I'm guest posting over at The Financial Debt Blog today about remembering that student loans aren't free money. Here's an excerpt for your reading pleasure:
Education is everything.That degree gives you a well rounded education in basic literature, history, science, math, public speaking, and yeah, maybe also underwater basket weaving (or whatever other elective you take). This leads you to be a smarter, better thinking, more educated person who is ready to contribute to society with all you have learned. And, having a college degree can increase your earnings from 10% to 300% depending on your industry. Not too shabby since most of us decide to go to college so that we can get into a certain field and/or increase our earning potential. So of course going to college is meaningful. But does that mean that we should mortgage ourselves to the hilt to get it?
Student loans are a loan against your future earnings. You mortgage yourself with the promise that when you have completed this magical degree you will be able to pay back all that you borrowed. Sure, that seems plausible, what with the increase in earnings and access to work that you gain when you get that parchment. But let’s look at the reality of these numbers.
According to College Data, the average costs of tuition at an in-state public college is $8,655 per academic year. That’s $36,320 for a four year education. If you are out of state, it will cost you about $21,706 per year which comes to $86,824. The average private college runs around $29,056 per academic year totalling $116,224 for that degree. These numbers don’t include other school expenses like books, fees, transportation, food, and lodging which can run, on average, another $13,000 a year. So a full time student can be looking at adding another $52,000 to their tuition costs for living expenses over that four year period.
That means the average full in-state college student who takes out a loan for their tuition and living expenses will owe around $88,320 plus interest at 3.86% to 6.8% for federal loans and up to 11.75% for student loans. Over 10 years at 6.8% interest, that $88,320 loan becomes $121,966.71. That’s an extra $33,646.71 just in interest. With a $36,320 loan for tuition alone, you’re looking at adding $14,598.43 in interest payments, bringing it to a total of $52,918.48.
These numbers are high. Like, buying a car for the price of a semester or a house for the cost of your degree high. Not to say that it isn’t worth it, because education is fundamental, but it isn’t to be taken lightly. Weighing carefully where you go to school (public v. private, in state v. out of state) is important but so is figuring out how to pay for that schooling.
Check out the full article here!