How will I pay for college?

Question

The SAT is coming up soon for me and, with it, everything college. I had held the impression that I was just going to rack up student loans, go to college, and then pay them off with whatever job I got after college. I'm trying to be a bit more realistic now in planning and understanding what's going to happen.

The only savings to my name are $2000 in my bank account, which I know won't go far. My father passed recently without a life insurance policy. My siblings and I are receiving survivor's benefits from Social Security, but those will end for me upon turning 18. My mother was recently fired from her minimum wage job and our sole source of income has been the benefits and my grandfather's pension (~$1500 a month).

So, college. Do student loans have to be paid monthly? Can I just, as I had hoped, borrow large sums of money and only start paying them after college? Would a minimum wage job help, would college and full-time job be manageable together? How do I find out what scholarships, grants, and financial aid I can apply for?

edit: Thanks so much for answers, I've really felt lost about all this for a while. Yes, I'm in the United States, and I'm in an independent study school which doesn't have any guidance counselors.

I would be pursuing a technical career, and have somewhat of a headstart in programming and web development. This is the main reason I'm intent on going to college. I've learned everything online, and there's much more to be learned, but for engineering and more advanced things, I would like to be taught. I've also somewhat assumed that a technical career would yield enough money to balance out the student loans, so that, at the worst, it would be similar to just working a minimum wage job without any debts.

Answer 1

First, it's clear from your story that you very likely should be able to receive some financial aid. That may be in the form of loans or, better, grants in which you just get free money to attend college. For example, a Pell grant. You won't get all you'd need for a free ride this way, but you can really make a dent in what you'd pay. The college may likely also provide financial aid to you. In order to get any of this, though, you have to fill out a FAFSA. There are deadlines for this for each state and each college (there you would ask individually). I'd get looking into that as soon as you can.

Do student loans have to be paid monthly?

Any loan is a specific agreement between a lender and a borrower, so any payment terms could apply, such as bimonthly or quarterly. But monthly seems like the most reasonable assumption. Generally, you should assume the least favorable (reasonably likely) terms for you, so that you are prepared for a worst-case scenario. Let's say monthly.

Can I just, as I had hoped, borrow large sums of money and only start paying them after college?

Yes. That is a fair summary of all a student loan is. Importantly, though, some loans are federal government subsidized loans for which the interest on the loan is paid for you as long as you stay in college + 6 months (although do check that is the current situation). Unsubsidized loans may accrue interest from the start of the loan period. If you have the option, obviously try hard to get the subsidized loans as the interest can be significant. I made a point to only take subsidized loans.

WARNING: Student loans currently enjoy a (nearly?) unique status in America as being one of the only loan types that are not forgivable in bankruptcy. This means that if you leave college with $100,000 in debt that begins accruing interest, there is no way for you to get out of it short of fleeing the country or existence. And at that point the creditors may come after your mother for the balance. These loans can balloon into outrageous amounts due to compounding interest. Please have a healthy fear of student loans. For more on this, listen to this hour long radio program about this.

Would a minimum wage job help,

Of course it will "help" but will it "help enough"? That depends on how much you work. If you make $7.50/hr and work 20 hrs/week for all but 3 weeks of the year, after taxes you will be adding about $6,000 to offset your costs. In 3 years of college (*see below), that's $18,000, which, depending on where you go, is not bad at helping defray costs. If you are at full-time (40 hrs), then it is $12k/yr or $36k toward defraying costs. These numbers are nothing to sniff at.

Do you have any computer/web/graphics skills? It's possible you could find ways to make more than minimum wage if you learn some niche IT industry skill. (If I could go back and re-do those years I wouldn't have wasted much time delivering pizzas and would have learned HTML in the 90s and would have potentially made some significant money.)

would college and full-time job be manageable together?

That's highly specific to each situation (which job? how far a commute to it? which major? how efficient are you? how easily do you learn?) but I would say that, for the most part, it's not a good idea, not only for the academic-achievement side of it, but the personal-enrichment aspect of college. Clubs, sports, relationships, activities, dorm bull sessions, all that good stuff, they deserve their space and time and it'd be a shame to miss out on that because you're on the 2nd shift at Wal-Mart 40hrs/week.

