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How to Go to College Debt-Free

Apr 25, 2022

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Paris Woods

By Paris Woods
Author, “The Black Girl’s Guide
to Financial Freedom”

THE TRUTH ABOUT STUDENT LOANS                                              

With all the news reports on the debate over student loan forgiveness and the high cost of education, you might find yourself asking if higher education is worth pursuing at all. The answer is a resounding yes. Research shows that adults who’ve earned a college degree have higher lifetime earnings and are less likely to remain unemployed after losing a job than those without a degree.

These stats are especially relevant in times of economic crisis. During the most recent economic downturn caused by the global pandemic, the majority of people who faced long-term unemployment were those in low-skill jobs that did not require advanced training.3 Restaurants and service-industry companies closed down for lengthy stretches when much of the everyday business of life was put on hold. While thousands of workers were laid off, people in white-collar office jobs kept business running as usual as they transferred to working from home. While there are many exceptions, the numbers show that having a college degree made a difference for the average American during that scary time in our world.                                               

This doesn’t mean that all degrees are created equal or that you’re guaranteed a six-figure salary if you go to college. But it does mean that earning a degree—if you can avoid crip- pling debt—is often one of the smartest choices you can make professionally and financially. A college degree serves as an insurance policy of sorts. Many college graduates aren’t even working in the field they studied, either because they pursued a liberal arts education that was intentionally not aligned to pro- fessions or because they chose to transition to a different field at some point down the line. In either case, the degree is what opened the doors to higher-paying, more secure, and often more fulfilling opportunities.                                

Given the value of a college degree, many people assume that taking out loans to fund your education is a good idea. There are raging debates among school counselors about how much debt is too much and how best to advise students and families on evaluating the cost of a degree versus probable future earnings. The problem with this analysis is that we are talking about human beings here. Humans change their minds, discover new interests and passions, and rarely wind up sticking with their first major or working in the field they had in mind when they started their college journey.4 Yet, they will always suffer the consequences of the psychological burden of debt regardless of how much money they earn after graduation. (There’s also the sad reality that many people who go to college will not finish, and there’s nothing worse than having no degree and student loans to repay.)                                      

Despite the value of your degree to your post-college earnings, monthly student loan payments have the same impact on you as credit cards and car loans. They eat away at your paycheck each month, limiting the amount of money you have left over for savings and investments. But that’s not all. Unlike other forms of debt, the student loan system has loopholes designed to keep you indebted for decades. Given the numerous payment plans and forbearance options available with federal loans, many people get stuck in the student loan vortex, making payments for years without seeing any change in the amount they owe. These bor- rowers end up paying thousands of dollars in interest over the years. What’s worse, student loans are some of the stickiest forms of debt around—even if you file for bankruptcy to eliminate all other debt, you will still have to repay your student loans because they are considered non-bankruptable.            

Trust me and the millions of Americans who are struggling with student loan debt today. Taking out loans to pursue your education is simply not a good idea. If you’re reading this book, chances are you’ve already completed college and are currently repaying loans. If this is you, don’t fret. You’re in good company; and the next chapter will help you with the process of getting out of debt. But even though you’re done with college, I would still recommend giving this chapter a read so you can educate yourself on how to earn a degree debt-free and pass this advice on to all of the young people you know. The truth is that friends and family are the most common source of college-going advice, and we’ve got to make sure that the younger folks following in our footsteps don’t make the same mistakes.

HOW TO GO TO COLLEGE DEBT-FREE                                                        

Despite what you may have been led to believe by our debt-burdened society, earning a college degree without going into debt is completely possible. There is a range of options available based on your academic background and family finances.                                              

Don’t feel bad if you haven’t heard of these paths before. The typical high school guidance counselor is overworked, underpaid, and usually untrained in college access. With hundreds of students on a typical caseload, it’s nearly impossible for the average counselor to provide individualized college guidance.                                            

And it’s not just public school students who suffer. Private school counselors may also have blind spots, often because they are unfamiliar with opportunities reserved for students of color or unaware of financial aid and scholarship options for lower-income families. I’ve heard from just as many public school graduates as private school grads about the lack of quality college guidance they received from their high school counselor. This isn’t to vilify those professionals, but to encourage you to do your own research and chart out a smart path for your education and your financial future.                                              

There are two important things you need to know to attend school debt-free. The first is how much the school actually costs. Universities and colleges have what’s called a “sticker price,” which is its published tuition and fee rates. But there is also a “net price,” which is the amount you would be asked to pay given your specific financial and academic circumstances. You can find the net price for any school by googling the name of that school plus “net price calculator.”      

Every school has a net price calculator on its website, usually in the financial aid section. This calculator can give you an idea of how much money you will actually need to cover the bill. Once you know the true cost of attendance, next you’ll need to figure out how to pay for it. Here is a quick summary of the types of funding available based on certain characteristics:

 

Student Background

Funding Sources

Talented

Merit Scholarships

Low-income

Need-based scholarships

Low-income, high-achiever

Colleges that meet 100% of need

Middle-income, middle-achiever

Outside scholarships & cash flow

This is an excerpt from the #1 bestselling book, The Black Girl’s Guide to Financial Freedom: Build Wealth, Retire Early, and Live the Life of Your Dreams by Paris Woods. Learn more and get your copy today by visiting http://pariswoods.com.

Watch Paris Woods on the April 27, 2022 episode of Wealth Wednesdays on the Good Reason Houston instagram.