How to avoid student loan debt

The problem of college students graduating with a mountain of loans has been talked about a lot in the past few years. Yet despite all the talk, no solutions are in sight. Every statistic I’ve seen shows the problem still growing despite the increased awareness. Waiting for a political solution seems hopeless given our current crop of leaders. I can’t think of any realistic way to help those who already have massive student loans. However, I think it is possible to help those who haven’t entered college yet to avoid loans, or at least avoid enormous ones.

Don’t go to the most expensive school that will admit you. Go to a cheaper one.

Let’s suppose that Alice is a brilliant student: Straight A’s at an elite high school, National Merit Scholar, plays three musical instruments while competing in four sports, etc… She’s good enough to get into Yale, Johns Hopkins, or Swarthmore. But she doesn’t have to do so. Other universities will be happy to not only admit her, but give her a good education for free. Places such as the University of Kentucky or Kansas University will almost certain give a student like her a free ride.

Now there’s an obvious objection to this problem. “Sure,” someone might say, “Alice will save a few hundred thousand dollars by choosing UK over Swarthmore, but she’ll lose out on tremendous opportunity.” Two things should be considered in response.

First, in everything we purchase, we weigh costs against benefits. In most things, such as cars, houses, clothes, or restaurant meals, we don’t simply assume that we should buy the most expensive thing we can afford. College educations seem to be the only item where there’s an unspoken assumption that many purchasers will spend any amount to maximize benefits without worrying about costs.

Second, I think many people overestimate the benefits of going to an elite college or university as opposed to an ordinary public university. It’s certainly true that Harvard sends more of its student on to graduate school and high-paying careers, when compared to the University of Kentucky. But it’s less clear how much of this is caused by Harvard’s superior education, rather than a self-selecting student body.

Here’s another way to think about it. If Alice attends Harvard or Swarthmore, she’ll most likely graduate in the middle of her class. If she attends UK, she’ll probably be very close to the top of her class. Now graduate schools and employers, if they’re smart, know how to weigh an average Harvard graduate against a top-of-her-class UK graduate, and evaluate either one on her merits.

This logic doesn’t apply only to top students. For example, consider Bob, who can’t get in to any school better than the University of Kentucky. He, too, doesn’t need to attend UK. He could instead look at Eastern Kentucky University. It’s a less prestigious school, to be sure, but it costs less.

In addition, there are options for a great education that don’t cost anything. One example is the military academies. A few years ago, Forbes ranked West Point at #1, in part because of costs. There are also places like Deep Springs College and Berea College, which deserve to get more attention.

Or be born into a wealthy family. Problem solved.

Actually, I agree with OP, although I think many students already do this.

I enjoyed DePaul but wish I had chosen a less expensive school. It met my criteria at the time as a ft employed commuter student with small children.

There are many options to acquiring a mountain of student debt. The first step to other choices is asking yourself if you really need to choose the narrow path you think will lead to maximum lifetime earnings. Once you’ve established a different goal and basis for your life, other choices come easily.

Going to a prestigious school is absolutely the right choice if you want to become a scientist or other high technical position. It’s also the best choice for becoming a lawyer, as lawyers from less predigious schools aren’t in demand as much these days.

For all other positions, going to a cheap state school is absolutely the best thing to do. Even better is to get your initial credits at a Community College and transfer them to a state school and get your degree that way.

Being a straight A student in HS, with pretty good but not stellar SAT scores, I could have applied to some mid-top tier schools and probably gotten accepted. But I was from a middle class background with parents who had not been able to save for my college expenses, so I knew it was going to all be on me.

I chose Oregon State University, but applied to the Honors College and got accepted and I don’t regret it for a minute. I still have a big pile of debt, but at least its not a mountain.

I also strongly recommend not even considering college unless you are absolutely sure what you want to do with it.

I’d modify your suggestion with regards to truly elite schools. If you get into Harvard, Yale, Stanford, or MIT (not an exhaustive list, but you get the idea) you should probably go to one of those elites schools. (Old joke: “What do they call the guy who graduates last in his class from Harvard?” “A Harvard Graduate”)

If the best school you get into isn’t in the absolute upper echelon of colleges, then go somewhere that’s cheaper. More and more, we’re entering a winner-take-all economy, and having those connections to the elite can make a huge difference. The difference between the top 10 schools in the country and 11-20 is way bigger than the difference between 11-20 and 50-100.

I also think it’s more important to choose your major well. Get a BS in Engineering or Computer Science from anywhere that’s not a total blowoff school and you’re going to be more than capable of paying back the loans from even an expensive private school. Those fields are not for everyone, but I think most 18-20-year-olds are not well-equipped to consider the substantial grind that being $80k in debt for a degree that doesn’t qualify you for any high-paying work.

