Don’t Let Student Loan Debt Eclipse Your Kids’ Financial Future

In light of this week’s solar eclipse and the astronomical amount of student loan debt many young people accumulate these days, I thought you might enjoy this re-post from February of 2016. If you are a parent or grandparent with high school or college aged kids and you are struggling with how to pay less for college, download My Favorite College Planning Tools on the right side of this web page, and click the Speaking & Events tab at the top of the page for a list of times and dates of my fall college planning workshops.

The Bridge will return with all new, original content on September 6th.

From the Archive: February 15, 2016

How to Avoid Getting Sucked Into The Black Hole of College Debt

Like the inescapable gravitational force of an exploding supernova, student loan debt can consume you and your student in ways that are hard to imagine when the dream of a college education is just a twinkle in your eye.

According to some estimates, the total amount of student loan debt outstanding has exploded to over $1.2 trillion dollars!

To put that number in perspective, American students owe over $10 in student loan debt for every single star in the Milky Way Galaxy!

College planning = retirement planning. Paying for college isn’t just a challenge that our kids must overcome. One of the biggest obstacles you will face in your retirement planning is the college tuition bill that you will pay between now and then.

Even well into their 50’s and 60’s many people continue to pay off college related debt. In fact, the fastest growing age group for people carrying student loan debt is people over age 60.

In other cases, baby boomers are liquidating their retirement accounts and other assets putting their retirement and long-term financial security at risk. All in an effort to help their kids or grandkids pay for college.

I say, “Enough!”

To reduce your child’s dependence on student loan debt and lessen the financial threat to you and your retirement consider these five strategies to minimize student loan debt.

Get as much college credit as possible before leaving high school. Cheri Frame, author of the book Credits Before College and founder of the website,, argues that with proper planning it’s possible to get up to two years or more of college credit completed before your student graduates from high school.

She should know. Cheri successfully homeschooled her three children, all of whom accumulated significant amounts of college credit before graduating from high school. You can read about her story here.

The College Level Examination Program or CLEP allows students of any age to receive college credits by exam – at a cost of about $80. Not all credits will transfer to every school. So you have to plan accordingly, but over 2,900 schools accept CLEP credits.

Here in Minnesota schools that are part of the Minnesota State Colleges and Universities (MnSCU) system accept the most CLEP credits. Since private colleges and the University of MN are not part of MnSCU, their policies may vary. For a list of private schools and what credits they accept, click here.

Postsecondary Enrollment Opportunities or PSEO are another way to get college credit while you are still in high school. Students in Minnesota and several other states can take live, on-campus college courses while enrolled in high school. In fact, it’s possible to earn your Associates Degree at the same time you complete your high school diploma giving you a two-year head start on your 4-year college degree.

Every class you are able to test out of or get college credit for is a class that your student doesn’t have to borrow money to pay for. Even receiving just a semester’s worth of college credits can save a family thousands of dollars.

These are just two opportunities that provide students a chance to receive college credit while in high school. For more information on receiving credits before college order Cheri’s book, Credits Before College or attend one of her workshops.

Seek out schools that are a good financial fit, as well as a good academic fit. The biggest factor determining how much you pay for college is often the school your student chooses to attend.

Some schools have price tags that exceed $60,000, but they will meet 100% of a student’s financial need. Others focus their financial aid dollars primarily on those kids with the strongest academic merit. Still others offer little in the way of either need-based or merit-based financial aid, but their total cost of attendance is relatively low.

Which school is the best financial fit for your student?

Considering that many of these schools have a similar “sticker price”, it pays for families to do their homework to determine which schools offer you the best value on a net cost basis. One way to do that is by using each school’s Net Price Calculator to determine how much you will pay to attend that school after factoring in scholarships, grants and other forms of aid.

Once you know a school’s net price, then you can compare schools to determine which you can afford and which are out of reach. A wrong decision here can cause your student’s loan debt to skyrocket.

