Sensible Tactics to Reduce Student Debt

My column listing seven strategies to avoid the student-debt trap generated some lively and thoughtful questions and comments.

Jessie from California notes that once her child goes to college, she plans to use the $1,000 a month she’s now paying for after-school care to pay for a “great public college” in her state. Plus, she says, “I could shave another $1,000 a month off my living expenses without real discomfort.” Jessie wonders, however, whether she’s “misguided to think that I will be able to pay for most of my child’s college education out of my monthly cash flow. Why don’t more families do just that? Interest rates are so low, it seems to me that it’s hardly worth the effort to save in advance.”

Jessie, it never hurts to save, even at today’s puny interest rates. If you don’t use the money for college, you’ll have it in reserve for other expenses. But your intention to use future income is a good one and puts you a big step ahead of many families because you have a plan. You can’t expect an 18-year-old to know whether it’s worth it to pay $200,000 for a private-school education—or even $80,000 at a state university—so parents have to take charge.

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Recently, Kiplinger’s received a letter from a graduate of New York University who had run up $140,000 in debt while majoring in psychology and history—“neither of them very helpful in the job market, or very practical,” she wrote. One of my co-workers was indignant. “Where were her parents?” he asked. “Didn’t they tell her she could major in those subjects at a less-expensive school?”

Contrast that with the experience of one of my young colleagues who was offered a scholarship to a graduate school that was not her first choice. “Take the money,” her mother advised. She did, and is thankful that she didn’t have to take on a heavy burden of student loans.

It’s also important to know your child. A reader named Bob objected to my suggestion that some students need to take a year off to mature before they start college. Bob worries that if your child happens to find a good temporary job during his gap year, it might be hard for him to give it up (along with the spending money that goes with it) to go back to school.

Good point, Bob. But it’s also true that if your child starts school when he’s more interested in football and frat parties than in his studies, he could flounder. That could mean taking additional—and expensive—years to finish, or even dropping out of school.

Knowing your child’s talents and abilities also comes into play when it’s time to choose a major. “I’m glad the subject of picking a marketable major is finally getting some attention, although it was the last item on your list,” comments Aleck.

Aleck, the fact that choosing a marketable major came last doesn’t reflect its importance but simply that chronologically it’s often one of the last decisions that students make. I advised my own children not to choose a major that ended with the word studies because it was too vague.

Another reader, however, took issue with the idea of picking a major based on its marketability. “I think you’ll have a much happier life if your work is aligned with your passions,” says Bill. I agree. I just think you can be happy—and better off financially—if you pair the passionate with the practical. And, as Bill advises, “Just be sure to learn to live within your means, however modest they may be based on your career choices.”

On an upbeat note, I’d like to refer everyone to the comments of Tom Leestma, who described six ways his son is completing his bachelor of science degree debt-free. Leestma’s son worked for a year, during which he also took exams through the College Level Examination Program, which lets students qualify for college credit based on their proficiency in nearly three dozen subjects. Says Tom, “Approximately $100 buys a college class.”

Follow Janet’s updates at www.twitter.com/JanetBodnar