“Student loans now constitute about 25% of all non-real estate consumer debt — alarming when you consider that 30 years ago, student loans were practically nonexistent.”
“College “rankings” are useless — designed to sell magazines and generate hype. If you trust one of the major guides when picking a college, you face potential financial disaster.”
Author and current college student Zac Bissonnett allowed Leslie and I to review an advanced copy of his new book Debt-Free U: How I Paid for an Outstanding Education Without Loans, Scholarships, or Mooching Off My Parents.
I was excited. As a recent graduate who employed exactly none of the ideas contained within the book and consequently racked up over $71,000 in student loans (our calculated net worth shows it whittled down to ~$58k), I continually startled my poor cats by shouting “Amen!” about twice a chapter.
Here’s the deal: If you are a college student, will soon be a college student, are the parent of a soon to be student, or thinking about becoming a parent, or even considering accredited college classes online, don’t be stupid like me, flush what you think you currently understand about selecting a college and paying for it, and start anew.
Debt Free U: A Preview of Key Ideas
Take a look at Zac’s list of nine college myths and my quick summaries of some the research and rationalization behind each. Do you agree?
Myth 1: It’s important for parents to do what they can to help pay for their kid’s educational expenses, even if it means taking out a loan.
If you are a parent and cannot pay for college with cash, it means that you are probably underprepared for retirement, have an inadequate emergency fund, and need to focus on remedying your own financial picture – you cannot afford to divert future earnings towards college loan payments. Zac makes it very clear from the beginning and cites this one idea as probably the most important in the entire book: Do not risk your own financial well-being to help your kids go to college. Helping is great but if you cannot, relax, they will be able to go anyway.
Myth 2: Scholarships and financial aid will alleviate the burden of spiraling college costs.
Think about it, if financial aid was really that great, student loan debt would not constitute 25% of all US consumer debt. As it turns out the average financial aid package is composed of 60% loans. What about scholarships? Scholarships are great and encourage your child to apply to tons of them, but just don’t count on them to make a meaningful impact on college costs. Be surprised if they do. It’s common sense: the easiest way to make college affordable is by choosing one that is less expensive.
Myth 3: It’s unreasonable to expect students to be major sources of financing for their educational expenses while they’re in college.
It’s sad but most in our generation seem to have lost the stomach for making sacrifices before and during college and would rather sacrifice future earnings that may or may not materialize after graduation. Don’t underestimate the power of small lifestyle changes that allow students and parents to cash-flow college costs. The average student watches 23.4 hours of TV per week. Ask your student to sacrifice some TV time to create income while in school. Stop wasting money on stuff you don’t need. You would be surprised how this all adds up.
Employers are more likely to hire the student that had two jobs while attending college full-time over the student with 3 PhD’s, a mountain of debt, and has never worked a day in his life.
Myth 4: Student loans are good forms of debt: leverage. My child will be able to pay them off out of his future earnings. Student loans are unfortunate but they won’t have a serious negative impact on his life.
According to the Project on Student Loan Debt the average student debt load in 2008 was $23,200, an increase of 23% from just four years earlier. College is a good investment, both financially and in terms of quality of life, but the author presents convincing data that college debt is uniquely poorly suited to debt financing.
- It can’t be discharged in bankruptcy.
- It isn’t asset backed – nothing can be sold for quick cash if you have trouble making payments.
- It’s likely to make a negative impact on the student’s ability to choose a career that interests him.
- It will make it harder to start a family, get married, start your own business, buy a home, buy a car, and save for retirement.
- It’s a big freaking loan.
A scary fact is that we can’t yet know the impact this new debt load will have on the long term success of my generation.
Myth 5: The name of the school on my child’s diploma will have a strong impact on her career and life prospects. The better the college she goes to, the more doors she’ll have open to her.
To sum up a very well researched and well reasoned chapter, I will quote one of the contained study authors Alan Krueger: ”Find a school whose academic strengths match your interests and which devotes instruction in those fields. Recognize that your own motivation, ambition and talents will determine your success more than the college name on your diploma.”
There is no causal relationship between Ivy League colleges and earning more money, plain and simple.
“I don’t care where someone went to school, and that never caused me to hire anyone or buy anyone’s business.” – Warren Buffett
Myth 6: “Thrifty” approaches to education like community college will have an adverse effect on my child’s life. You get what you pay for.