How do I find out what scholarships, grants, and financial aid I can apply for?

Are you in a high school with a career or guidance counselor? If so, go to that person about this as a start. If not, there are tons of resources out there. Public libraries should have huge directories of scholarships. The Federal Student Loan program has a website. There are also a lot of resources online found by just searching Google for scholarships--though do be careful about any online sources (including this advice!).

Sermon: Lastly, please carefully consider the overall cost vs. benefit to you. College in 2012 is anything but cheap. A typical price for a textbook is $150 or more. Tuition and board can range over $40k at private colleges. There is a recent growing call for Americans to re-think the automatic nature of going to college considering the enormous financial burden it puts many families under. Charles Murray, for one, has put out a book suggesting that far too many students go to college now, to society's and many individuals' detriment (he's a controversial thinker, but I think some of his points are valid and actually urgent).

With all that said, consider ways to go to college but keep costs down. Public colleges in your state will almost always be significantly cheaper than private or out-of-state. Once there, aim for As and Bs--don't cheat yourself out of what you pay for. And lastly, consider a plan in which you complete college in three years, by attending summer courses. This website has a number of other options for helping to reduce the cost of college.

Answer 2

Firstly, good on you for thinking about it before you commit to it.

1. After you finish school, you will owe the money and can pay it back monthly.
2. There are programs with federal loans that can make payments easier
3. There are professions that can get your loans forgiven under special circumstances
4. There are federal loans, and private loans. AVOID PRIVATE LOANS Better to not have a loan than taking a private student loan.

Next. Chelonian provides lots of detail. Read that answer.

Consider the cost of going. Use your local community college. Use a state school. Get a job as an intern or another entry level position, with an employer that will reimburse you for education. Consider the military in the United State. Consider not going.

That last one sounds rough, but do you have a very clear idea in your mind what you want to do for a living? I would suggest that at today's costs, figuring out what you want to do should be done before you commit to school.

Answer 3

You sound like you're well educated, well spoken, and resourceful, so I'm going to assume that you are somewhere in the neighborhood of top 5% material. That means you can pretty much do anything you want to if you put enough effort into it.

There are two types of people in this world: those who run the world and those who live comfortably in it (and, of course, everyone else, but they are irrelevant to the discussion). Who do you want to be?

I've been around a lot of wildly successful people, and they have two consistent traits: connections and freedom.

First, everyone always told me that "it's not what you know, it's who you know", but I never appreciated it until after college. The world runs on connections. The more connections you have, and the more successful they are, the more successful you will be.

Second, the more freedom you have, the more opportunity you will have to take chances, which is how you become wildly successful. Freedom comes from not being in debt (first) and having money (second).

Why do you think Harvard grads are the guys that end up having so much money and power? It's probably because they grew up in a rich family which provided them money (freedom) and a wide social circle of rich people (connections).

So you're not rich. What to do?

Well, the easiest way to get into that group is to go to college with them. And that means you need to get into Harvard or another Ivy League. Stanford if you want to be an engineer.

College will be where you will make your most intense and long-lasting friendships. That roommate at Harvard that you went on the crazy four-day road trip with may someday be CEO of a company... and when he needs a CIO, you can be damn sure you'll be at the top of the list if you're qualified.

But Harvard costs a lot of money...which means you'll be in debt, a lot, when you get out of college. You'll have lots of rich, important friends(connections), but you'll be deeply in debt (no freedom).

Most of these type of people end up becoming consultants at big firms because they pay well. You'll live a comfortable life and pay off your student loans in five or 10 years. Then you'll continue to live comfortably, but at that point you'll be too old to take huge chances and too comfortable to change things (or perhaps you'll have a big mortgage = no freedom).

With a heavy debt load, it's almost impossible to, say, join an early stage startup and really be able to take huge chances. You can do it, maybe.

Or, as an alternate option, you can do what I did. Go to a cheap state school and graduate with no debt. That puts you on the other side of the fence: freedom, but no connections.

