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Where To Get Money
For College

by Keith Rawlinson
 Volunteer Budget Counselor

The average college student graduates with around $20,000 in debt...
and they haven't even started their careers yet!

Financing a college education is a huge financial undertaking, especially these days.  Having a college education does give you a big advantage when it comes to earning money, getting debt free and becoming wealthy, but it does cost a lot of money.  When it comes to getting money for college, the first thing most people think of is a loan.  I'm not against education loans, but I am against turning to them as a first resort.  An education loan should be the last thing you try--not the first.  Do as many of the things you will learn in this article as you can before even considering going into longterm debt for a college education.

What's wrong with loans?

Education loans have two major problems.  The first is that they never go away until you completely pay them off.  You can even declare bankruptcy and your federal student loan still does not go away.  Also, if you default on a student loan, the creditor can come after you by garnishing wages and seizing your bank accounts without even having to go to court to get a judgment against you.  Personally, I have a real problem with the constitutionality of  someone being able to take your money without due process such as first suing you and getting a court order allowing them to do so; but, nonetheless, that is exactly what the institution holding your federal student loan can do.

The second problem is that you are taking out a loan at a point in your life when you have little or no income and no idea where life is going to take you.  You are so excited about going to college and improving your future, that you don't really think much about  how you are going to pay back a student loan.  The loan balance may even look like a huge amount of money now, but you are so sure that you are going to graduate from college, be successful and earn so much money that paying back your student loan will be no problem at all.  Since it is this thinking that causes the most trouble for people who take out student loans to go to college, let's take a little time to discuss the implications.

First of all, there is no guarantee that you are going to finish college at all.  Of course that is your plan when you first start out, but you never know what is going to happen.  Your family situation might suddenly change requiring you to drop out of college to care for a family member or to get a job to earn extra money to get your family back on its feet.  When something like this does happen, most people plan on going back and finishing their education, but you would be surprised how many times people never make it back to college.  And if you do drop out of college for whatever reason, in most cases you still have to pay back your student loan.

It may not even be something as serious as a family emergency.  What if you meet Mr. or Mrs. Right and decide to get married?  Many times, in this situation, people drop out of college thinking they will go back to college later and finish their education after they get their families started,.  Again, you would be surprised how many times that just never happens.  If you drop out of college to get married, you are starting out in marriage with no college education and a gigantic student loan that has to be paid back.

A glimpse into your possible future...

Paying back a student loan can become an unbelievable burden in your financial life.  If you don't believe that, then there is no way I can convince you not to take out student loans.  In order to help convince you of the danger of taking out student loans, let's look at a practical, real-life example of what often happens.  This example is based upon actual cases:

You take out a $50,000 student loan and manage to actually complete college.  After graduation, you move back home temporarily while you look for a job.  Since you are now graduated, you have to start making your student loan payment of $550 per month which is scheduled to continue for the next ten years.

You manage to find an entry level position in your chosen field.  It pays a little less than you thought you would be making, but you know that you can work your way up to the higher pay over time.

You need a car to get you back and forth to work, so you buy a car and now have a car loan.  Before long, your parents decide it is time for you to make it on your own, so you move out of your parents' house.

Living on your own, you now have rent payment, car payment, credit card payments, utilities, groceries, clothing, gasoline, car repairs, insurance, furniture and appliances.  Things are starting to get pretty tight when you throw your $550 student loan payment in on top of all of the new expenses in your life.

Then, you meet the person you want to spend your life with.  You get married and now have two incomes.  That allows you to get a larger apartment, at a higher rent of course, plus you are taking on another car payment.  Your spouse also has a $550 per month student loan payment.  Things are somewhat tight, but not too bad since you have two incomes to work with.

Then, the baby comes along.  One of you has to either quit your job to stay home and raise the child, or you have to pay for childcare which is surprisingly expensive.  You also decide that since you are now raising a family, it's time to buy a house.  You don't really have much of anything for a down payment, so you find a loan that allows for a very low down payment and you take on a mortgage.  Having no down payment makes for a bit larger of a mortgage payment, but you have calculated that you have just enough income to pull it all off.