The author provides a great roadmap for turning any college into an Ivy League college. ”What they get out of their education is a function of what they put in. It’s possible to go to the number-two ranked college and get a terrible education, just as it’s possible to go to number 180 and get a wonderful education.”
Myth 7: The most important thing when it comes to choosing a college is finding a good fit.
One quote:
“Please, for the love of everything that is financially prudent and mentally stable, do not mortgage your house and take out a parent PLUS loan because your kid liked the sushi at one college and was unimpressed by the fried chicken at another.”
Myth 8: Guidance counselors, admission officers, campus tours, and anecdotes from former students are great sources of advice and wisdom on the college application and financing process.
You are probably getting the hang of this by now. Do not listen to the people who you are supposed to listen to. The college selection process is emotionally charged and it is a challenge to be rational. Take the challenge. Be rational.
Myth 9: The quality of education my child receives will be largely a factor of the college he attends. Guides like US News & World Reports “America’s Best Colleges” are valuable resources in evaluating possibilities.
Zac quips “If I had a penny for every thousand dollars in household wealth that was destroyed by college decisions made based on US News’s rankings, I would buy a summer-house in the south of France. ”
Oh the rankings. We just can’t get enough of the stuff. The 2005 Secretary of Education gathering labeled the “Commission on the Future of Higher Education” found that colleges and universities make no serious effort to examine their effectiveness on the most important measure of all: how students learn.” In other words there isn’t enough information available to compare the educational merit of one institution over another and the author proceeds to debunk all of the invented metrics used by opportunists and hucksters like US News & World Report.
There. Are you convinced?
The above description is really only a trickle of the information and strategies included in Debt Free U. We highly recommend the book for anyone involved in the college selection and college financing decision chain, no matter how far along you might be.
We would love to hear your comments below. What do you think about these ideas? What are your experiences? Have you read Debt Free U? What is your impression of the book?
We found the book Debt Free U to be so valuable as to purchase several to give away to our readers. If you are interested in entering for a free copy of the book please leave a comment below and or link back to this page. We will be drawing three winners from the commenters and linkers for a free book on Friday September 3rd so be sure to subscribe to see if you won.
**Update 11/2010: Thanks to everyone who entered. Debt Free U may be one of those books you just want to buy or rent from the library immediately. We really cannot recommend this book enough. Check your library or head over to Amazon and learn more about acquiring a copy. Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents
You might also be interested in our guide on how to save a bunch of money on college textbooks. Enter the organized used book marketplace, the Back to the Future textbook arms race:
- SpillingBuckets Guide: Save Money Buying Textbooks
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I am very much looking forward to reading this book. I first heard about it on te Dave Ramsey Show…and many of us know how he feels about debt. My husband and I are debt-free (by DR standards) and we have several children. Putting them through college debt-free would be nice. I will gladly accept all the help and advice regarding this process.
Zac Bissonnette’s Debt Free U is a terrific book for parents with kids entering the college decision years. It is filled with excellent buyer beware advice for those entering the financial aid process, and deflates the fallacy that all debt in pursuit of an education is good or not harmful. He outlines another road for parents and future students to pay for a college degree that will be a godsend for many. I’ve loved the advice, and like many readers, cannot believe the wisdom of this 21 year old.
But Zac’s advice and analysis falls down in a couple of places. I believe he is right that there is very little difference in a state university degree and a small elite college degree in the marketplace, but the key is the degree. Graduates do well, those that fail to matriculate don’t…and often have student debt to boot. Graduation rates at schools matter. Zac passes over this statistic uncritically blaming low graduation rates entirely on students, as if the universities have no role in this. His own UMass has a 4 year graduation rate of 53%. How well do the other 47% fair? Fair to poorly I expect.
This is the other side of the coin. Large universities that accept many underprepared students, place them in large classes with little mentoring or contact with professors, fail to provide sufficient support, and place the blame firmly on the students when in fact the failure is theirs as well. When you look at the 100 colleges (US News and World Reports) with the highest four year graduation rates, only 5 of them are public colleges (3 of those are the military academies). I would argue that the greatest expense associated with college is not graduating, and this is not well addressed at the large state universities.
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