My younger brother was torn between applying to the expensive private school I went to and a good state school. I pointed out that with its large endowment, my alma mater had committed to meeting 100% of financial need with non-loan aid. A state school couldn’t afford to do that, so it would’ve been much more expensive. “Absolutely the best thing to do” is a big overstatement.

If someone doesn’t know what they want to study, it makes sense for them to go to a school with a lot of options. For instance, it doesn’t make sense to push someone towards an engineering school if they just sorta-kinda like science and hate math. Even if that engineering school is free.

I’m as proud of my public school pedigree as the next person. But if Harvard knocked on my door, it would be mighty hard for me to turn them down…even if I was living under a bridge at the time. If I had a kid who was accepted and they really wanted to go, I would hate for them to blame my frugality on why they missed out. I think we’d find a way to make the dream come true.

That said, if my kid just wanted to go to a namebrand school just for bragging rights and I know they aren’t going to be pulling in tons of scholarships, I’d point them to a Really Good Public School. They could still go the fancy namebrand route, but they would be responsible for the costs above and beyond the Really Good Public School tuition.

This is generally good advice on a macro level, but it’s more difficult to rationalize this on an individual level.

Maybe, maybe not. It’s really dependent on a variety of things. That said, even a free ride doesn’t mean no debt.

I think you are wrong in thinking that people don’t consider the costs when deciding where to go to school. I also think you are overestimating the correlation between prestige and cost of attendance. For the average family, schools like Harvard and Princeton are often cheaper than other schools because they have generous subsidies for most students. To quote the link:

Don’t get thrown off by the sticker price.

It doesn’t really matter if it’s strictly the education. I think it’s pretty clear it’s something that is happening at Harvard. I think it’s mostly the connections you will make, and people you will meet. There is a value to being “taught” by Nobel Laureates, and pretty much knowing you are sitting next to a future billionaire or CEO. However, if you plan to go into a field like education or nursing where that matters much less, the benefits might be wasted on you.

They are not that smart. Particularly in really high-paying careers. If you want to work at a big corporate law firm, or get a Harvard MBA, or clerk for the Supreme Court, even graduating at the top of your class at Eastern Tennessee State is probably not enough.

True, but again, picking a college is not only picking a place you want to learn. It’s deciding where you want to spend a decent chunk of your life. There is a value to that like there is anything else.

West Point is crazy hard to get into to. You used to need a congressional nomination, or a military connection to get it.

That said, the real issues with college debt are mostly because of five issues: One, the great number of people who start school, but don’t finish in four years, or at all.

Two, the fact that many degree programs are longer than they need to be. For example, there is no reason law school couldn’t be 2 years and maybe a year paid apprenticeship. There is also no reason the top 10% or so of high school grad should take 4 years to get a degree since most of their first year classes could be delivered to them as seniors in high school.

Three, is that the cost of college is the same for each student regardless of whether you are training to be a microbiologist or a teacher. The costs should be more closely aligned with the resources dedicated to training that person, and the value of that degree.

Four, the cost of borrowing is increasing as a whole because it’s not based on credit worthiness or the worth of the product being purchased. This is why for-profit college contribute much more to the number of loan defaults than they should. It’s also why people can get into six figure debt to get a degree that is basically useless.

Five, the free market increases college costs because they complete for students, faculty, and grants to cover a far too broad list of goals and mandates. While the market enables us to provide great educational experiences, it doesn’t help deliver them at a low(er) cost in aggregate.

That said, the student loan crisis is still largely overblown given that this debt is being taken on by the most capable amongst us, and because most schools still provide a good return on investment. It would be nice however to see some of the above addressed, or to have a guide which tells about the ROI one might expect at any given school.

For Grad School. Getting a degree from a State School, getting really good GREs or LSATs and then getting into a great grad school is a plausible plan - but its the terminal school on your CV that counts - if you can graduate from Harvard with your law degree, no one cares that your first two years of your undergrad were at a community college.

Of course, clawing your way from a community college through to getting accepted to a top tier law school might be a challenge and you might have better luck going with a rigorous school.

Better “one size fits all” advice is to keep an open mind and be realistic. If your heart is set on “prestigious expensive school” and they give you a full ride, go for it. (Sometimes that aid dries up in year two, so you want a guarantee on it), however, don’t let your heart override your reason if it comes down to taking out $30k a year in private loans. Unless it is the type of school to provide ROI - like Harvard. My cousin in heavy into loans for Vassar - but Vassar…

I went to night and weekend classes while in the military. Left there with a Masters degree. I even had GI Bill money left over but didn’t feel like going to school anymore.

My youngest daughter earned both sport and academic scholarships. She didn’t have much in the way of loans.

My other two kids when to cheaper state colleges and also don’t have all that much in the way of student loans.

Of course their parents also gave them a lot of money and things like a car to drive. We also started to buy them $50 Savings Bonds each month from birth for their college fund. That helped cover a lot of costs.

