POSTED: Wednesday, May 9, 2012 - 7:00am
UPDATED: Wednesday, May 9, 2012 - 7:04am
United States — Crown CEO Chuck Bentley has a message for college students and their parents—student loans aren’t the solution—they’re part of the problem. In fact, 2 out of 3 students will graduate with debt, according to The Student Debt Project. This year, as student debt has surpassed credit card debt, Crown is proposing a “12 Step” Program for families who may soon be in over their financial heads.
“The next great debt bubble to explode in this country will be student loans. The average graduate with debt owes $27,000 and the total outstanding debt for all student loans is nearly $1 trillion,” says Bentley. “What most families don’t realize is that they don’t have to be a part of it.”
Congress again this week will grapple with the extremely volatile issue of government subsidized student loan interest rates, which will double if new legislation isn’t passed to stop automatic increases. Add that to the fact that over the last three years, the cost of education at a four-year public college has gone up 25 percent, and you can see the financial strain on parents and students.
“All of this is happening at a time when the unemployment rate for young people in their 20s is above 12 percent and 85 percent of college grads are moving back in with their folks. In an already stagnant economy, the burden of having to pay back student loans only makes it tougher on young people starting out today,” said Bentley.
It doesn’t have to be that way, according to Bentley. “It’s entirely possible to attend college debt free. I know, because my two oldest boys have done it. We’ve still have two to go, and we don’t plan on taking out student loans for them, either.”
Bentley says that graduating debt free requires savings, planning and commitment, and a game plan that could include the following “12-Step” program:
1. Know yourself. Rather than just take prep-courses for the ACT and SAT tests, do some self-evaluation to choose the appropriate course of study. Crown’s Career Direct is a personal assessment that can help a student turn their passion into a career.
2. Treat high school as the place to work to earn the grades that will qualify students for scholarships and grants. It is the highest paying job for anyone age 14-18. For some, it could mean more than $100,000 of financial rewards.
3. Attend a community college for the first two years while living at home. It dramatically lowers the cost of a college education while still allowing the student to earn a diploma from the desired school.
4. Choose an affordable institution for an undergraduate degree, and save money for a master’s degree at the school of your choice.
5. Take as many AP classes as possible while still in high school. The college credits earned there save money later.
6. Take dual or joint enrollment classes while still in high school. These are taught either in your high school or on a college campus. They are graded and count toward your GPA.
7. “CLEP” out of some classes. The College Level Examination Program, or CLEP, allows you to test out of certain classes. Study guides are available to help you learn enough material to pass the test.
8. Participate in the U-Promise program.
9. Turn a teenager’s web browsing skills to good use looking for scholarships off the beaten path. Many big box stores like Wal-Mart and Target offer a large number of small general scholarships for local students, from $500 to $1,000. Every little bit helps.
10. Work part time while in school, during breaks and over the summer. A student should be able to work part time to provide spending money while in school. Studies prove that students who work perform better in their classes.
11. Consider the military. By joining a military reserve unit, significant funds can be earned. As active duty military, student can earn GI Bill money for education.
12. Leverage your athletic ability. Sports scholarships have long been a path to college for talented athletes. Turn that God-given skill into a degree than can last a lifetime.
In the end, choosing debt should be done with a calculator and a good understanding of the long term implications. In general, for parent or students, only 5 % of after-tax, spendable income should go to debt repayment. When student debt (or any consumer debt) devours more than 8 percent of available income, financial stress will dramatically increase and may turn that dream degree into a nightmare.