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College as a “Financial Decision, not a Rite of Passage”

A little forethought before taking student loans can help students and families understand all the effects of their decision.  As Sue Shellenbarger reported in the Wall Street Journal, 4/17/2012, “[approaching college choices] as a financial decision, rather than a rite of passage” can help families make responsible decisions.

[Consider the] Potential consequences of taking out too many student loans

–Delays in buying a car or purchasing a home

–Postponement of marriage and childbirth for financial reasons

–Parents feel pressure to take out loans or otherwise help with payments

–Risk for parents who co-sign loans of losing homes, cars and other assets

–Little ability to discharge student loans in bankruptcy

–Inability to get credit cards or home or car loans

–Inability to rent a home because of high debt-to-income ratio

–Being forced to deal with private collection agencies in the event of default

–Having liens placed on bank accounts or property in a default*

–Facing collection fees of 25% of amount owed in a default

–No statute of limitations on collection efforts

–Having wages garnished

–Possible loss of state-issued professional licenses

–Reduction of Social Security payments**

–Seizure of tax refund**

*Used primarily by private lenders

**Government loans only

2 Comments on “College as a “Financial Decision, not a Rite of Passage”

  1. Debt is income brought forward. Always look to acquire debt that seeks to acquire something of real value, which will produce a future cash flow (income in this case) that is greater than the total cost of the debt, (interest, principal and inflation) to be paid for out of future income.

  2. Honest and straight forward conversations can be a vital part in helping both the parent and student understand the possible risks of taking on student debt(s), not to mention the plethora of offshoot questions, expectations, and conversations that, for some, may add complexity to an already difficult topic.

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