A few days ago I received a comment from a reader with a question about student debt. Because it’s a good question, and one a lot of people probably have, I decided I’d do a post about it. Here’s the comment, from reader, Jim:
Our son graduated in May, 2012 and wants to start law school in the Fall of 2013. We’re trying to pay off our house and fully fund our retirement and are not in a position to help him with law school tuition. He’ll be working for the next several months, living at home and saving every dime he makes for law school, but that will hardly be a drop in the bucket. Any suggestions on how he can keep his student debt to the lowest possible amount? We paid all his expenses in undergrad and he hasn’t got a clue what student debt means. Thanks.
Jim, I’m breaking your comment into two questions/parts. The first part being: “How do we help our son understand student debt”? And then a second question, “How can he take out the lowest amount of debt possible?“-this post will be coming Wednesday.
First of all, don’t feel bad you’re not able to help your son with his law school tuition. It’s wonderful you were able to help him through undergrad and I’m sure that puts him in a much better financial place then most of his law school peers, who are already in 10′s or even 100′s of thousands of dollars of student debt.
My parents weren’t able to help me with any of my schooling bills, and I know they aren’t alone. The biggest advice I can give as someone who’s paid for schooling myself and went into a lot of debt to do it, is: Don’t Take Out Student Loans. If you have to take out student loans, take out as few as humanly possible and borrow the lowest amounts necessary to live a very minimalistic lifestyle.
If your son has never had debt before (lucky him!), then he might not understand how much student debt can suck. Have him talk to a few friends or peers who have student loan debt so they can tell him how horrible it is to be saddled with student debt. I have several friends who owe over $100,000 in student loan debt. Those peers haven’t been able to buy homes, start saving for retirement, start families, travel or even watch cable TV in 8 years (we’re now almost all 30). Imagine still borrowing from your parents, or worse living with your parents when you’re 30 (no offense mom and dad, I love you, but at 30, I need my own space).
Unlike a mortgage or a car debt where you pay a bill each month towards owning a tangible “thing”, student debt can be pretty depressing because you have nothing to “show” for all the money you owe. Well, except for a very expensive piece of “paper” with your name on it. If your son graduates from law school and can’t find a job right away, he’ll still owe hundreds of dollars per month (maybe more) towards a non-tangible “thing”. In short, you don’t want to be the woman in the photo above. $278k in student loan debt to be a teacher. I hope when she gets a job she’s the highest paid teacher in history, because she’s going to have to be, to pay of $279k in student loan debt. Pretty scary, right?
Stay tuned for a post on Wednesday where I discuss ways I kept borrowing to a minimum, and things I wish I’d known/done.
Other folks want to chime in here? How do you “warn” aspiring students about the dangers of student debt?
Image: JaStrow75
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Mrs. Pop @ Planting Our Pennies
December 29, 2012 at 2:53 pm (UTC -4) Link to this comment
One way that I suggest students think about money when they take out loans (especially for living expenses) is to add the accrued interest charges to all the price tags before you buy anything.
So if you manage to get good federal loans at 6.8% interest and hope to have them all paid off in 15 years (and some people take longer!), well then for everything you’ve purchased using those loans, by the time you’re done you’ll have paid for them 2.68 times.
That $20 T-shirt? Think of it as a $53.60 T-shirt. Would you still buy it at that price?
KK
January 1, 2013 at 9:30 am (UTC -4) Link to this comment
That’s a really great way to look at things. I wish someone had given me that advice before I went to school (and started taking out loans). Same thing is true for credit cards-but double that interest rate. Somehow in my mind student debt didn’t seem as scary or “bad” as credit card debt. $53.60 T-shirt, nope I’ll pass.
femmefrugality
December 30, 2012 at 12:04 am (UTC -4) Link to this comment
I’ve dodged it completely. I don’t want to get anywhere, anywhere near it. I’d take a hard, realistic look at hiring practices, keeping in mind that many lawyers don’t ever make partner. (Although that would be nice!) Or whichever other field of law you want to get into. Then realistic salary expectations. Not from some website. From real people working in the field. Then decide if you’re okay with borrowing tens of thousands of dollars. And calculate how long it will take you to realistically pay it off.
