As startling as these college stats are below, it reminds me of a phrase that I often use with clients who plan to help put a child through college, “you can always get a loan for college but you can’t get a loan for retirement.” However, some people I believe potentially miss my point.
There has to be a conversation between sponsor and child way before you get to the college years. Conversations that include;
- What is affordable and what is not
- Majors that can support a given level of student loan debt and those that cannot
- What is a realistic sense of the value that a college degree at a specific institution could provide
For example Harvard may be a great place to receive a degree and an honor to be accepted into, but if you are pursuing a career in teaching, going far into debt may not be the best decision to go along with that career choice. Everyone needs to consider the return on investment that college provides.
Adam Zoll of Morningstar offers 8 College-Planning Tips From the Car-Buying World. Pay close attention to his point; Don’t Buy More Than You Can Afford.
Student Loan Debt basics:
- $1.2 trillion — the estimated amount in outstanding student debt
- $260 billion — what that amount was in 2004
- 37 million — Americans with student loan debt outstanding, according to estimates from The New York Fed
- $28,000 — The typical 2012 college graduate’s debt load upon Graduation Day, according to Hamilton Place Strategies
- $9,000 — That debt load in 1993
- $810 billion and $670 billion — The total outstanding auto and credit card debt held by Americans, respectively, putting student debt into a clear lead.
The default rates:
- 13.4% — the national default rate for borrowers whose loans entered repayment from fall 2009 – fall 2010. (This is the first year for which the government has released three-year default data.)
- 22.7% — defaults in the first three years for graduates from for-profit colleges. “For-profit institutions had the highest average three-year default rates at 22.7 percent, with public institutions following at 11 percent and private non-profit institutions at 7.5 percent,” according to the Department of Education.
- Nearly 47% of all defaults were from for-profit colleges, the Institute for College Access & Success said, even though those institutions have just a 13% share of college enrollment.
If You Are Applying for Financial Aid
If you are graduating from high school in 2015 or you’re already in college, you need to submit the Free Application for Federal Student Aid (FAFSA). To get the most assistance for college, your application needs to be turned in by March 1. You do not need to pay money to complete the FAFSA. The FAFSA is FREE, so if a website asks you to pay to fill it out, you’re not dealing with the official FAFSA site.
For Michigan residents please see this link for more information about completing the FAFSA form in addition to other forms of free aid for college. Be sure to go to this Sallie Mae site for Scholarship opportunities.