Avoid the college debt trap
For many college students, debt is a fact of life. But does it have
It's not as if student loans and
big credit card balances are mandatory graduation requirements.
You don't have to borrow your way through university.
In fact, it's possible to graduate
from college debt-free, but it does take a lot of work. And you'll
have to buck a financial system that all but encourages students
to dive into debt.
"The credit card people are
just jumping all over them," says Gordon Wadsworth, author
College: Creative Ways to Pay for College and Stay Out of Debt.
"The university people are
there with student loans. They call it financial aid."
Indeed, according to the College
Board, 54 percent of the $105 billion in financial aid distributed
in the 2002-2003 school year was for loans.
And it's never been easier for
college students to get credit cards and pile up balances. Those
who used credit cards to pay for part of their education reported
an average credit card balance of $3,400 at the time they left school
compared to an average balance of $1,600 for all students with a
credit card, according to Nellie Mae.
Go where you are wanted
How can you avoid the student debt trap? Start by attending a school
that wants you.
"Students should apply where
they're looked upon as a real asset. In other words, they want you,"
Wadsworth says. "If you're recruited by a school, it doesn't
matter if it's an Ivy League or lower league school. They're going
to make sure you get in without loans.
"Find a school that wants
you vs. a school that you want. I know that sounds rough. The students
don't like to hear that, but the parents do."
Another great way to cut college
costs is to attend
a community college for two years. Earn your associate's degree
at a school close to home and then transfer to a higher profile
school in your junior year.
"Suppose you score all A's
in those courses," Wadsworth says. "There's a possibility
you could get into a big name school."
This is a great strategy for students
with uncertain career goals.
"Often times college students
find themselves not knowing what they want to do," says Michael
Darne, director of business development at wiredscholar.
"Does it make sense for them
to pay $19,000 a year at a private school as they try to figure
Does it make sense to attend a
private school at all? Those hallowed ivory towers come with a hefty
price tag. Attending a public university can save you a bundle.
In the 2003-2004 academic year,
the average cost for tuition was $19,710 at a private university
and $4,694 at a public university, according to the College Board.
Earning a four-year degree would cost $60,064 more at a private
college. The red, brick buildings at a state university are looking
better all the time.
If you're keen to attend a public
university in another state, you may want to consider establishing
residency in that state before starting school. That way, you'll
avoid paying out-of-state tuition charges, which can really add
Let's look at the undergraduate tuition costs for
the 2003-2004 academic year at the University of North Carolina
at Chapel Hill. A North Carolina resident would pay $4,072 for tuition
and fees, while an out-of-state student would pay $15,920. Over
four years, an out-of-state student at UNC would end up paying an
additional $47,392 in tuition and fee charges.
AP tests can save you money
Taking advanced placement courses in high school can also help knock
down college tuition costs. Say you're in AP history class. If you
pass the AP exam for American History, that's one less class you'll
need to take freshman year at college.
"If you're on an AP course
or track in high school taking the exams doesn't take that much
more effort," Darne says. "And you're not going to have
to pay for those three credits of World Civilization."
The more AP exams you pass, the
less general education or core classes you'll need to take at university.
"Students have told me they'll
be sophomores going in because they've done so well with advanced
placement classes. So that's a great way to do it," Wadsworth
And let's not forget about scholarships.
High schools students should apply early and often.
"High school students can
start looking as early as their freshman year," Darne says.
As a high school student, Benjamin
Kaplan won scholarships worth almost $90,000. He graduated debt-free
from Harvard in 1999.
"If I could do this all over
again I would have started in seventh or eighth grade," says
Kaplan, who wrote How to Go to College Almost for Free.
You don't have to be a star student
to land a big scholarship. One of Kaplan's biggest awards, a $17,500
scholarship, called for a 2.75 grade point average or better.
"Whether you had a 2.76 or
a 3.9, it didn't matter once you passed that minimum bar,"
Kaplan says. "One of the big myths is you have to be an academic
whiz to get these awards, and that's just not the case."
On the scholarship trail
The Web is a great way to track down scholarships. Check out individual
college Web sites, and search for scholarship sources on sites such
Board and Wiredscholar.com.
Avoid sites that charge you to search for scholarships.
Don't overlook local sources of
scholarships. Community-based awards may be smaller, but they're
also easier to win. You can learn about local competitions at the
public library and at the guidance office at your local high school.
Your scholarship hunt shouldn't
end when you leave high school. Plenty of college scholarships are
targeted toward upperclassmen and graduate students.
"It doesn't end and it doesn't
have to end once you graduate from high school," Kaplan says.
"No matter where you are along the educational path there's
scholarship money out there for you."
And if you don't manage to land
a lot of free money from scholarships, you can always earn money
on your own with a job.
Some students work their way through
school. They go to school when they can afford the tuition. When
they can't, they take the semester off and bump up the hours at
their off-campus jobs. It may take them five or six years to graduate
but when they do, they'll be completely in the black.
Other students work summer jobs
or part-time jobs during the school year. Some students take on
work-study jobs as part of their financial aid packages.
Don't overlook co-op programs.
Several hundred colleges and universities offer co-op programs that
combine classes with work opportunities in a student's area of study.
With some programs, a student will take classes for a semester and
then work for a semester. In other programs, a student's day is
divided between work and school.
Wadsworth says students can earn
as much as $14,000 a year toward college tuition costs through a
co-op program. It may take a co-op student an extra year to earn
a bachelor's degree, but they'll have some great work experience
to go along with their diploma.
"I always encourage parents
to encourage their students to work. It's so productive. It does
so many things," Wadsworth says.
"If you can work, help yourself
out and work."
As a 25-year-old college senior,
Wadsworth worked 35 hours a week at an ad agency.
"I got my best grades ever.
As a matter of fact, I went to class with my suit on," he says.
"I didn't have time to play. I didn't have time to be hung
over every Friday and Saturday night."
Working also helps students gain
valuable money management experience.
"If you're bringing money
in, you're also aware of it going out as opposed to just ringing
up debt on a credit card," Darne says.
Too often, college students get
stuck in a when-in-doubt-borrow mentality. Their credit cards get
quite a workout, and the credit card companies rack in the interest
Kaplan, who scored so big on scholarships,
used credit cards sparingly. He only charged what he could pay off
at the end of the month. There was no way he was going to pay a
card company 18 percent interest.
"You want to avoid financing
college with credit cards," Kaplan says. "Financing college
with high interest debt is the worst possible thing."
-- Updated: Jan. 6, 2004