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When attending your dream college means massive student loan debt

Does attending my dream school mean taking out substantial student loans?

This is an essential question high school seniors must ask themselves ahead of ‘Decision Day,’ the colloquial term for the May 1 college decision deadline. It’s the date by which many colleges and universities require students notify admissions if they plan to attend in the fall. Student loan discussions are far from the most glamorous aspect of the college decision making process, but it is one of the most important factors that could affect students’ lives for years to come.

In a recent episode of Talking College with Admissions and College Planning Expert John Dragone, host John Dragone discusses what makes a reasonable amount of student loan debt, why price tag might be more important than prestige, some of the struggles students and parents face by taking on excessive student loan debt, and why that may make you think twice about attending your dream school.

Reasonable vs. unreasonable debt

By now, most students and/or their parents will have received financial aid award letters from the schools to which they’ve been accepted. The letter details how much financial aid the institution is willing to offer that student. It breaks down information on grant money (no repay), loans (must be repaid), and self-help programs (like work study).

You’re going to want to compare the award, or gift money, to annual cost of tuition and multiple that by four- that’s the amount you’re on the hook for either out-of-pocket or via loans for a four-year university. Now that you have a concrete figure in mind, you might be asking yourself: Is that a reasonable amount of student loan debt to accrue?

“Some experts in the field of college financing and financial aid define the term ‘reasonable’ as this: If you can come out of the four years of college with an amount of student loan debt that’s equivalent to the student’s first year starting salary out of college, that’s reasonable,” said Dragone. “For example, let’s say the student gets a degree in social work. Let’s say their student loan indebtedness is $46,000 for the four years. Let’s say their first year starting salary out of college is also around 46,000. That’s probably a reasonable amount of debt, because the rule of thumb is, if you owe a total amount for the whole four years that is equivalent to your first year’s salary, it’s pretty reasonable the amount of debt that the student has accrued.”

On the other hand, what signals an unreasonable amount of debt? If your student loan debt is upwards of two times your annual/first year salary, there’s a decent likelihood you may default on your loan due to the disparity between what you’re making and what is owed.

In a lot of cases, there is certainly a positive side to taking out student loans. “They enable people who may not have the cash on hand to pay for [school] to go to college,” said Dragone.

High cost doesn’t equal high quality

According to Dragone, “There’s not just one college out there that you have to attend if you’re going to be successful in securing employment in your professional field. It’s not necessarily where you go to college that’s going to launch you into a good career or a professional position. What matters most- instead of the name of the college that you attend- is what the student accomplishes at that college during those four years.”

Those accomplishments might be good grades, a successful internship, student activities, or other aspect of career-building. Either way, coming out of undergrad with a good background is what most appeals to employers.

People often assume a high-cost school equals the best quality education.

“Nothing can be further from the truth,” cautioned Dragone. Take state schools, for example: “The reason why that price tag is lower has nothing to do with quality. It’s simply because the state that the student lives in gives a big pot of money to each state college to help them run their campuses on a daily basis. That savings is then passed on to the student and his or her parents, so it’s got nothing to do whatsoever with quality.”

Consequences of excessive student loan debt

Dragone has worked with students and parents on the college decision making process for three decades. He’s worked as an independent college consultant for his company John Dragone College Guidance Services since 2012. Through that experience, he’s become acquainted with some of the ways excessive student loans can affect students and their families.

There is a relatively short grace period between college graduation and when loan repayment begins. Students with excessive loan debt may not have the luxury of taking time to find the job that is ideal for them. They might have to take the first job that pays well because they’re desperate to start paying back the loan.

If a student with excessive loans has dreams of living in a big city- where the cost of living is sky high- they will most likely find it very difficult to afford living there like they planned.

Dragone said, “I’ve seen cases where students have such excessive student loan debt, they end up having to move back in with their parents just to be able to get their feet on the ground, financially speaking. A lot of students aren’t thrilled about doing that.”

Additionally, they may struggle to afford daily necessities, make large purchases, or qualify for home or car loans. In some cases, excessive student loan debt can even delay getting married and starting a family.

Finger Lakes Partners (Billboard)

Ways to limit college debt

There are quite a few paths to take on the money saving college route. You can get the same degree from a school that’s half the cost of the one you ordinally wanted to attend. You may consider, for example, earning a nursing degree at a state school instead of a private institution.

You may also consider the two-plus-two community college option, where you attend a two-year community college then transfer to a four-year school to finish out your degree.

Make sure to check each possible college’s policy on awarding AP class or dual enrollment credit.

For high school juniors and other younger students thinking about college, Dragone said to apply to colleges strategically.

“Let’s say you apply to a college that’s super difficult to get into admissions-wise, and they have very high admission standards. Let’s say you apply to another school that may be just as good academically and maybe even better. You’re at the top of that [second] applicant pool, you’re the cream of the crop that college really wants you. If you’re at the top of the applicant pool, a lot of times those colleges will offer you significant amounts of gift money- money that never has to be repaid,” explained Dragone.

Dragone leaves parents with a final important question to ponder.

“Do you want your child to begin their life as an adult with an unreasonable amount of student loan debt that could affect them in many areas of their life for decades to come? Or, will you use this as a teachable moment whereby your son or daughter must learn that delayed gratification, as opposed to instant gratification, is sometimes the wiser way to go?”

The choice, he said, is up to you.

You can listen or watch the full podcast episode “Excessive Student Loan Debt Can Ruin Lives” here.

New episodes of Talking College with Admissions and College Planning Expert John Dragone are released every Thursday at 4 p.m. Check this page for the latest episode.