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Avoid the college debt burden |
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Written by David Beck
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Tuesday, 27 March 2007 |
Student loans have overtaken grants as the primary form of financial aid for undergraduates. While tuition costs have soared, government support for higher education, other than student loan programs, has diminished. Our government no longer really helps people pay for college, it helps them get into debt for college.
A college education is virtually a prerequisite for a middle class standard of living. However, leaving college with a high debt burden creates anxiety over how the loans are to be repaid. Instead of being able to emerge from college and consider lower paid work in a job they love, or in public service - teaching for example - new graduates must take a job that pays down the debt.
Most middle class Californian families exceed the income levels for government Pell and FSEOG grants. So other than the parent’s savings and the occasional scholarship, there seem to be few alternatives to student loans. It is argued that since you can take out a loan for a college education but not retirement, it makes sense to do so rather than use retirement savings. Most families go no further than this in their thinking. They receive the financial aid package from the college they have settled on, and apply for loans to cover any shortfall, grateful for the subsidized interest rate they, or the student, will pay.
Is there really nothing else to do? No - there are many strategies that move assets and income around with the express goal of reducing the family’s tax burden. Other strategies maximize the direct help from the institution. Cost considerations should be part of the college selection process from the start. Unfortunately, this kind of sophisticated analysis is beyond most financial planners, let alone the average family. It is an example of when specialized advice can pay for itself many times over. We urge you to consider such help if you have college bound children, especially those for whom college is in their immediate future.
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Last Updated ( Tuesday, 27 March 2007 )
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