Monday, April 6, 2015

How to Pay Cash for College - Lesson 1: Why Not Borrow

I wrote "How to Pay Cash for College" for April edition of Autumn Ridge Church Magazine. You can find the condensed version on the church website. They did a great job of publishing the article with pictures and graphics. I had to take out a few examples to fit their space requirements. This is the full article in its entirety. I'll split it over several posts to make for easier reading.  Thanks to Lisa for helping me write and edit this article.
How to Pay Cash for College

We have been taking Reed, our high school junior, on college visits over the last several months. A year from now he will be making decisions on where to attend college, just like this year's seniors. We have two students in college and a junior in high school. As a family, we are committed to not borrowing for college. I'll ask you to pull up a chair to our kitchen table and listen to what we have taught our students.

Why Not Borrow

Student loans have reached a crisis level in the US and now exceed $1.2 trillion dollars. Total credit card debt is $880 billion. So student loans are now the highest level of consumer debt. Think of what I just wrote. Students now have more debt that all the credit cards out there. The average student graduating with a four year degree has a staggering $27,000 in debt with one in ten having more than $40,000.

It is very important for our students to know why borrowing for college is a bad idea, and what borrowing will do to their future.

Ask them to fast forward in their thinking 4-5 years and think of careers they may want to pursue. For our students teaching in a Christian School, a career on the mission field, being a youth pastor, being on staff at a church, or being a stay at home mom would be likely candidates. All of these are extremely important, but all have relatively low pay. All of these options become extremely difficult if not impossible with $30-40,000 in debt. With this amount of debt, you will be working at the highest paying job you can find and possibly two jobs.

But even if you have your sites set on a higher paying job you are likely stuck with 10 years of repayment.

Proverbs says the borrower is slave to the lender. The young adult years should be a time of exploring your calling and having the flexibility to change jobs frequently is part of this. Large student loans short circuits this process.

Please don't hear that we are not strong proponents of getting a college education. We are very pro-education. It is only borrowing that is a bad idea.


Brian and Lisa Petersen, lead the Financial Peace University course at Autumn Ridge Church. They just finished leading their 10th class, where over 400 people have been trained in the Biblical principles of money management. Each family situation is unique and they welcome your questions and dialog on this important topic.

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