Why you should be very cautious about paying college tuition with loans.

I have never been a fan of student loans. Perhaps for some students, small loans make sense, but there are just too many horror stories anymore about students struggling for years trying to manage their college tuition loans. The price of college has become outrageous. Even if  you choose a lower priced 4 year public college you can expect to pay about $10,000.00 per year, and it is only getting more expensive. For example, here in Pittsburgh, the University of Pittsburgh raised tuition by 6% for 2008-2009,  4% in 2009-2010, then 5.5% in 2010-2011.

College tuition has historically risen faster than the inflation rate. (In other articles we additionally showed how the average historical inflation rate, 3.1%, has outpaced the typical pay raise) According to FinAid.org, "On average, tuition tends to increase about 8% per year. An 8% college inflation rate means that the cost of college doubles every nine years."

Michelle Singletary's column in the Washington Post mentions a report titled “Delinquency: The Untold Story of Student Loan Borrowing”. This report outlines many of the reasons why you want to avoid student loans. This report shows that 23% of borrowers are working to avoid defaulting on their loans by deferring payments. In fact many of the finding of this report that after graduation many borrowers are unable to keep up with the payments and resort to alternate payment options that ultimately keep them in debt or grow the amount of debt they have.

If you are considering borrowing money to pay for college tuition be careful that you are honest about the risk involved. Personally, I have met college graduates who were unable to find work in their chosen profession, had unmanageable student loan debt, and were working at entry level wages for years. A better way to pay for college is to plan ahead. There are plenty of ways to pay for college, such as scholarships, the military, civic organizations, college employment, and unemployment, just to name a few. These options and others will be discussed further in a book I am writing and will talk about further in the upcoming months.

Mike Bowman

 
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