Along with the house comes insurance, property taxes, maintenance, higher utility bills and lawn-care equipment.

Just as you start to realize that the baby is costing more to raise than you thought, a second baby comes along.  The cost of diapers, formula, clothing, bedding, supplies and equipment is really starting to add up, so you put it all on a credit card so you can worry about it later.

Now you have all of your household expenses, your credit card payments, childcare (or reduced income), car payments, higher food costs, more vehicle maintenance as your cars age, plus $1,100 worth of student loan payments to make for many more years to come.

Over time, costs go up and more expenses find their way into your life.  You have to put more and more onto credit cards just to meet all of your obligations.

It's now ten years later and you are finally about to make the last payments on your student loans.  Those student loan payments have made things so tight over the years that you have a huge amount of high-interest credit card debt, plus a home equity loan and a few medical bills that have piled up over the years.  You have nothing saved up for emergencies or for your future retirement.  After the student loan is finally gone, it is going to take you another ten years to pay off all of the debt you created over the years, assuming that nothing goes wrong during that time.  

Your financial life has been made tight and stressful for TWENTY YEARS due largely to student loan payments.

And in this example, nothing major went wrong.  Imagine how this story might have gone if you were laid off or fired a time or two.  Or huge medical bills came up that you were unprepared for.  What if you, your spouse, or one of your children developed a serious disability?  Imagine the extra expenses then!  What if the house needed to have a roof replaced, or a foundation repair?  

I'm not making this up; this story is based upon actual cases of people with huge student loans.  And to be honest, I actually portrayed things a bit better than they were in the real situations.

Now, imagine if you had a very small student loan, or no student loan at all.  How much could you have gotten ahead during that same twenty years?  Well, if you had invested that $550 per month payment into a good growth stock mutual fund instead, in that same twenty years it would have grown to around half a million dollars!

Do you now see how much student loans can end up costing you in the long run?  Do you see how much financial stress student loans can add to your life?

So, if loans are not a good idea, where do you get money for college?

The first thing to do is apply for grants and scholarships.  Every year, hundreds of thousands of dollars worth of free grants and scholarships go un-awarded just because no one bothered to apply for them.  Do the parents or the student belong to any clubs, groups or organizations?  If so, check with those groups first and see if they offer any kind of grants or scholarships to their members.  If any do, then apply for them.  Are you a minority, do you have a disability, have you survived a serious disease?  There may be scholarships available based upon that.  There are also grants and scholarships available based upon your religion, nationality, age and even your hobbies.  Next, go into the admissions office at your school of choice and ask for information about any and all grants and scholarships they may be aware of.  Apply for all of them for which you are qualified and eligible.  Even if you don't think you have a chance, apply anyway--you never know.

There are thousands and thousands of grants and scholarships available and the information can be easily found on the Internet.  Just do a Google search and you'll find an unbelievable number of them.  Do not apply for any that require you to pay money to apply and do not pay anyone money for a list--at least not at first.  Go ahead and apply for any and all free grants and scholarships for which you qualify.  Don't worry about how much or how little the dollar amount of the grant, just go ahead and apply for any and all for which you qualify.  The trick here is to make it a full  time job!  Especially if you are applying during the summer and aren't working or going to school.  Get up in the morning, start filling out application and writing essays, and do that for an entire eight hour day if you can.  If you are working, then use all of your spare time to fill out applications.  I'm serious, don't just fill out one or two a day and then stop...fill them out constantly.  The reason this is necessary is because you don't know how many or how few you'll get, and most of them will be for very small dollar amounts.  That's the trick.  Many people won't bother applying for a grant that only offers say $500.   That makes your chances all the better.  And if you manage to receive ten grants for only $500 each, that adds up to $5,000 toward college!  That is why you apply for every grant for which you can qualify.  Those small amounts can add up significantly if you receive enough of them.  I know of cases where applying for grants and scholarships at the school and on the Internet added up to enough to completely pay for the student's entire next year of college.  Applying for hundreds of grants is not fun.  It is a lot of work and is very, very time-consuming, but it can keep you from being in student loan debt for ten or fifteen years after you graduate.  I would say don't even consider stopping applying for grants and scholarships unless you have applied for at least 100 of them and didn't get any.

