Paying for College Without Loans

22 May

image001-5I’m pleased to feature this guest post from Bill Fay, a writer for Debt.org who is focused on news stories about the spending habits of families and government.

Student loans? Sigh.

Parents of college students know exactly what the sentence above means.

Over the last decade, college tuition, including room and board, increased 67 percent. The cost of a college education is rising so fast that few families can cover it without taking out a student loan.

Sixty percent of this year’s college graduates borrowed money to get a diploma. The average student owes $27,253 after graduation — that’s a monthly payment of $313.63 over the next 10 years. Double sigh.

I know this story well. I have two sons in college. The oldest graduated Summa Cum Laude; the other just finished his freshman year Tappa Nutha Keg. Neither of them took out a dollar in student loans. They paid about 75 percent of their school costs and my wife and I handled the other 25 percent.

The reason: Student loans have been a dinner-table topic at my house for the last six or seven years. The boys understand what debt-for-a-diploma means and neither shows the slightest interest in borrowing to get a degree.

That was critical. We all agreed the goal was to finish college without taking any loans and we stuck to that. The only options discussed were grants, best defined as money that you don’t have to pay back. The boys scrounged up enough of those to get by and, though it took a little effort, it paid off.

There are some pretty grants every student wants and a surprising number, nearly 40 percent, receive at some level. The Pell Grant, a $41.2 billion federal program based strictly on financial need, is the most generous. Private sources provide another $35 billion in merit grants that require straight-A’s, high SAT scores, and great essays to win these, if you apply. For some reason, lots of people don’t, making it easier for those who do.

Then there are the not-so-pretty grants – called work – that not every student wants, but do keep you out of the loan repayment business. The federal government budgets $1.2 billion a year for work-study programs at universities. The work is usually basic office stuff in an on-campus building, which makes it convenient and rewarding, if you apply. Most people don’t.

Other not-so-pretty grants involve a lot more effort, sometimes with a lot more reward.

For example, enrolling in a ROTC program could mean receiving tuition or room and board (one or the other, usually not both), books and a monthly stipend that ranges from $250 to $400. In return, students typically must maintain a certain level of academic achievement, participate in weekly physical workouts and give up a weekend every month for training purposes.

The good news is that a guaranteed job awaits after graduation. The not-so-good news is that you are obligated to serve anywhere from four-to-eight years after graduation.

At many universities, there are less taxing positions for students willing to work as managers for athletic teams. The most prominent sports, football or basketball, demand a huge time commitment, but the reward could be as much as a full scholarship or at least a tuition waiver. At some schools, members of the band, cheerleading and dance team can receive far less compensation for their effort.

Of course, there are always plenty of part-time jobs in every college town. They usually don’t pay much, but a study released last year says that students who contributed something to the cost of their education had higher grades than those whose parents paid the whole tab.

That alone should encourage parents wondering if they should push their kids to contribute. Even if the students cover only one piece of the financial puzzle – Tuition? Rent? Food? – it’s that much less they will have to borrow.

My oldest is moving on to graduate school and his brother is going back for his sophomore year, so I’m sure this topic is coming up at the dinner table again this summer.

Sigh.

If you paid for college without student loans, how did you pull it off? For those who did take out student loans, what steps are you taking to pay them off?

Bill Fay spent 21 years in the newspaper business and eight more in television and radio, dealing with college and professional sports, then seven forgettable years writing speeches and marketing materials for a government agency. 

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