Consider alternatives to the traditional “college experience”. In America we have been sold on the idea of going away to college, focusing primarily on the social and academic opportunities that “the college experience” promises, and largely ignoring other less glamorous routes but more cost effective routes to obtaining a bachelors degree.

Granted, frat parties and football games are fun and all, but at a cost of $100,000 to $200,000 or more is the traditional college experience really worth it?

Only you can decide what’s right for you and your student, but I believe it’s possible to have a high quality college education and an affordable experience at the same time. The key is to think a little outside of the box and consider all your options.

For example, few kids come home from high school announcing their intention to live at home and go to the local community college after high school. But living at home and attending community college for a year or two is a strategy worth considering.

According to Trends in Higher Education, the national average price for a public two-year college is $3,435 per year. At the other extreme private, non-profit colleges have a national average price for tuition that exceeds $32,000. Room and board adds another $10,000 or more to your annual costs.

In Minnesota our numbers are a little different. To find out what it costs to go to a local college or university in our area, click here.

If the live at home/community college route isn’t your thing, one alternative that offers a compromise is to attend a four-year state college or university. In fact, it’s possible that a public school may be the best academic fit in addition to the best financial fit for your student.

The University of Minnesota — Twin Cities, and UW – Madison are both topnotch. Apparently, US News and World Report agrees, listing both schools among the top 25 public schools in the nation.

While schools like “The ‘U’” and UW-Madison have total costs of attendance in the $25,000 range, other state colleges and universities are even less expensive. According to the MN Office of Higher Education, a typical MnSCU college has a total cost of attendance of about $20,000 or less.

Maximize your opportunities to receive financial aid. Before you fill out the FAFSA form you should do two things:

First, get an estimate of your Expected Family Contribution or EFC by using the EFC calculator on the College Board website. Using this tool, you can get an idea of how much the financial aid systems thinks you can afford to pay for college. This is also the number that schools use to determine your financial need. If you have no need, you will get no need-based financial aid although you may still qualify for student loans, merit-based grants and other forms of aid.

To learn more about why this first step is so important, read this excellent article by nationally recognized college planning expert, Lynn O’Shaughnessy.

Second, if you believe that you may be a good candidate to receive need-based financial aid, take steps now to maximize your opportunities to receive financial aid for college PRIOR to completing the FAFSA form.

FAFSA rules state that you are to use the value of your assets as of the day you complete the FAFSA form. So if you haven’t completed your FAFSA yet, there is still time to do some planning. For some families this could mean repositioning assets, contributing to IRAs, paying down debts or taking other steps to maximize your financial need as determined by the FAFSA form.

Set limits for your student and stick to them. For the past 18 years you have set limits and boundaries for your children. Don’t stop now.

One myth surrounding student loan debt is that a student can actually borrow their way to a college education. While that may technically be true, there are limits to what a student can borrow without the help and support of others – like you.

According to the Federal Student Aid website, a dependent, undergraduate student is limited to $5,500 in Stafford student loans their first year in college and $31,000 in aggregate over the course of their undergraduate program. Independent and graduate students can borrow more.

PLUS loans, private loans and other loan programs can launch a student’s debt load into the stratosphere. Pile on student loan debt for graduate or professional school and the total amount of student loan debt can become truly astronomical.

To keep your student’s debt load down to Earth help them understand what the student loan limits are, and what you can afford to contribute towards their college education. Talk to them about how much college will cost, who will pay for what, and where all this money will come from. Let them know that you will not co-sign student loans, take out loans in your name, or borrow against your 401(k).

Schools may tell your kids not to worry about the money, but the truth is that your 16 or 17 year old has no concept of what it takes to pay off $30,000 or $50,000 or $100,000 of student loan debt.

Cosmic breakthrough. Like the gravitational waves created by two colliding black holes, student loan debt will have a ripple effect on your kids’ future in ways that may not be evident for years to come. Consider all your options and take steps now to ensure they get the education and college experiences they need without derailing their financial future.