Some people have thrown all logic out the window when it comes to their education.  They are stupidly borrowing huge sums of money in the form of student loans to pay all of their college expenses.  I’m sorry to be so blunt, but it is true!

Occasionally, a blogger writes a post that they truly wished everyone would read.  This is one of those posts for me.  I really hate hearing that people are burying themselves in tons of student loan debt unnecessarily. 

I believe this is a mistake that most will live to regret and regret in a big way.  So, I’d ask you to please forward this to any parent or student you know that might benefit.  Thanks!

Two real-life examples of student loan debt gone bad

My fervor over avoiding student loan debt peaked recently as I was listening to The Dave Ramsey Show on the radio.  I heard two of his callers give heart-breaking details of their situations.

First, let me say, while I strongly believe that a college education is a good investment, it is not priceless!  I believe paying for college with student loan debt is a recipe for financial disaster!  Here are two great examples of where things went terribly wrong!

Student Loan Debt – Situation One

The first was a 23-year old female that explained she was engaged to a 24-year old young man that had $90,000 in student loan debt!  He attended a private university to obtain a degree in Spanish and financed the whole deal with student loans.

This poor couple had debt equivalent to a home mortgage and they weren’t even married yet!  On top of that, his degree isn’t likely to earn him a big salary.  They are going to be saddled with paying off his student loans for years! 

This young couple will be starting life in a deep, deep hole that will severely limit their options and could become a sore spot in their marriage.  Sad, but true!

Student Loan Debt – Situation Two

The second caller I heard was a middle-aged, married man that works in maintenance for a school district.  He never completed college, but he did attend for awhile.  His wife is a teacher with a Master’s Degree.  Their combined household income is about $6,000 a month.  It all sounds pretty good so far, doesn’t it?

Well, this couple has accumulated $180,000 in student loan debt!  They feel handcuffed in their lives because they have no financial breathing room.  Ramsey pointed out that even if they live on rice and beans so they can pay $30,000 a year on this debt, it would still take them over 6 years to dig out of this mess!  What a shame!

My heart truly goes out to these people.  It saddens me to hear how financially bound they are due to student loan debt.

Why I feel so passionately about avoiding student loan debt

It seems that some people look at piling up student loan debt like it is a necessity akin to medical bills.  This is simply not true!  I think they go into it without thinking the whole thing through.  Here are at least two things they need to consider:

1.  Student loan debt puts you in a financial hole right from the start

In most cases, you have to start repaying student loan debt as soon as you leave school regardless of whether or not you ever get a degree, are satisfied with your degree or find a job.  This puts a substantial load on you just as you are trying to get some financial traction.

Failure to repay on time will result in damage to your credit score which can cause you additional trouble such as difficulty getting a job, getting an apartment and buying a house!

If you neglect repaying your loan long enough, it will go into default which means the total loan becomes due immediately.  This can result in legal action, wage garnishment, loss of professional licenses and loss of tax refunds.  Think seriously about what you are obligating yourself to before taking out a student loan.

Furthermore, you cannot get out of most student loans by declaring bankruptcy.  You are going to be stuck with this debt for a long time if you sign on the dotted line!  Student loans are not a quick and easy answer to the problem of paying for college!

2.  Your potential earnings might not offer a good ROI

Some would say that student loan debt is “good debt”.  They would say that you are making an investment in your future.  Well, good investors look at their potential return on investment or ROI before they commit.

A good investor only puts his/her money into something that offers a good ROI.  In both of the situations above, the potential earnings as a teacher or Spanish major do not come even close to justifying the amount of student loan debt.  In addition, these individuals could have earned the same income with a much smaller initial investment using some of the strategies I suggest later in this article.

Furthermore, the repayment of student loans is likely to delay investments for retirement and wealth-building.  This has a big cost!  According to this article on MSN Money, if a 22-year old puts just $3,000 in a Roth IRA they can expect it to grow to over $95,000 by retirement age assuming an 8% return.  If this same investment is delayed just ten years, the typical length of a student loan, the nest egg will only be $44,000 which is less than half!

Student loans are not a good way to finance your investment in your future!  They drain you of your financial power and leaving you feeling helpless.

Seven alternatives to student loan debt that you should try

Where there is a will, there is a way to go to college!  Ruling out or at least minimizing student loan debt is not that hard and should be seriously considered to avoid the mistakes Dave Ramsey’s two callers made.

Here is some of what I and others suggest:

1. Go to a junior college for the first two years – Community colleges offer much cheaper tuition and let you get the basics out of the way in the first two years without it costing so much.  Very few employers are going to care where you went to school during your first two years.  They just want to know where your degree is from.  Also, attending a local junior college might let you avoid the additional cost of room and board.
2. Go to a public university instead of a high-cost private institution – Unless you get a scholarship that pays all or most of your expenses, then I highly suggest choosing a public university versus a private one.  The savings can be immense and the differential in earnings later in life is minimal. 
3. Exhaust every option for scholarship, grants and other financial aid – Be tireless in your pursuit of free money that you do not have to pay back.  There is a ton of good information available on the Internet about how to do this.  The effort can save you thousands of dollars up front and a lot of heartache later.
4. Work while you attend school to help pay expenses – It is possible to work part-time or full-time while you attend college.  Numerous people do it.  The money you earn will go directly towards offsetting your expenses.
5. Seek out an employer than offers tuition assistance – Many employers have tuition assistance programs that will help you pay for a degree in your area of employment.  There are also programs that pay you to go to school if you commit to working a certain number of years in a rural or under-served area upon graduation.  This is a great way to work your way through school!
6. Take advantage of the G.I. Bill to earn your degree – Consider joining the military so you can take advantage of the new G.I. Bill.  The post 9/11 bill will pay tuition, a monthly living allowance and a book stipend of $1,000 per year.
7. Save money in advance to pay for college – I know this may seem obvious, but since so many fail to do this I felt it was worth mentioning.  If you still have time, save as much money as you can in advance to pay for school.  Do some research and be realistic about what you will need to pay all your expenses.  This is probably the best alternative there is to student loan debt!

Avoiding student loan debt is priceless!

You will save yourself a lot of financial heartache and regret if you simply exercise some in creativity in figuring out how to pay for college.  Student loans are not the easy way out!

Again, I hope you’ll share this with as many people as possible in hopes that it helps them avoid this killer financial mistake!

Photo by  jennifercw