College Costs: Some Economic Lessons To Minimize Debt

College is possible without horrifically burdensome student loans. Forethought and good decisions are necessary — either that or substantial wealth. I recently picked up some tips from credit union leaders who make student loans. I gave them an economic update and also reviewed the statistics that we all know: College graduates have higher earnings and lower unemployment than those who didn’t go to college or didn’t graduate. Then I listened to other experts. Here are a few things that I learned.

Completion of the degree is critical. The worst student loan defaults do not come from those with the highest debt. High debt is most often incurred for graduate programs such as medicine, law or business, and the graduates have plenty of income to repay their loans. The highest default rate comes from people who started—but did not finish—a program. Whether it’s an associate degree or a bachelor’s degree, completion of the program will boost income, usually enough to cover loan costs.

With this in mind, prospective college students should take a good hard look at themselves. Honor roll students in high school have the ability to finish college, if they avoid the temptations of alcohol, drugs and video games. The marginal high school student may get through a college program, but only if dedicated and persistent. College isn’t for everyone, especially at 18. Many people would be better off learning a trade or getting work experience. When thinking about college, the so-so high school student should take a few community college courses part-time and test the waters before borrowing money for full time study.

Time in college is expensive. A fifth year of college is common but hard to justify economically. Graduating in three years is often feasible and invariably cheaper. Begin with Advanced Placement classes, one of the best deals available to students. Surprisingly, many students in AP classes do not take the exam. That’s a shame, given that a small testing fee can save a lot of tuition expense later on. Some students probably don’t want the extra study necessary to ensure a passing grade on the exam, but that extra study is a good measure of whether the student has what it takes to succeed in college. A bright, hard-working high school student can earn one or two semesters of college credit, a huge savings in the total cost of an undergraduate degree. Before selecting a college, make sure you understand their AP credit policy. That could be a decision-factor.

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