More and more, we are hearing about students who are buried under a mountain of student loan debt. Some default and suffer severe consequences. Others manage to pay back the loans, but the minimum payments are so high, they have to move back in with their parents and don’t pay off the loans for 20 or even 30 years. Meanwhile, their lives are on hold.
Instead, take the time to talk with your child about student loans. Many students who have such a high debt load chose to go to expensive private or out-of-state colleges. Examine the many choices that are available. Can your child go to a community college first? Can he or she get a good education at a local university? Using both of these strategies will cut your child’s student loan debt immensely.
Remind your student of life stages she may miss out on or have to delay if she has a five or six figure student loan debt:
- Home ownership. Many people buy a home once they graduate from college, if they are not burdened with student loan debt. Home ownership has many advantages—you have your own space, you can take advantage of significant tax deductions, and you are not “throwing your money away” as some say you are if you rent for a long period of time. In the current economic climate, interest rates are so low that a home loan is even more affordable. However, if your child has student loans with expensive monthly payments, he can’t take advantage of the power of home ownership.
- Getting married. The median marriage age for women is 25 and 27 for men. However, young professionals who are deep in debt often push back this time frame until their 30s. If both your child and her partner have debt, they could be in an even more difficult financial situation. Many delay marriage until they have reduced their student loan debt considerably.
- Having children. Just as these students delay getting married, they also delay having children. Having children is expensive, and when the majority of your money is going for student loan repayment, thinking about the tenants of “adulthood” such as home ownership, marriage and children, can seem out of reach.
- Retirement savings. Many college graduates initially neglect their retirement savings so they can apply more money to their student loan debt. However, they then miss out on the power of compound interest that can make their retirement savings stretch further. Instead, they wait to invest until their mid to late thirties, when they will have to invest more for the same retirement they could have had if they had started investing in their twenties with less money.
Often students don’t realize the consequences of deciding which college to attend. Take the time to explain to your child how much student loan debt can burden their future and their ability to buy a home, get married, have children and save for retirement.