The College Debt Trap

When Jane Bennett Clark's story Digging Out of Student Debt appeared on Yahoo Finance, it generated an astounding 4,600 comments. Jane wrote the story in response to the dozens of questions she fields from readers, such as the one from a recent college grad who had amassed $140,000 in loans while majoring in psychology and history at New York University. "Where were her parents?" one of my colleagues asked indignantly.

Unfortunately, there's no magic wand that will make those loans disappear. But one simple solution is not to take on so much debt in the first place. And that's where parents come in. You can't expect 18-year-olds to understand what they're getting into by taking out loans. They need help from Mom and Dad to choose a college (and maybe even a major) that makes sense economically. When one of my young co-workers was offered a scholarship to grad school, her mother advised her to take the money even though the school wasn't her first choice. She's glad she did.

Kiplinger's does its part with our annual rankings of the best values in higher education, which this month focus on private colleges and universities. This hugely popular project, shepherded by Jane, differs from other college rankings in that it focuses on value, as it has since we first began our rankings in 1998. We start with schools that are academically strong and then factor in additional criteria to select ones that are affordable as well. You'll also find lists of top schools in key categories -- for instance, those with a low sticker price, generous financial aid and low average debt at graduation.

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My two cents. As someone who writes on the subject of kids and money -- and who has gone through the college-selection process with three kids -- I have my own thoughts on how to avoid the student debt trap.

First, it's never too late to save, especially if you live in a state that gives you an income-tax break for contributions to state-sponsored 529 plans (see Get a Break on College Costs).

Think outside the four-year box. Taking Advanced Placement classes in high school can slice a year off your child's education and cut your expenses by 25%. The College Level Examination Program lets students qualify for college credit based on their proficiency in more than 30 subjects. Look into colleges that offer accelerated three-year degree programs.

Or here's a radical thought: Not everyone is ready for college at 18. It might literally pay if your child takes a year off to mature and figure out what he really wants to do in life -- which may not include a four-year college at all.

If your family must borrow to pay the bills, use an online calculator (such as the Student Loan Advisor at FinAid.org) to figure out how much it will cost per month to pay back student loans based on a future salary for a given occupation.

When your child declares her major, she should certainly choose something she's passionate about. But it helps to be practical, too. For example, I counsel journalism majors to zero in on a field of expertise -- business, for example, or health or computers. An economics major should take accounting; a history major could learn a foreign language. Then students would have a better shot at landing well-paying jobs to help pay back those college loans.

P.S. Would investors get better advice if brokers were required to work in their clients' best interests? Read our surprising answer.