Then, in order to be successful, you have to figure out how to get connections. Goldman Sachs won't hire you, and everyone you meet is going to automatically assume you're mediocre because of where you went to college. At this point, your only option is to take big chances. Move to New York or San Francisco, offer to work for free as an intern somewhere or something. It can be done, and it's really not too hard, you just have to have lots of spending restraint because the little money you have has to go a long way.

So what are the other options?

Well, some people are recommending that you think about not going to college at all. That will certainly save you money and give you a four year head start on whatever you decide to do (freedom), but you'll forever be branded as that guy without a college degree. Think my second option above but just two or three times worse. You won't even get that free internship, and you'll be that weird guy at dinner parties who can"t answer the first question "So, where did you go to college?". It doesn't matter if you're self-taught; life isn't a meritocracy. If you're very good, you'll end up getting a nice cushy job pushing ones and zeros. A nice cushy golden handcuff job.

Well, you could go to community college. They're certainly cheap. You can spend very little money so you'll end up with fairly good freedom. I might add, though, that community colleges teach trades, and not high-level things like management and complex architecture. You'll be behind technically, but not as bad as if you didn't go at all.

How about connections? Your fellow students will probably lack ambition, money, and connections. They'll be candidates for entry-level wage slave jobs at Fortune 500 companies after they graduate. If they get lucky, they'll work up to middle management. There's no alumni association, and there's certainly no "DeVry Club" in downtown Boston. At New York and Silicon Valley dinner parties, having a community college degree is almost as bad as having nothing at all. Indeed, the entire value of the community college degree will be what you learn, and you'll be learning at the speed and level of your classmates.

My advice?

If you get into an Ivy League school, go and hope you get some grants to help you out. The debt will suck, but you'll be well positioned for the future.

Otherwise, go to a cheap second-tier school where you can get a large scholarship. There are also lots of third-party scholarships that are out there on the Internet you can get. I got a couple from local organizations.

Don't work during college. Focus on expanding your network instead; the future value of a minimum wage job while you're trying to go through school is practically zero.

Answer 4

One potentially useful option to avoid the crippling tuition fees in the states is to instead get your degree abroad. Numerous European countries have very low tuition fees, even for international students. Tuition can be as low as a 1000 EUR and housing is generally also very affordable. There is of course the language barrier but many universities are oriented towards receiving international students, providing relocation assistance and offering courses in English. As a bonus, most Europeans speak excellent English and are generally quite happy to practice it so you shouldn't have any problems off-campus either. Going to the UK is an option but likely considerably more expensive than colleges in mainland Europe.

This article, while written for a Nigerian audience, lists some of the most attractive options for the international student. The quality of the education is also generally very high for these colleges. As an example Belgium, one of the cheapest options in the list, has two universities ranked in the Top 100: Leuven and Ghent. Many other German, French, Dutch or Scandinavian universities figure in that list.

Answer 5

There are some useful comments about the tradeoffs of the decisions in front of you. Intertwined with the financial choices, hopefully you can see a map opening up.

Make a little chart if it helps. Benefit and Cost. If you're looking for financial options, you will have to also add more columns to that chart: Option and Cost.

An example is the comment on making connections with rich kids. Trust fund babies are everywhere in this country. Did you know any rich kids while growing up? How were those rich kids you knew of back then... in your school... in your town? How did they treat you? Were you ever invited to their parties or gatherings? Now there's an opportunity for the privilege to pay a lot of money to sit in a classroom next to them? Even in the early days of American history with merit based millionaires... tycoons who made it rich by the seat of their pants. At fancy dinner parties and soirees, a new term emerged to put each other again out of reach: old money (the deserving) and new money (uncultured climbers).

That's my bias. You'll have some of your own. What is important to YOU has to come through because these days, the price tag of any higher education implies a considerable piece of your life's timeline will be committed to... something. Make sure you get what you feel is worth that commitment.

Take stock of what has been said here by the others, but put a value on those choices and seriously consider what you're willing to pay for... and what you're not. There is no formula for your success as there's been thousands of exceptions... ESID (Every Situation is Different).