In some cases, grants and scholarships are available based upon into what profession you are going.  For any jobs that are in high demand, there are very likely scholarships or grants available.  You might even try calling around to some companies or agencies for which you wouldn't mind working and asking if they offer any kind of incentives.  Sometimes, these organization will pay for some or all of your schooling if you promise to work for them for a specific period of time after you graduate.

It's just a piece of paper...more or less.

In most professions, it makes no significant difference from where you get your degree.  You can spend twice as much as someone else getting your degree from a fancy university, and within a couple of years, you'll both have similar jobs making about the same money.  For this reason, consider going to a less expensive school.  There are many fine state universities throughout the United States which cost considerably less than private institutions.  You may also want to consider attending two years at a community college, and then transferring to a more expensive four-year school.  That is exactly what I did and I am earning as much money as those who did their entire four years at the four-year school.  I saved an unbelievable amount of money doing it this way.  Private colleges and ivy league universities are wonderful institutions, but only if you can afford them.  If you have to borrow the money, then you can't afford them.

Take some time off.

In addition to applying for grants and scholarships, another way to have money for college is to do what I did and take a year off to work.  It doesn't matter if you're flipping burgers or working at a law firm, you work hard and save every penny you possibly can while you're working.  Then, after you are in school but are off for the summer, get a summer job and do the exact same thing to have additional money for the upcoming school year.  By doing this, along with applying for grants, I was able to pay for school completely...no loans at all!  And while we're talking about working and saving the money, why not look into the possibility of an on-campus job or part-time work off campus?  Other students may possibly look down on you or tease you a bit, and working while going to school will take up much of your extra time, but later on in life you will be getting wealthy while those with whom you graduated are struggling to pay off their student loans.  

There is also no law that says you have to finish a two-year degree in two years or a four-year degree in four years.  If need be, consider taking a lighter class load which will cost less in tuition and books, and allow you some extra time to work while still going to college.  I did this for a while and was able to build up enough money to go back to a full academic schedule later without taking on any student loan debt.  Be aware though that if you are getting grants or scholarships, some of them require you to finish school within a certain amount of time.  Check into the requirements of your grants or scholarships and adjust your class load accordingly.

If the parents can take it...

Consider the possibility of going to a school close to home so you can live at home while going to college.  This will save you a fortune in housing costs.  And if you do have to go away for school, look into the cost of on-campus housing and meals.  It usually ends up being a lot cheaper in the long run than living in an off-campus apartment and buying groceries.

Not easy, but worth it.

Doing all of the things mentioned above is not easy and is not fun, but it can later put you way ahead financially.  Doing these things takes a lot of time, determination and effort and that's why most people won't bother doing them.  Normally, people take the easy way out and go for the ease and convenience of taking out a loan.  That is why most people will graduate with a large amount of debt and will spend years and years trying to pay it off.  Don't be normal.  Don't graduate with so much debt that it causes you financial stress for years to come.  Make the extra effort to earn money to put toward college, reduce school expenses and  apply for all the free money you possibly can in grants and scholarships.  Like I said, taking out a loan should be your very last resort, not the very first thing you do.  Even if working to earn money for school, reducing costs and applying for grants doesn't completely pay for college; it will certainly reduce the amount of money you end up borrowing.

To learn a lot more about saving, investing, eliminating debt and becoming wealthy, please read the articles on the Financial Page.  There, you will find a veritable treasure of what to do and how to do it.

Please know that all of the thoughts, information, suggestions and techniques given on this site are nothing more than the author's opinion on the matter being addressed.  Do further research before making any decisions.

This article copyright 2007 by Keith C. Rawlinson (Eclecticsite.com).  All rights reserved.

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