I will agree that you should not go to the most expensive school, but you seem to be confusing cost with quality. What you should do is go to the best school you can get into, like, and can afford, even with loans.

Your statement above is quite incorrect. Big companies, with limited recruiting resources, go to the top schools. If you want to work for a top tier company this is very important. If I want to even talk to a student not on the list I have to get the resume cleared at a very high level. I’ve done it, but most managers won’t bother.
There is also a very significant halo effect. The average person adds a bunch of IQ points to graduates of good universities. There are also alumni networks - though the networks of top state schools are really good within that state.

I’ve never seen an undergraduate resume with class rank, though they all have GPA. I know no such thing exists at MIT and Chicago.
And finally, top schools give you the opportunity of meeting leaders in the field. You have to work at it, but it is possible.
My kids don’t have any school debt because I paid, and I was able to pay because my father let me go to the best school I could get into, even though I was also admitted to a good and free college. One of the best things he ever did for me.

However, if you want a McJob out of college, I can see the benefits of going cheap.

Also, the issue isn’t Harvard vs. State School. The issue is the low tier private schools out there (in Minnesota they would be places like Augsburg or St. Olaf or Hamline), that charge private school prices for a degree that doesn’t confer any more prestige that Winona State (and less prestige than the University of Minnesota). If you can get into Harvard, it probably makes sense to go to Harvard - even if your financial aid package sucks, your parents didn’t save any money, and you have to take out loans. For the rest of your life, HARVARD will stand out on your resume. That isn’t true for the vast majority of $30k a year private schools.

It strikes me that this is very similar to the Do What you Like, Like what you do thread. Four years in a college is a long time. Why should a kid go to one that doesn’t click to save money? The school she likes might even be cheaper. Both my kids loved their very different colleges, and would have been miserable if they had to to go to the college the other one chose.

I question your premise.

This study [PDF] indicates lack of state support for education (that would be public colleges) and for-profit non-accredited colleges, like DeVry, Phoenix, etc.

Here’s another study that points to state schools creating student debt, and the recession. This is a new problem, not an age-old one.

Going to a private institution that has an endowment and a large scholarship and financial aid program may even be the better choice, especially as the first study says drop-out rates are a problem with student debt. Better to be successful and graduate from a good school than fail out of a bad one and pay for it the rest of your life.

So if you qualify for a top-tier school, you not only come out a Hale or Ya’vahd Graduate and make more money, but paid less to get there. The problem would seem to be trying to emulate this curve at a school that gets you nowhere near the boost of an Ivy League institution, has no special endowments or substantial scholarship base and thus costs you more for far less in return.

Maybe the solution is more selectivity about attending college at all, especially for any of the sweep of general degrees that have no particularly assured career use. And there seems to be a degree of… fostered foolishness in encouraging third-rate students to grind out a Business degree for $250k.

Elitism? Sure, in the same way the US Olympic Team doesn’t have 220 million members. Or even 2200.

I agree. It would be kind of crazy not to go to Harvard, since Harvard is the biggest namebrand school in the world. Everyone knows about Harvard. You could be a lousy student, but if you’ve got Harvard on your resume, then, well, you’ve got fucking Harvard on your resume. That’s valuable.

But yeah, St. Olaf will just make people think of Rose Nyland. It’ll give you traction in Minnesota, but outside of that, probably not.

My niece is in this situation. She attends a very pricey liberal arts school that’s well-known regionally, but virtually unknown elsewhere. For all the money she’s borrowing, it would have made sense for her to go somewhere with more name recognition. Especially in this day and age where you often have to travel far to get a job.

I question if Harvard or Yale is worth it even if you did get accepted if all you want to do is be a high school english teacher or something. If your aspirations are very high, even if all you want is an English degree or something, a top tier school would probably be worth it.

Also I agree that if you can get grants/endowments/scholarships for some nominally more expensive school that brings it down to about the same cost as a cheap state school, go for it. I was speaking explicitly under the assumption that private school was more expensive, which isn’t always the case.

Also, I question the whole “you need to make sure you go to a college you love, so spending more money is worth it.” I think it’s not the worst advice, but I think you should work really hard to find a cheap college that’s also not too unbearable for you. Paying an extra $10-20k per year just because you don’t like being out with the cows at the state school is not really good advice.

St. Olaf won’t even get you traction in Minnesota, because its where kids who couldn’t get into Carleton, Macalaster or St. Thomas end up. Its the safety school for people who want to go to St. Thomas.

I think it probably still is - because few people who set out to teach English teach English their whole lives. Especially as high school teachers. Someday chances are you’ll be applying for Law School, or getting a PhD to teach college level English - and Harvard will open grad school doors…or you’ll be looking for a corporate job…and Harvard will open doors.

Remember that college is like a hotel room in that few people pay the full sticker price. So don’t just reject the private school because the sticker price is higher than the state school. Apply to both and wait to see how the financial aid packages compare.