There are two main ways that college students end up deeply in debt. Some get a “free” credit card and can’t stop spending. The spend $500 and perhaps pay off $50 or $100. If they never spent any more, they’d finally get rid of the debt. The problem is that they go out and spend even more. When you spend more than you can afford to pay back you get deeper and deeper into debt.
Student Loans are the second way that student go very deeply into debt.
We have all read the stories about students who believed the story that they could get such a great job after college, they should be able to pay off their student loans in just a few years. For a few students who land top paying jobs that might be true. But for many other students, they keep paying and the debt keeps growing larger. It often is impossible for students to pay off such loans.
Even Barack and Michelle Obama just finished paying off their students loads not long before moving into the White House. In 1912 Obama said they’d finished paying ony 8 years earlier. He also said that for their first eight years of marriage they were spending more to pay off student loans than for the mortgage on their condo.
The ideal situation would be to have a combination of savings, students grants,part-time jobs, and a small government loan that could be paid off fairly quickly.
Liz Weston has a blog and a newspaper advice column. Some of her older columns on the topic of student loans were pretty scary with parents needing to sell their home to pay off a loan. This was her recommendation and I believe it is excellent advice.
Personal Finance Columnist