Student Loan Debt

Article by R. Joseph Ritter, Jr. CFP® EA

At a conference recently a person was telling me about some of his friends and family members who as young adults had visions of what they wanted to become and accomplish in life. However, they became saddled with student loan debt for their college education, which was a requirement for the work they wanted to do, and ended up having to accept employment unrelated to their calling just to make ends meet.

Student loan debt today is a very serious issue. The primary effect on the student is that the debt cripples and paralyzes him or her financially, often at the cost of his or her ambition. The student is unable to further his or her intellectual growth and is unable to achieve financial independence. Society does not benefit from the student’s anticipated contributions to the good of its citizens and suffers because of it.

Examples of these situations include students who aim to be entrepreneurs, ministers and missionaries, serve the poor and disenfranchised, or dedicate their lives to service in areas such as education. These positions do not offer significant compensation and, in the case of entrepreneurship, can require startup capital. Students who graduate from college saddled with student loan debt must now seek higher paying employment to maintain their debt and postpone entry into service fields.

If this were occurring to one student, the impact overall would be negligible. Unfortunately, this is occurring to the majority of college graduates, quickly stifling the entry of new graduates into critical employment, and reducing the availability of necessary services for those who need it most.

Addressing the issue is not simple or easy. Now more than ever, many universities and colleges are tightening admission standards and raising tuition because more students are applying than there are seats to fill. Universities have expanded to online and virtual education as an effort to admit as many students as possible, however, there are occupations requiring technical certification and licensure which limit the number of courses a student can take online. Universities and colleges are setting higher educational and achievement standards for income students, however, many highly qualified students are being passed over in the process, which will eventually have the effect of discouraging future achievement.

When described this way, it almost sounds as though we are in the middle of an education boom, much like the recent real estate boom … and bust.

The most unfortunate effect is that many students seem to have resigned themselves over to taking on student loan debt to get where they want to be. It is almost as if students (and parents) have acquiesced to student loan debt being a necessary part of the process. However, many of these same students and parents likely do not understand the long-term effect student loan debt will have.

So what are some solutions?

1. First, if you are a person of faith, what role does your faith play in funding an education? If you believe God has called you (or your child) to be a minister, missionary, teacher or service in some other position of service, do you not believe God will open the doors for an education to be possible? Do you believe that if God is calling you (or your child) He would then want you to be saddled with student loan debt that would prevent you from entering the calling?

In my personal experience, fulfilling a calling from God is more than just showing up for work everyday. It is a spiritual journey full of spiritual growth, prayer, discipleship, trusting God and building your faith. This is true especially if you are going to be a missionary or minister directly engaged in spiritual care, nurture and evangelism. Let me issue a challenge to you that if you will be living on faith and trust in God with prayer and discipleship, believing that God will provide a way for your education is the first step. Accepting a calling and then saddling yourself with student loan debt is equivalent to believing God has an active role in your life but then believing He will not be there when you need Him.

2. Student loan debt is avoidable. To avoid or minimize student loan debt, costs must be reduced or money must be saved. Some of the available options to avoid and minimize student loan debt include

  • gainful employment before college and saving your wages
  • applying for in-state tuition
  • local community colleges
  • living at home, with a relative or sharing a house
  • gainful employment during college to help pay for tuition
  • delaying college for 1 or 2 years to spend time working and saving money
  • choose a smaller, less expensive college that specializes in the field you expect to work
  • scholarships and grants
  • employer assistance with education

Ivy league schools, major public universities and high tuition schools may be the first choice of those who can afford to write a check for the full tuition and may be very attractive to everyone else. However, much more focus today is being put on whether you can do the work and where you completed your graduate studies than your undergraduate education.

3. A college education does not prepare or qualify you to any kind of work. There seems to be a mistaken belief that graduating from college entitles the student to immediately begin working in the field of study. Graduating from college does not mean your salary will be increased and money will rain from the sky. There are many things books and professors cannot and do not teach in the classroom that can only be learned from personal experience. Most employers promote people into management rather than hire recent college graduates to be managers. Doctors, lawyers, teachers, financial advisors and many other professionals start out in positions of learning and handling small cases, gradually working their way up over time, often years, to become experts in their fields who can command higher compensation.

There is no substitute for experience. Education is a complement to experience, and experience should always come first. If it means delaying entering college for a few years, the experience will always be invaluable and open many more doors than the education.

4. For those wishing to be an entrepreneur, starting a business should be the first priority. At the age of 15, I started a lawn mowing business with a small loan from a family member that I used to buy used equipment. Unfortunately, we moved away before the business could have time to grow, but for the short time I had it the business was successful. Even today, there are many opportunities to start businesses by buying someone else’s equipment at a fraction of the cost of buying everything new.

Once the business is established and profitable, it can provide the financial resources you need to obtain a college education.

5. Consider that more focus is placed on an employer’s past experience with a college or university. Also consider that certain colleges and universities, even or especially if they are small and not very well known, are known for the quality of their education in certain fields and would be the first choice among employers hiring for those fields. For those wishing to enter spiritual care as a chaplain, minister, missionary or in another field, or wishing to enter a service occupation such as teaching, many smaller, less expensive colleges offer a very competitive education and first class instruction that can surpass the education in the same field from more well known, more expensive schools.

6. Focus today is placed more on where you did your graduate or certificate studies than undergraduate work. My own experience is an example. For 18 months after high school, I worked and saved my money. Then, I obtained a two year degree from a local community college which charged tuition at a fraction of the cost of public universities. For my bachelor’s degree, I stayed home and attended a local private university and was able to qualify for several scholarships to pay for about half of the tuition.

Even though the undergraduate degrees come from schools that are not well known outside the local area, the education and experiences available to me were exceptional and competitive with the education and experiences available to students at more well known schools, and I paid a fraction of the price.

What opens doors for me is the alma mater where I obtained my master’s degree and the alma mater where I obtained my Certificate in Financial Planning. For the people I rub shoulders with, the name of the alma mater for my master’s degree is very recognizable and has become known for its sound education and principles, and the master’s degree was obtained less expensively than my undergraduate degree.

With very careful planning and spending some time talking with people who are in the field you desire to enter, you can begin to develop a strategy that minimizes and even eliminates reliance on student loans.

If you are parents of young children and would like to consider how you can begin to position yourselves and your children financially for their future, we would certainly welcome an opportunity to review your financial situation and assist you in sound education planning. If you are a student or know someone who is about to enter college, please have them read this article, and we would be happy to help the student in whatever way we can.

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