It’s Time to Get Real About College Loan Debt

With tuition rising every year, it’s common for parents and students to take out loans to pay for college; but is this a wise financial decision? Will you or your student be able to repay the loans? Are the job prospects after college guaranteed and will the job have a high enough salary to pay for those loans? Before accepting the offer of college admission, evaluate your options and involve your student in the decision.

What parents have to think about

As a parent of two children who went to college, I have experienced all this frustration first-hand: the decisions about choices, the dilemma over financing, and the anxiety related to waiting for the financial aid packages to arrive. Possibly the most important decision about college is the financial aspect. This affects your student’s future debt acquired from federal and private student loans. It can also affect your debt if you choose to borrow either federal parent loans or private loans to pay for their education.

How does this translate practically as you make decisions about which college your student will attend? My daughter’s decision to attend her second-choice college was precipitated by comparing financial aid offers. After being accepted to her first choice college, we waited for the financial aid award to arrive. In the meantime, awards from the other colleges she had applied to filtered in. She was offered a full-ride scholarship at one school; 80 percent of her financial need was met at two of the other colleges with grants and scholarships. She receieved at least some small grants and loans from the rest of her college choices. Disappointingly, her first choice college offered no financial aid other than student loans.

It was time to be realistic about her future student debt. She wanted to attend her first-choice college. But, in order to attend, it would require financing the expensive education with loans – both federal student loans and private loans. My common sense knew it would be a financial disaster. I sat her down, explained why this college was out of our financial reach, and she listened.

What students need to think about

Even though she was young and inexperienced regarding budgeting and financial planning, she accepted my advice. She was willing to lay aside her dream and make a tough, yet realistic decision. The college choice should always be made with finances in mind. Students need to be willing to be realistic. Colleges and loan companies are more than willing to offer loans to pay for college. The process is simple: Sign on the dotted line and you have the loan.

My daughter’s story does have a happy ending. She fell in love with her second-choice college. It was smaller and offered a much better environment for her academically and socially. Most importantly, the college wanted her to attend, as evidenced by their willingness to give her financial aid. But the real payoff came when she graduated with only a small amount of college debt, being able to easily pay back the consolidated loans. Had she attended her first-choice college, she would have graduated with close to $100,000 in debt, burdening her for years.

The bigger picture

When it comes to college, students are thinking with their hearts. Parents should be thinking with their heads. Have a serious discussion about college and finances. Decide how much you can afford to pay, how much you expect your student to pay, and also encourage applying for scholarships to supplement those figures.

Use loan repayment calculators to get an idea of how much the loan payments will be after graduation. Evaluate the financial aid packages and always consider the best offer, even if it’s disappointing for your child. Parents must practice some tough love. Disappointments are much easier to deal with than being saddled with debt after graduation.

[Want more tips from the TeenLife Experts? Here's 5 Q's you should ask the financial aid office.]