Slavery by Debt – School Loans and More…

, ,

An infamous document, the “Hazard Circular,” American and British banking interests discussed the advantages of debt slavery over physical slavery. These interests favored the former, as the latter came with costs (e.g., housing, food, medical care, etc.).

A “free” people housed and fed themselves. And, a “free” people could be kept enslaved by debt, through wages insufficient to meet their cost of living, as the amount repaid exceeded the amount lent.

Such slavery continues today in many different forms. Of particular importance to us is the plight of college-bound students and their families.

College graduates leave campus with a handshake, a diploma, and an average of $37,000 in student debt. Even more, if you include private loans co-signed by their parents.

Our government’s student loan portfolio totals almost $1.4 trillion. Student debt has increased by approximately 164% in 25 years, while median wages have increased by under 2%.

Unlike other consumer debt, student loan debt must be repaid. Bankruptcy, absent the direst of circumstances, is not an option.

Students assume the debt burden on the promise that their degrees will lead to jobs that will provide the means for repayment. Unfortunately, the jobs may not be there or, if they are, the pay is not enough to meet expenses.

Based on recent statistics, five years after leaving school, nearly one-third of borrowers have been unable to pay down their debt. While not in default, their payments have consisted only of interest. This can mean a lifetime of “slavery” if the loan remains unpaid.

Human nature dictates that a debt that can’t be paid won’t be paid. If default occurs, it damages credit and limits the ability to borrow for such things homes, autos, furnishings, etc.

Pretty depressing picture we just painted, isn’t it?

What, then, can be done to relieve the school debt burden on both the students and their families?

Consider looking into our debt elimination program, a program we will ask (i.e., require) every college planning client to implement. Why would we require it?

Because the families who implement and follow it typically eliminate all debt, including mortgages and school loans, in 9 years or less, without spending more than they currently spend and with little effect on their current lifestyle.

Contact our Professional College Planners for more information.

5 Common Myths about Financial Aid

, ,

Now that many public colleges and universities have an annual cost-of-attendance exceeding $25,000 and a few private institutions have exceeded a $70,000 annual cost-of-attendance, financial aid has become an essential element of a family’s college planning campaign.

Don’t rely on anecdotal information; get the facts!

Consider the following five myths:

  1. My child won’t qualify for financial aid because we earn too much money.

Yes, it’s true that income is the main factor in determining “need-based” aid. However, the number of children you have in college at the same time significantly affects the amount of aid for which you might qualify.

Even if you believe your family won’t qualify for “need-based” aid, file the FAFSA. Do so because it is the prerequisite for eligibility for an unsubsidized Stafford Loan and it is often a prerequisite for “merit-based” aid.

Yes, even if you make too much money, your child may still qualify for awards and scholarships issued from the coffers of the schools.

  1. The form is exceptionally confusing.

While it may have been an incredible burden years ago, it is much less so now. It’s now online, easier to navigate with detailed instructions, and it relies on your tax information from two years prior rather than your most current return.

  1. Applying to a more expensive school will result in more financial aid.

Maybe…maybe not.

The greater the financial need doesn’t mean you’ll receive a larger financial aid package. Schools are not obligated to satisfy your entire need. Each school has its own financial aid formula and method by which it develops an individual student’s award package.

  1. We own our home, so we won’t qualify.

Home equity is not requested on the FAFSA, nor are the value of retirement accounts, cash value life insurance, or annuities.

  1. Our circumstances have changed, but nothing can be done.

If your circumstances have changed since you filed the FAFSA and you have supporting documentation, you can ask the financial aid officer to review your aid package. Adjustments can be made if there have been material changes to your income or assets.