As a parent, you are concerned for your child’s well being and eventual success in life. For most people, this vision usually includes some type of college. The word college can be overwhelming to some parents, since in order to start saving for college you have to start early in your child’s life. You might not think it is important to save for your child’s education. If that’s the case, are student loans what you will rely on?
The Price of College Then and Now
The cost of college is increasing. In 1950, the University of Pennsylvania tuition cost $600. Fees were $25 and books were $50. In 2014 the costs are a little different. For a state school and in-state, one year of tuition is around $5,000. Out of state tuition is around $12,000. These amounts only reflect tuition, not fees, books, living expenses, etc.
To receive a four year degree from a non private, non Ivy League, in-state college, it will cost the average student at least $20,000 in tuition.
The Reason Student Loans Seem to Be the Answer
There are reasons so many students depend on student loans to get them through school.
- They don’t have enough money to cover the cost of education.
- By obtaining a loan they don’t have to worry about working while going to school. They can focus entirely on their schooling.
- The interest rates for student loans are lower than other types of loans.
- Student loans are not required to be paid back until you have finished all your schooling.
- Taking out student loans can help you build your credit score. It can be hard for young people to obtain a credit card so managing your student loans properly can help build that necessary form of credit.
- Some student loans allow you to postpone paying them back if you come into financial hardship or unemployment.
These reasons make student loans appealing. You think you can finish school, get the high paying job and then pay back those loans easy, right?
The Forgotten Facts about Student Loans
The problem with obtaining student loans is you are essentially living on credit. You might assume you will be in a better situation to pay back the loans a few years down the road, but you might not. According to USA Today, the average amount of student loans is $25,000. Add that amount to a mortgage payment, car payments and other living expenses and you have to be making great money to meet all those needs.
People might think they can take out loans and then if times get tough, they can file for bankruptcy and get out of their loans. The Washington Post says that is a major misconception among college students. In order to have your student loans washed away, you have to meet “harsh and high standards” set by a case in New York over 20 years ago. In 2008 there were 72,000 federal student loans filed for bankruptcy and only 29 succeeded in obtaining full or partial discharge of their loans.
Once you take out a student loan, be prepared to pay every penny of the loan back, plus interest. Make sure your decision to obtain that loan is worth it.
Research the Costs
An education is always a good investment; just make sure you do your research before you decide to take out student loans. If money is an issue, choose a college that doesn’t cost as much, or look into scholarships. Be aware of the changes possibly coming for student loans through congress. Do the math; calculate the numbers and understand how much you will be required to pay back in interest on those loans. Student loans are not all bad, but taking one out without fully understanding the costs and the risks can be!