My parents both were the first individuals in their families to obtain higher degrees. And between them, they have multiple degrees. They accumulated student loans out of the wazoo. It took them a long time to pay them off and the cost of other things they could have done with the money was high. Because of this, they decided it was an important priority for them to help my brother and I through school financially.
Their goal was to pay for our undergraduate degrees, because they believe education is that important. They knew how student loans had held them back in certain ways and they wanted us to be in a better position when we graduated.
I still worked during college and did what I could to earn scholarships and help with the bottom line, but the reality is that my parents carried the brunt. During college I don’t think I appreciated their financial support as completely as I should have. After getting out of college and having a job where I barely made ends meet — and that was without a huge student loan payment each month — was when I became truly appreciative.
I will always be grateful for the choice they made to help me.
Student loans: A small price to pay
When Mark and I met, he had a good job. He was working as a manager within a then medium-sized public company. He made a little more than I did, but not significantly. He had obtained his two undergraduate degrees in Accounting and German. During undergrad he had studied abroad for a full year. He completed his MBA almost simultaneous to when we met.
He, like my parents, was the first generation in his immediate family to get a four-year college education. His grandma was an important influence on him and continually told him that he needed to stay in school and go to college. His parents hadn’t saved for his education, so he took out student loans to make college a reality.
He had, in my opinion, student loans out of the wazoo.
It was a little scary to me. I didn’t have student loan debt; I didn’t have debt of any kind to be honest. I had this sense that student loans are this heavy thing, they weigh you down and take away opportunity. One time we were talking and he completely changed my thought process on student loans.
He saw his student loan payment as a sign of the opportunity he was afforded. Without student loans, he wouldn’t have been able to obtain the job he held at the time or create the job opportunities that he’s had since. He likely would have stayed in the small town he grew up in (for which there is nothing wrong with but wasn’t his dream) and worked a much lower paying job. He wouldn’t have traveled all over the world for professional purposes, which is something to this day that he is proud he did.
These opportunities in his adult life were not possible without those loans.
So, instead of feeling weighed down by his student loans, he was thankful for them. His monthly payment was what he considered the small fee he had to pay for the salary he earned and for all of the wonderful experiences that he got to experience.
From his perspective, it was a small price to pay.
When debt is a good thing
One tenant in personal finance is that there are three reasons for which it is reasonable to go into debt:
- Starting a business
This debt is an investment that can provide significant returns in your future. Mark reminded me that what he had done was to make an investment in himself and for that he would never be sorry.
My guess is that you’re probably in the stage of life of paying off debt. Don’t begrudge that payment. While we may not be in that stage of life, though, I think it would be a missed opportunity to not talk about some best practices with respect to student loans. We need to help the next generations with student loans. I know there is a lot of political talk about what to do with student loans. The reality today is that student loans exist and the cost of higher education is going up.
Let’s push the next generations to be mindful about their use of student loans.
Mindful student loan debt management
I think our generation filled out the FAFSA and generally just took all the money that was offered. While for some people this may be a necessary option, there are other ways to look at financing education.
Here are a few rules of thumb when it comes to the time to take out student loans.
Consider grants, scholarships and work-study programs first
Grants, which don’t have to be paid back, and scholarships are the cheapest way to pay for college. They directly reduce the bottom line of college education without creating debt. Additionally, work study programs generate revenue for college students and likely provide relevant experience to put on a resume.
So, push your kids, nieces, nephews to seek out grants, scholarships and work study programs.
Don’t get a loan ‘just because’
Just because a loan is offered doesn’t mean it must be taken out. If the cost of credit hours, housing, books, and the amount needed to survive (and have a little fun!) doesn’t total the amount of loans offered, encourage the next generation not to take out the extra amount.
If they don’t have it, they won’t spend it on unnecessary things. Paying for things that weren’t needed is one thing, but paying interest on those things for years in an additional layer we want to be aware of!
Be strategic about your education plans
Education has a purpose: to learn skills and to get a diploma. If you know someone who is a career student (who enjoys going to school even though the additional education is not going to add to their bottom line), help them get out of that cycle and don’t encourage them to take out more loans to go back to school.
We all know people in careers for which their studies may not be directly aligned, so it shows that career students can, instead of doing more school, figure out how to align the skills they do have and evidence their passion for the new field in order to eliminate the need for additional education.
If there is a very specific skill set needed, more education could be valuable, but encourage them to be strategic and make sure it’s truly necessary to fulfill their goals.
Get in and get out
Encouraging others to take steps to minimize the amount of time spent in school is key. As I started college, it increasingly became popular to take a “victory lap”, or five years, to complete a degree that was designed to be completed in four. I thought that was incredible.
First, my parents wouldn’t have supported a fifth year of college just because. Second, why sit around somewhere when your friends move on to the workforce or a master’s program? Third, why take on an extra year of debt when instead you could use that year to earn money or gain additional skills?
That extra year, in my opinion, is a year behind. I get it, it is college and it’s fun, but so can being an alumnus!
Minimize the cost of credit hours
Along these lines, let’s encourage people to minimize the cost of credit hours. Traveling overseas for courses that can just as easily be obtained in the states to me makes no sense. Let’s travel on our own dime, so that when we are overseas or wherever we can do what we want, when we want and not pay a premium for housing and credit hours.
The one caveat I will say to this: Mark studied overseas for a year. That directly translated to him being offered a job traveling the world because he could speak two languages and could display how comfortable he was being in new and foreign places.
If there is a strategic purpose for studying abroad, then that’s great. But if the purpose is to spend a month of the summer in Europe, we should push on the person to see if that is the best use of time and money as a college student. Studying abroad is very expensive.
- Student loans are an investment in ourselves.
- I will push the next generation to be more strategic with their use of student loans.
- Student loans are only one resource for paying for college.