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As I show my students the college debt calculators, I always feel I walk a fine line between informing them and scaring them. What are some good ways to point them towards college but away from too much debt?

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Posted by jholmquist
Asked on December 17, 2015 12:26 pm
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Definitely a delicate balance needs to be struck here. If you are looking for scare tactics, I developed a video playlist, Scared Straight for Student Loans (http://nextgenpersonalfinance.org/scared-straight-approach-to-student-debt-a-documentary-playlist/), so students could see firsthand the downsides of debt. I balance that with a few facts: 1) Debt is a reality for most college students (70% of graduates borrow with avg. debt of $30,000 – $35,000) 2) Most of those who default on loans owe less than $10,000, have dropped out of school and attend for-profit colleges (which makes it harder for them to pay back their loans). The $100,000 in undergraduate debt story that consistently makes headlines fortunately is the rare case.

The key for me is to have students create a college financial plan so they go in knowing what they will need to borrow. With all the tools available online (including the new College Scorecard, https://collegescorecard.ed.gov/, it is easier to predict what a student’s Net Cost will be prior to applying. A rule of thumb to help provide guidance: borrow as much as you expect your first year salary to be (which can be hard to predict given how frequently people switch majors). If you want to be more conservative, never borrow more than the federal Stafford loan limits of $5,500 (frosh), $6,500 (soph), $7,500 (jr) and $9,500 (sr) and graduate in 4 years!

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Posted by Tim Ranzetta
Answered on December 21, 2015 9:37 pm
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I agree with Tim’s post and use the same talking points with my students (student loans are the reality for most students; there are good loans and reasonable loan amounts). I also agree that the loan limits for the federal direct loans (Stafford) are good rules of thumb, I get nervous when students are asked to take out more (even if this is in the form of other federal loans, assuming that the Perkins Loan returns).

I also encourage students to strongly consider applying to colleges that meet full demonstrated financial need as these might be the most generous colleges especially for lower and middle income families. Here’s a link to the 2015 list: http://blog.collegegreenlight.com/blog/colleges-that-meet-100-of-student-financial-need/#sthash.7NsoPKsi.dpbs

Finally, I am a fan of the Net Price Calculators (NPC) that all colleges have to make available on their websites. It’s a place where students and their families can plug in their financial information to get a ballpark figure of what their financial aid package might look like. Some schools have designed their NPCs to include merit awards (based on GPA and/or standardized test scores). This might help point students to colleges that are more affordable.

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Posted by Anna
Answered on December 23, 2015 4:11 pm
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I think it is our responsibility to scare them a little! The debt some students are taking it out of control and irresponsible. It burdens them in the future too much to make sense. I highly encourage my students to go to a community college first, especially if they have no idea why they are going to school! I also constantly encourage them to fill out scholarship applications to help with expenses. I show them the Ivory Tower Documentary and we discuss the pros and cons to college after that. It is a great movie to give them another perspective on college and the reasons for going and just to stop and think about what their next step is going to be after high school. Too many schools are still preaching the “College only” option and it is too expensive now to just follow the crowd to debt. We also use calculators to show how much they will pay per month and how long it will take them to pay off their debt and this helps them at least see what taking on debt will do to them. Unfortunately high school student who have not paid any bills can not really understand what it will be like to have a large bill for 10-20 years but at least we are exposing them to the concept. My theme in class is to say they will need further education after high school to do well in life but how they get it will vary for each and every one of them, there is no ONE way to further your education and a four year college is only one way!

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Answered on January 11, 2016 11:17 am
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I use the rule of thumb of no more debt than your first year out of college expected salary. This way a teacher doesn’t take on 100K in debt, but it might be OK for an electrical engineer. I also show lifetime earning differentials, and the costs of an in-state college where you might live at home, at least in the first few years.

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Posted by andapanda15
Answered on January 11, 2016 2:54 pm
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I incorporated paying for college into my budgeting lesson. We did a simulation for one semester of college using a few scenarios. It was eye opening for my 10th graders – in a good way. I think it motivated them to start researching scholarship options now. It also made the budget lesson relevant and helped with understanding overall understanding.

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Posted by heidistokar
Answered on January 12, 2016 5:09 am
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