a lot of options and opportunities, but it will take some work to dig up the info. Scholarships are always good.. but I'd do some comparison shopping too. I went to a private school for 3 years and although it was cheaper than most of the larger state universities I could have saved some real money if I had went to a community college for the first part of my education. In fact, I would have been paid to go to school.... sigh

[Erik Mazzone]

For my $0.02, I would say, go to state school. Private college tuition has been increasing out of all proportion, due mainly to the readily available student loan. I agree that borrowing for your education is probably a good investment, but not borrowing the increasingly exorbitant amounts required for private school.

For what it's worth, I went to both private college and law school, received the advice to consider state school, and blew it off. I was an English and philosophy major, as well, and there is virtually no ROI on that action. The end result: it took me a long time to dig out of the hole I didn't need to put myself in.

The absolute best advice I can think of on the subject though, is to follow one of Stephen Covey's habits: begin with the end in mind. Don't think about college as the end in and of itself. Think about where you want to go, what you want to achieve in the medium to long term, and then make the best college choice you can to help you get there.

Good luck!

[The David]

What would you recommend to someone who pretty much hates the state they are in?

[Wreck]

Originally Posted by Erik Mazzone

The absolute best advice I can think of on the subject though, is to follow one of Stephen Covey's habits: begin with the end in mind. Don't think about college as the end in and of itself. Think about where you want to go, what you want to achieve in the medium to long term, and then make the best college choice you can to help you get there.

This is great advice. I probably need to familiarize myself with Covey.

[Vanessa]

Depending on the private college it may not be any more expensive if they have generous need based scholarships and grants.

Have you already figured out your estimated financial aid contribution? That will help you gauge what kind of need based gift aid you qualify for. In addition to any private scholarships, grants and loans you apply for.

One of the things that has been mentioned here is to begin with the end in mind. Can you identify what it is you're looking to get out of your education? Are you going for a particular major, for strong connections, for a particular learning environment, what kind of student body do you want to be a part of?

I did my undergrad at an expensive private college --38k a year. However, they gave me a need based scholarship and it ended up being cheaper than attending any of my state school options. It fit exactly what I was looking to get out of education and open the door to my longer term goals.

There are plenty of financial aid calculators that will help you get an idea of what you will owe after you graduate with a particular starting salary. But those are guidelines. Keep in mind that federal loans are always better than private loans (in interest rates, repayment plans, life of the loans).

Good Luck!!

[Erik Mazzone]

Originally Posted by The David

What would you recommend to someone who pretty much hates the state they are in?

Most of the time you can attend a state school in a different state, and the "out of state" tuition will still be substantially cheaper than private school. So, you don't need to stay in state. Also, I'm not sure which state you are in, but there are a lot of cool college towns in a lot of unlikely places. Growing up in NY and living in Boston for a long time, I NEVER thought I would end up living in a place like North Carolina. But I really like it here, and mostly because I live near Raleigh, Durham, and Chapel Hill -- all very cool college towns.

[Erik Mazzone]

Originally Posted by Wreck

I probably need to familiarize myself with Covey.

Yeah, I am a big fan of his. Here is a link you might find interesting:

Seven Habits Discussion Guide: Table of Contents

It's a study guide to Covey's most widely-known book: 7 Habits of Highly Effective People.

[Zero]

You are doing the right thing by asking questions about this decision.

I am very fortunate that I did not listen to the "college is an investment" and "you can take out loans" when I was deciding on a college. I chose the 2 year community college, finish up at a four year university and work as much as I could at ♥♥♥♥♥♥ retail jobs route.

If you are going to be making 30K per year at graduation, 50K in debt is a lot of money. At 5% and a 5 year repayment schedule, you are looking at almost $1000 per month. This is serious money. The student loan payments will strangle you and prevent you from purchasing a car, home or having a big wedding.

If you are interested in the field you wish to study, go to a state university, work hard and keep the debt down. For most fields, a fancy university is just sprinkle on a resume or something to talk about at a cocktail party in order to impress a chick...

[The David]

Those were basically just random numbers. There's also the option of work-study, and summer jobs. If I recall, 30,000 a year is fairly low.

[Vanessa]

I came across an interesting article, The Biggest Gamble of Your Life (Is College Worth it?)

"In 2005, young people (ages 18-25) in the US gambled $67 billion. Not in Vegas or online poker rooms, but on a betterment program called college. Their hope is that the monies they are spending will allow them to earn more money over their lifetime. Many are paying for this wager by amassing a mountain of debt that will take years to pay off. Is it a good wager? Conventional wisdom says so, but with $67 billion on the line (and that's debt accumulated in just one year by college attendees) we should have more than conventional wisdom or parental pressures to guide the way to smart economic decisions. REEF’s economic analysis shows that college is a financial mistake for more than half of the American young people today. Shielded from scrutiny in this transaction by an assumption of 'public good' are universities and college lenders who many expect to provide guidance to these young people. While the data hints at ways for some individuals to improve the odds of a positive financial outcome, half the people attending college should hear the frank counter-intuitive advice, "Don't go to college."

