Weigh Chances before Signing for Student Loans

Question: I have a son in high school and we are looking at a lot of different options for college. If he goes out of state or to a private university, he's going to have to get student loans. How do we compare the benefits of an excellent education with the cost of getting it?

Answer: Author Gordon Wadsworth asks us to imagine a group of adults borrowing nearly $50 billion a year for four years. In exchange they are receiving a wealth of knowledge and thinking skills…but no tangible product.

"Is that a fair trade?" he asks.

Good question.

Consider the young woman excited to have finally earned her law degree, but sobered by the reality that she will be a grandmother before her undergraduate and law school student loans are paid off.

According to a 2002 National Student Loan Survey, the average undergraduate student loan was $18,900. If a student attended a private four-year college, the average loan was $21,200. For students going on to graduate school, they borrowed an additional $31,700.

Law school and medical school borrowers have accumulated (on average) over $90,000 of student loans from all their schooling.

According to Wadsworth, author of Cost Effective College, students are allowed to borrow over $100,000 in government-backed loans without any known source of income or credit.

He tells of one woman who cried telling her story of having two children in day care so she and her husband could earn enough money to pay off their $40,000 in student loans. All loans were in default.

And let's not forget that 25% of all college students use credit cards to fund a part of their college experience. And those that do graduate with an average balance of $3,400 owed to the credit card company.

Unfortunately, many students (and parents) dutifully borrow up to their eyebrows to send junior to the "college of his choice" to get "the best education available," with little educated thought going into that decision.

Can I just propose that we think about a few things here?

Is there any other decision that Mom or Dad would let junior make that would cause them to go into debt for $20,000 or $30,000 (or more)? On the other hand, should Mom and Dad simply stand by while junior blissfully signs his name onto a loan paper, meaning he'll finish with a sheepskin in his hand and a millstone around his neck?

Is it possible that there is an education to be had in the college experience that won't be found in the classroom? What if junior had to (horrors!) go to school one semester and work the other to earn some or all of his college costs? Would the value he places on his college education be somewhat different than the kid who never pays a dime (until after college when the loan payments start)?

Don't read into these questions that I am against the finest college education you can afford -- I'm all for it.

Let's just make sure the (a) you can afford it, (b) it will be worth it and (c) we don't miss some of the education experiences available along the way.

There will be a test on this material.