OPINION: Be Frugal and Pay For College Without Debt

By  //  July 14, 2013

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ABOVE VIDEO: The renowned financial expert, Dave Ramsey, talks with Christian Broadcasting Network correspondent Carolyn Castleberry about frugal management of lifestyle dollars and how to graduate from college with manageable or even no debt. (Video by CBNnewsonline)

BREVARD COUNTY • COCOA, FLORIDA — I’d like to offer a politically incorrect perspective on the so-called “outrageous” student loan debt crisis.

According to various articles, the average student debt for a bachelors degree program is between $20,000 and $25,000.

opinion-180-5-2We are hearing cries of disaster from millions about how raising interest rates from something like 3.4  to 6.8 percent will destroy the future of these graduates, and that it will keep them in perpetual debt.

Let’s look at the facts. If we round the assumed rate to 7 percent for some easier math, and even increase the average loan amount to $30,000, then interest the first year would be around $2,100. Payment of $250/month would reduce the balance by around $900 a year the first year, and more in future years.

Depending on which studies are referenced, it appears that college graduates, whose skills/knowledge are of value to and sought by potential employers, will pull down an average income that is about $20,000 a year more than a high school graduate. Which means if a college graduate had a budget the first two years after college equal to what he/she would have had as a high school graduate, they would have earned enough “extra” money to pay off a $30,000 loan, plus interest at 7 percent, in less than 2 years.

A more frugal lifestyle for many students may lead to more effective student loan management.

Putting things into perspective, you can take it one step further. One thing many college students or graduates buy for themselves as soon as they can qualify for a loan is a fancy new car. The average cost for even a moderately priced car is about $25,000. However, no one seems to be sounding the alarm or concerned about an economic crisis related to students needing to be bailed out from that kind of loan.

Maybe if more students didn’t buy fancy cars, they could pay for college without having to go into debt, and, who knows, maybe that early lesson in thrift would enable them to retire with more than the median $100,000 or so, on which millions of retirement age workers will be struggling to retire.


Ilene Davis
Ilene Davis

Ilene Davis, a resident of Brevard County since 1971, is a Certified Financial Planner with a bachelors degree in Mathematics from the University of Michigan, a bachelors degree in Accounting from Rollins College, and a Masters in Business Administration from Webster University.  Ms. Davis became a stockbroker in 1982, earned her designation as a Certified Financial Planner in 1984, and with a desire to serve clients more on her own terms, opened her own financial consultant office in Cocoa Village in 1986.   She is committed to helping each client create their own “Financial Freedom Fund,” and believes strongly in free market capitalism and a “hand up rather than a hand-out” as the best path to prosperity.