The current downturn in the job market has begun to significantly impact the next generation of American workers as family funding for education has begun to dry up. In a recent Wall Street Journal article, Philip Shishkin identifies four main response facing students: dropping out, increasing educational loans, transferring to a less-costly institution, and getting part-time work.
Some of these strategies are certainly better than others. Early on contact the financial aid office of the student’s school to discuss the financial situation of each the individual student and the larger family. Many financial aid offices have access to resources to help those struggling. Among the aforementioned strategies then, switching to a cheaper school and finding a part-time job can be good options. Something that should also be considered is moving back home to save on housing costs if the student lives elsewhere. These approaches entail finishing school in a cost-effective way and with minimized debt. But the most valuable action that students and parents can take is to have a joint discussion on outstanding financial issues for the family and specificially on spending behavior. The outcome of the talk should include a budget that the student should live by and that also takes into account any outstanding debt and a plan for how that debt is to be paid down.
Of the possible reactions, withdrawing from school presents the most pitfalls as the likelihood of completing the degree falls dramatically. Students who have already acquired significant student debt will face a double whammy of the burden of student debt and lower earnings. US Census data show that college dropouts earn $21,000 less than college graduates, reducing the ability to meet debt payments.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
Tags: college, debt, education, family finances, financial aid, student debt
