The student loan is the biggest loan people get with perhaps the exception of their house. Sometimes the student loan even exceeds the home loan. A part of the problem is that people use their student loans to rent an apartment, buy clothes, or even buy a new car.
Student loans seem to hang around forever too. We have had clients in their 40′s, 50′s and even 60′s that still have one or more student loans hanging around their neck.
We think the student loan is one of the biggest financial mistake that people make. It saddles a new grad just starting out in life with this huge 50k, 60k, or even 100k of debt.
And there’s no way to get rid of these loans. They aren’t bankrupt-able. At best you can put them on hardship deferral which makes them hang around even longer.
The worst part is that if the student ends up dropping out of school for whatever reason, the student loans become due. So the student who was supposed to have the degree’d job to pay for the loan, now has no degree, and owes a bunch of money.
As promised yesterday, here is our recommendation on how to go to college, debt free. The overall gist of it is to first know what you want, secure the money, then sprint for your dream. Here are our steps:
1) First pay cash for at least 2 years of community college
One of the reasons people’s student loans are so big is that often they change majors 3, 4 or even 5 times before they graduate. It’s stupid to do this type of exploration at an expensive university.
Instead, community college is cheap, and it’s an awesome place to explore what you like and find out what you’re good at.
Until you know what you like and what you’re good at, you’re not ready for the university. If it takes you 3 years to discover what you like and what you’re good at, then you should spend 3 years in community college.
2) Get scholarships and save up for the university
While you’re in community college, you should be saving up some serious cash for the university. You may need to work a job while you’re in community college. Remember you’d rather work your “bunt cake” off now, than have a student loan hanging around when you’re 60 yrs old.
This is also a great time to look for grants and scholarships. The word we get is that if you work hard enough, scholarships and grants are available. Don’t stop looking for scholarships and grants until you have money from some of these.
With our plan, you will be at the university only 2 years. So you only need enough money to cover 2 years worth of university expenses.
3) Go to the university
You are ready for the university when:
- You have clarity on what you want for your degree
- You have completed all of your general education at the community college (this would mean transferable units).
- You have enough money to pay cash for the university.
You probably don’t need to go away to college. If you go out of state to college, you’ll be paying out of state tuition as well as have extra living expenses. Unless you’re going to be a lawyer or a doctor, it’s not going to matter where you went to college.
The best plan, financially, is to stay home and go to college. If this isn’t going to work, at least go to college in your home state, and live as cheaply as possible (which probably isn’t on-campus living).
Now you’re ready to blast through the university in 2 yrs and get your degree … debt free.
What about you? Did you graduate debt free? If so, tell us how you did it.