By Erin Tigro
How Much Is Too Much?
Movies, TV shows, magazines and books often glamorize college as a 4-year VIP pass to parties, social clubs, sporting events and other networking opportunities. And somewhere along the way you earn a degree that should change your life for the better. But is the cost to attend college really worth it? It is important to note that in the midst of our country's economic hardship, those with a college degree have fared best. However, according to The New York Times, in 2010, individuals who graduated from a 4-year institution with student loan debt left owing an average of $24,000. The costs don't end there for those who want to attend graduate or professional school. Also, this figure doesn't take into account higher balances that may come about as a result of compounded interest, which you may be subject to if you defer your loans or fail to pay.
How Student Loan Debt May Affect You in the Future
College tuition rates are rising, which will arguably raise the student debt in this country. Not surprisingly, student loan default rates have also been on the rise. In fact, another article published in The New York Times indicated that student loan debt exceeded U.S. credit card debt for the first time in 2010. In addition, various publications have noted the predicted economic impact from these exorbitant and seemingly perpetual bills. Because many graduates may take more than a decade to pay back their college fees, they may not be able to spend their income in a way that would stimulate economic growth. They may decide to push back major purchases, such as a buying a home. What's more, this huge debt will undoubtedly affect other areas of personal finance, including savings, investments and retirement planning.
Find schools that offer these popular programs
- Biological and Biomedical Sciences
- Communications and Journalism
- Computer Sciences
- Culinary Arts and Personal Services
- Liberal Arts and Humanities
- Mechanic and Repair Technologies
- Medical and Health Professions
- Physical Sciences
- Transportation and Distribution
- Visual and Performing Arts
Costs to Attend College
In 2011, the not-for-profit organization College Board indicated that for the previous decade, required fees to attend 4-year schools increased more than five percent above the rate of inflation. While the costs to attend college remain high, many students are able to qualify for subsidized tuition schedules as a result of grants and scholarships. The following stats reflect the average tuition and fees for the 2010-2011 academic year, prior to any financial assistance:
|Type of Postsecondary Institution||Average Tuition and Fees|
|Public 4-year||$7,605 (in-state)|
|Public 4-year||$19,595 (out-of-state)|
|Private, nonprofit 4-year||$27,293|
What Can You Afford?
If you're just starting college, decide what you want to major in first. Don't waste time taking classes that may not even apply to your major. All you'll be doing is running up your tab. However, after you've decided what you want to study, do some research and find out how much you can expect to earn with the type of degree you'll be pursuing. Famed financial advisor Suze Orman indicates to work backwards and calculate how much of a monthly payment you would be willing, comfortable and able to make after you graduate, taking into account living expenses and other anticipated costs. This may prompt you to reconsider your career path, but it will also help you figure out a total loan amount that you can afford. The U.S. Department of Education and websites like FinAid offer student loan payment calculators to help with this.
Paying Off Your Debt
If you graduate college with federal loan debt, you may be able to discharge your remaining current balance after ten years by working in public service. After 25 years of paying, you may also be able to quash the remaining balance. Other than that, there aren't too many choices to get around paying off your balance in full. Student loan debt is typically not dischargeable in bankruptcy. What's more, if you fail to make your payments and don't arrange a workout plan, your income tax refund or wages could be garnished.
Continue reading for tips on how to pay down your student loan debt.