Can your kids graduate from college without debt?

Just a few years ago, I sat in the University of Georgia football stadium as  my son walked across the on-field stage to receive his college degree. As the  ceremony ended with the traditional toss of the graduation caps into the air, my  wife and I were also celebrating the fact that he was beginning his new life  without any student loan debt.

But as head of an organization that helps people get out of debt and develop  financial skills for life-long success, I could not help but wonder how many of  those students were launching their careers anchored to debt. It turns out,  quite a few of them were.

An estimated two-thirds of college students graduating in 2010 have student  debt, reported The Student Debt Project in late 2011. And what they owe is  increasing each year.

The U.S. Department of Education’s National Center for Education Statistics  released figures in October indicating that all college loan borrowing,  including private loans, federal loans, and Parent PLUS loans, increased from 34  percent to 39 percent between 2003–04 and 2007–08, and that Federal Stafford  Loan borrowing increased from 32 percent to 35 percent during this period. About  that same time, the Federal Reserve Bank of New York indicated that student debt  had surpassed not only total credit care balances, but also total car loan  balances.

It gets worse.

The graduating class of 2010 left college campuses burdened by an average of  more than $25,000 in debt, reported The Student Debt Project. That means more  than 37,000,000 college alumni are trying to pay off almost $1 trillion dollars  of debt in a very tight job market.

Ironically, the willingness to borrow becomes an incentive for schools to  disregard cost-cutting measures. While the economy has sputtered along with 1 to  3 percent growth, over the last three years the cost of education at a four-year  public college has gone up 25 percent.

What’s taking place is an emotional blackmail of sorts, in which colleges  raise their prices far out of line with market events, holding the hope of the  American dream over the heads of increasingly desperate teenagers and their  parents.

I recently received an e-mail solicitation from an ambitious high school  senior asking for donations to sponsor her to the elite private school of her  dreams.

She was accepted for her academic and leadership abilities but found that she  would need $165,000 to get through the four years ahead before she could toss  her cap into the air. These numbers look more like a mortgage to me.

Most disturbing is that the government recently has proposed a number of  policy changes that will continue to fuel the bubble.

The Obama administration has advocated moving more and more of the  underwriting for these debts to the public sector (i.e., the taxpayer),  modifying the terms for repayment and easing the time before the loans can be  forgiven and seeking to artificially curb interest rates on the loans. All of  these will be helpful to the current borrowers but sends clear signals that  borrowing is an acceptable practice for earning a college degree.

It’s time to discuss the better solution: earning a college degree without  debt. Not only is it possible, it is a prudent decision that needs to be  championed by parents, students and educators.

A good place to begin is by evaluating a student’s gifts and skills to direct  them to a field of study that can become a future career. Learning is priceless,  but the costs today warrant avoiding the unnecessary expense of a midstream  change in majors or simply attending for four years to “get a degree in  something.”

For some, postponing college in favor of work experience while making a plan  and carefully choosing a field of study would be time well spent.

But for those ready to begin a college career, here are our recommended “12  Steps” to consider:

1. Know yourself. Rather than just take prep-course for the ACT and  SAT tests, do some self-evaluation to choose the appropriate course of study.  The organization I represent, Crown’s Career Direct, is a personal assessment  that can help a student turn their passion into a career.

2. Treat high school as the place to work to earn the grades that will  qualify students for scholarships and grants. It is the highest paying “job” for anyone age 14-18. For some, it could mean more than $100,000 of financial  rewards.

3. Take as many AP classes as possible while still in high school. The  college credits earned there save money later.

4. Take dual or joint enrollment classes while still in high school.  These are taught either in your high school or on a college campus. They are  graded and count toward your GPA.

5. Turn a teenager’s web browsing skills to good use looking for  scholarships off the beaten path. Many big box stores like Wal-Mart and  Target offer a large number of small general scholarships for local students,  from $500 to $1,000. Every little bit helps.

6. Attend a community college for the first two years while living at  home. This decision dramatically lowers the cost of a college education  while still allowing the student to earn a diploma from the desired school.

7. Choose an affordable institution for an undergraduate degree, and save  money for a master’s degree at the school of your choice.

8. “CLEP” out of some classes. The College Level Examination Program,  or CLEP, allows you to test out of certain classes. Study guides are available  to help you learn enough material to pass the test.

9. Participate in the U-Promise program.

10. Work part time while in school, during breaks and over the summer.  A student should be able to work part time at least to provide spending money  while in school. Studies prove that students who work perform better in their  classes.

11. Consider the military. By joining a military reserve unit,  significant funds can be earned. As active duty military, students can earn GI  Bill money for education.

12. Leverage your athletic ability. Sports scholarships have long been  a path to college for talented athletes. Turn that God-given talent into a  degree than can last a lifetime.

In the end, choosing debt should be done with a calculator and a good  understanding of the long -term implications.

In general, for parent or students, only 5 percent of after-tax, spendable  income should go to debt repayment. When student debt (or any consumer debt)  devours more than 8 percent of available income, financial stress will  dramatically increase and may turn the dream degree into a nightmare.

No student should come home from college ignorant of the high cost of debt as  a drain on life for years to come. For parents and students considering their  options, understanding debt—and avoiding it—should be part of College Prep  101.

Chuck Bentley

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