Is it possible to get an education without debt?
It takes planning, shoe leather and a focus on what you want to accomplish to emerge from college debt-free
Education is society’s silver bullet. Not only does it make us better as a whole, but it makes us better employees and business owners and it can lift people out of poverty. But what is the purpose of education? Are we educating our children to increase their overall knowledge? Or, are we expecting that they will get a job in their field after college? Usually, we're doing both, but we often don’t like to admit it.
Is the answer always a four-year college?
There is a new debate entering financial circles talk, among both families and students: Does it make financial (or other) sense to attend a four-year college?
In today’s dollars, an average in-state college education costs $25,290 including tuition and room and board, according to the College Board. With a projected 4% inflation rate, in 10 years, college will seem astronomical. Private schools are two to three times more expensive.
Is college worth the price tag?
If you have a young child, you might already be asking yourself if you can, or even should, pay for college.
As a parent, you must decide how much you’re willing to pay for your child’s post-secondary education, keeping in mind that this is not your only financial goal. Here's the first step: Determine an amount that seems appropriate for you based upon your financial circumstances. Then, when appropriate, share that amount with your child and discuss ahead of time any strings you’re putting on the money.
Non-college career options
There are many options for good careers without a four-year degree. Not everyone is suited for college. In fact, many go to college and rack up substantial debt without ever getting a degree. The real issue is assessing the desires and skills of your teenagers and helping guide them to the right future, be it college or technical school.
Careers that don’t require degrees include plumbers and electricians, hairstylists, carpenters, customer service personnel, bookkeepers and mechanics — the list is long. Most trades require training and apprenticeships, so there is still cost but it is often more manageable and directly prepares the student for a job.
A four-year college is a major financial commitment for both the student and the parent. You should both be convinced that the student is motivated to complete college and that college now is a better option than a technical school or working for a couple of years before college to figure out what they might want to study.
Bringing down the cost of college
There are several techniques that help bring down the cost of college.
First, find the right school. It may not be the one with the lowest tuition, but it may have the lowest net cost after financial aid. Consider a local or community college for the first year or two; you can get the "basics" out of the way for less tuition and because you can live at home, you can save a bunch.
Second, drill down on financial aid. It starts with the Free Application for Student Aid (FAFSA) – be sure to fill it out early. It opens the door to almost all financial aid including grants, scholarships or work-study options. And only apply for grants that don’t have to be paid back.
There are accessible federal grants, but there are often state- or school-based grants as well. Start checking out what might be available for your student while they are still in high school to get an idea of how to qualify. There are numerous scholarship finders on the internet. Keep in mind that not all financial aid is need-based, so do your research, because even if you think you won’t qualify, you might be surprised.
Look everywhere for financial aid options, there are many unknown sources of financial support including financial aid officers at the high school or at the desired college(s). Often, companies and organizations offer industry-based scholarships. A journalism student can score a scholarship from the national journalism organization; an engineering student can apply similarly to associations that offer financial support to students studying in their discipline.
So, is it possible?
Whether you choose college or technical school, it may be necessary to take out student loans to help pay for the education. Keep in mind that you will be required to pay back student loans. It’s tempting to think, "I’ll make a lot of money so having $200,000 in student debt is no big deal." Instead, think about what your first job might pay and try to limit your monthly loan payment to less than 10% of your projected income.
Keep in mind that all loans are not the same. Federal loans have a fixed interest rate for the life of the loan. They may also defer interest until you graduate, which can save you thousands, and they may also have more flexible repayment plans.
Private loans often have higher, variable interest rates and interest is typically not deferred while you’re in school. You may also be able to borrow more money with a private loan, but you should really think about if it’s a good idea.
It is possible to get an education without incurring any debt, or at least with keeping the debt at a bare minimum. It takes planning, shoe leather and a focus on what you want to accomplish to emerge from college debt-free.
Disclosure: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please consult your financial advisor regarding your specific situation.
Teresa R. Sanders, MBA, RICP, CFP, is a partner at Aspen Wealth Management, Inc