The analysis begins by assessing a college education purely as a monetary investment. Undoubtedly, there are other benefits beyond money to attend college, but it's such an enormous economic decision that it seems foolish to not fully understand the financial ramifications and use that as a primary factor in the decision process. Overall, college grads do have higher earnings than non-grads, but that's only part of the equation. A deeper analysis looks at the costs of acquiring that degree and the monies including interest charges which need to be repaid. (At the end of this piece is a complete listing of the data sources used and a walk through of the calculations.) Using a 40 year time career, here is the total return which look at earnings, college expenses and interest."

The article goes on to say that the rate of return would be better to not go to college and simply find a job and start investing. Very interesting idea.

Thoughts?

[The David]

Originally Posted by Vanessa

I came across an interesting article, The Biggest Gamble of Your Life (Is College Worth it?)



The article goes on to say that the rate of return would be better to not go to college and simply find a job and start investing. Very interesting idea.

Thoughts?

That is an interesting and disturbing article...however:

1. The 'investments' were way off the charts. I can name at least four schools I could attend for practically free. Even the private school investment was a stretch, unless you're going to Harvard or something.

2. There is much more to college than getting a good job. I can vouch for that.

[Lychee]

If you can go to those colleges for free, why not?

I think you should consider the state college even if you "hate" the state you're in. I would say you should consider a prestigious private college like an Ivy (or a "regular" private college you desperately want to go to) if you plan to end your education at the undergraduate-level only. It doesn't matter greatly what undergraduate college you went to if you plan on going to graduate school.

[CStrunk]

I go to a state school. It's about an hour away from Cornell. My school, Binghamton University, is where all the Ivy-Quality kids go when they don't feel like paying ridiculous amounts of money. For in-state kids, it costs $17,000 a year. I have a sweet job, however, that makes it cheaper. They give me my own room for free and pay for my food. It costs me $6,000 a year plus books. I'll either have $0 debt, or have money left over for a good grad school program. And then with grad school you can try to get an assistantship and teach or something for money.

[Nicketas]

1] There's no such thing as good debt, only good wealth.

2] It's only worth going into debt if you KNOW what you want to do with your life and you KNOW you are ***REQUIRED*** to have a degree in order to do it.
Otherwise? Save your cash, get a job and an inexpensive apartment and spend your spare time building an internet business doing something you love. Trust me on this....

College can be awesome, but if you don't know what degree you want or if it's anything OTHER THAN med school, engineering/IT, computer science, or intensive art training, don't bother because you will regret all of the debt you rake up. Use that money to buy a program like wealth beyond reason or six figure streams (google them) which are all less than a fraction of the cost of a SINGLE college course.

You'll always get richer (and have more FUN)working for yourself if you take responsibility for it. Always.

Ask yourself these NECESSARY questions:

What are you getting for your 30 grand?
Will it really make you wealthy?
Is it really the golden ticket it is supposed to be?
Is it REALLY necessary in order to do what you want with your life, or are you able to do what you want at home and still make a living off of it? Be honest and more importantly VASTLY OPEN MINDED about this.

It's YOUR LIFE.


P.S. You need to keep in mind that this is coming from someone who absolutely loved his college experience. I owe a big portion of my personal growth to college, and it was arguably the best time of my life.... but also the most financially stressful. In hindsight, I could have had similar experiences but without all of the debt.

If you can have your cake and eat it to, and you know its what you want, go for it. Just keep my notes above in mind, as this p.s. does not invalidate them...

[helgi]

One thing to keep in mind also is the general availability of information these days. A $40k a year college needs to have something very unique to offer a liberal arts student for it to pay off. For just about anything other than professions with mandatory qualifications like law, aviation, medicine or whatever, it now makes much more sense to go to an inexpensive college and focus on lots of extracurricular DIY.

If you're interested in journalism, for example, go and take a look at Corey Spring at Newsvine, currently a senior at Ohio State and already a fairly well known journalist. Do you think anyone will ever care what school he graduated from?

[Nicketas]

Originally Posted by The David

What about 50k (in debt)?

...for an English major?

Why are you majoring in English?

I'm asking honestly, because if you have a very specific profession in mind that requires an english degree, then ok.

Otherwise, you're much better off joining a book club and practicing reading/writing on your own while you read ONLY books that interest/inspire you, not whatever the professor forces you to read. You can improve your skills this way much faster than you could enduring 4 years of english college mixed with ♥♥♥♥♥♥♥♥ prerequisites.