KK
January 1, 2013 at 9:33 am (UTC -4) Link to this comment
Very good advice! I was considering going to law school after undergrad, but did a volunteer year through Americorps instead. My placement was at Legal Services. After talking to many of the attorneys I realized that I didn’t want to take on that debt burden to make a relatively small salary when I graduated (If I’d become an attorney I probably would have been a public defender or worked in legal services). Like you said, many attorneys never make partner and if they do they probably sacrificed their social lives and family time for years to get there. Not a money/time trade off I was willing to make.
Mo' Money Mo' Houses
December 30, 2012 at 2:39 pm (UTC -4) Link to this comment
I agree. Don’t take out a loan if you don’t have to. I was able to only take out a tiny loan in my last year of school which made it way easier to become debt-free afterwards, and that’s because I worked my butt off when I was in school so I could pay for everything myself.
KK
January 1, 2013 at 9:34 am (UTC -4) Link to this comment
Smart! I think that’s the best way to go. If you start your life off saddled with tens of thousands of dollars in debt it’s a real struggle to get yourself back in a decent financial place.
Brick By Brick Investing | Marvin
December 30, 2012 at 3:33 pm (UTC -4) Link to this comment
I agree don’t borrow a dime! It’s fantastic that his son aspires to be a lawyer but he shouldn’t go into crazy debt in order to do it. If he is dead set on going to law school I would offer the following solutions.
1. Join the military, I was an Army officer and they have what is called the JAG branch. They will pay for everything and of course his son will owe the Army 4-6 years of his young adult life but I can tell you it’s worth it. I had no student debt, experienced the world (some not so nice places), and had the opportunity to learn things that your average 22 year old doesn’t.
2. Get an entry level job at a law firm. If he honestly can’t find a low level job tell him to speak to the HR department and offer to work for free… YES FREE! If he can’t prove his worth within 6 weeks then he should move on. If the law firm doesn’t accept him, he can work his way up and possibly have them pay for his schooling.
These are just a few options. In this day and age our kids need to start thinking outside the box. Yes a degree is great but not at a price tag of $100k no matter what job market you’re entering.
KK
January 1, 2013 at 9:40 am (UTC -4) Link to this comment
Marvin, I’d completely forgot about the military options. A good friend of mine had his med school paid that way. Very, very smart and a very good option for anybody living in the US. Yes you have to spend a few years “working” for the military, but as you said it’s invaluable life experience, and you get to see and experience things that many people don’t.
Ironically, my grandfather, who’s a Korean war vet, told me at Christmas dinner that his biggest regret is not going to college (the Army would have paid for it of course). Thanks for your service!
Holly@ClubThrifty
December 31, 2012 at 11:08 am (UTC -4) Link to this comment
I have a friend who is working two jobs and paying for college as she goes as we speak. It can be done!!!
KK
January 1, 2013 at 9:40 am (UTC -4) Link to this comment
Sure can. It’s not easy and it’s not always fun, but it’s a lot more fun then graduating with debt.
jim
January 4, 2013 at 6:25 pm (UTC -4) Link to this comment
Guys,
Thanks again for all your input. Marvin – he did try the military route, but to no avail. He’s got a private pilot’s license and intended to go to the Air Force Academy – they disqualified him because he had taken zyrtec for his allergies in the 5 years preceeding his application (so not kidding – right off the bat they disqualified him). Ditto with the Marines and Army because he had ONE exercised induced asthma attack. He didn’t try the Navy, figuring he’d already struck out 3 times and was horribly disappointed each and every time. He’s more than willing to work his butt off to pay for as much of this on his own that he can, but the tough law schools really do mandate that you not work your first year. You actually have to agree to do that before they’ll accept you. We’ve raised him to be honest, (ok – no jokes about honesty and lawyers here) so he’s going to agree to not work that first year and he’s going to be true to that. Ugh!
Guess he’s going to have to live and learn – just like we are ’cause it is, quite frankly, killing us to put our mortgage and retirement ahead of his dreams – but we’ve got to be realistic. Thanks again for all your input. Appreciate the insights.
Avoid Student Loans Like the Plague » Student Debt Survivor
January 2, 2013 at 6:09 am (UTC -4) Link to this comment
[...] tackled the first part of Jim’s comment in a post I titled: Our Son is Clueless About Student Debt-Help! The second part of his question/comment about avoiding student loans will be addressed in this post. [...]