What is Unforgivable and Can Crush your Child?

What is Unforgivable and Can Crush your Child?

Oct 25, 2016 / By : / Category : Financial, Loans

Student Loans

Unforgivable

No, I am not speaking of an action, a song, or the fact the coach did not play your child enough last game.

A student loan is unforgivable. Literally. Virtually every kind of debt can be erased through bankruptcy, but not the student loan. It will live on, even through bankruptcy.

I am able to share these realities with you because The Recruiting Code is not a service depending on your college attendance. I am a coach and a dad who loves athletics, but not at any price.

I am not writing anything original. I am stealing from some great articles about student debt.

* I relied heavily on the August, 2016 Consumer Reports magazine for this information in this article. Clicking on any linked information will take you to my sources.

Painful

Painful: Parents allow their children to rack up tens or even over a hundred thousand dollars in student loans. If you have been reading the news over the past few years, you know a growing percentage of young adults are graduating with loans the size of house payments. Imagine the pain of those monthly payments at 23 years old.

Worth “IT”!

A college education is often viewed as worth “it”. Whatever “it” is.  Three of the top reasons young people attend college right out of high school.

  • The promise of higher paychecks for the rest of your life.
  • Pride in a degree.
  • Meeting the expectations of family and friends.

Crushing

This is the sentiment of many post college young adults have concluded about their student loans. Jackie Krowen, 32 of Portland, Oregon said this of her $152,000 student debt, “I feel I kind of ruined my life by going to college’ I can’t plan for an actual future.”

More Crushing

There are 42 million people who carry a student loan. They are in debt to the tune of $1.3 trillion dollars. Getting through college without debt can be a challenge. A horrible trifecta has occurred over the past couple of decades.

Entrepreneurial Spirit

The department of education expects to earn an astonishing 20% for the loans it made in 2003. It seems our department of education has an entrepreneurial spirit. The student loan industry is now a $140 billion per year market.  The U.S. Government holds approximately 93% of all outstanding debt, effectively making it one of the largest banks in the world. They have turned over the debt collection to private companies.

Graduating with debt

“Seven in 10 seniors (68%) who graduated from public and nonprofit colleges in 2015 had student loan debt, with an average of $30,100 per borrower. This represents a 4% increase from the average debt of 2014 graduates.” 

What will happen to that debt after college when your child struggles to pay for it?

Your child will receive calls from a caller at a collection agency who is making $12 an hour. They will use their prewritten scripts to try to extract fear and hopefully money out of your child.

On the other end, your child, now an adult, will declare they are unemployed, marginally employed, or have other bills to pay. Whatever their excuse, the collection company will begin taking their tax refunds and garnishing their wages.

According to the Consumer Financial Protection Bureau, one in four borrowers are behind in their payment and 7.6 million are in default.

A 2013 regulation limited a student debtor’s federal loan payment to 10% of discretionary income.

Paying for the Dream

From my experience as a college coach and as a youth club director of coaching, selecting a college is a highly emotional decision. It is especially so with athletes because the dream of playing college sport can be so intense. In the quest for a dream school and athletic opportunity, many families lose sight of the financial consequences associated with their decision.

It was my job as a college coach to sell an athlete on coming to play for me. It was NOT my concern how the family afforded it, as long as they could find a way.

That way often involved loans. It starts out innocent enough, with $5,500 in student loans for most people the first year. Before you know it, your child is the average student borrower entering school in 2016. What does that mean? According to Mark Kantrowitz of Cappex.com (a website that helps students compare colleges and find scholarships) the incoming class of 2016 will graduate with an average debt of $37,000.

The Nightmare that Follows

According to a Consumer Reports survey, the cost to the borrowing student has been devastating. 44% have had to cut back on living expenses, 28% have had to delay major goals like buying a house and 37% have put off saving for retirement.

Read this quote at least twice: “45 percent of borrowers say knowing what they know now, their college experience wasn’t worth the cost.”

We have all watched movie scenes of the star athlete at their high school reunion, reliving the glory days. The only glory days they ever knew: four years of high school. The rest of the their life has been at best mediocre, at worst a train wreck. Could that be your child? An athlete who achieved four glory years in college and pays for them the rest of their life?

Are you allowing, even encouraging, your children to play for the moment, and NOT speaking of the consequences of those actions and how their lives will be forever altered?

Will they be at their college reunion 20 years later, still paying off debt? Did the loan delay their decision to have a family, to buy a house, to save for what is still to come, their retirement?

Having the Money Talk

I was talking to a coach recently about a parent of a 15 year old athlete. The athlete wanted to change clubs. Rather than go to the club in town, he wanted to go to one an hour away. The dad did not want him to make the change and thought the current club was providing what his son needed. Helplessly, the dad followed the wishes of his son and spent a miserable year commuting several times a week. Why did this dad not just say “no”? This same dad will in the years ahead be the one who allows his son to choose any college regardless of the expense and future consequences in the effort to make him happy in the moment.

Student LoansMany of you have been in a situation where your child wants something and you believe it is the wrong decision and yet…you go along to keep them happy.

 

  • Have the talk.
  • Be honest with your child.
  • Let them know how much money you have to contribute and what they will have to contribute to their education.
  • Be realistic about how much debt is appropriate and how much is too much for an education.

Have guidelines and limitations in place early and don’t cross the line for the shiny apple. It is not about the amount of the athletic scholarship, or  the college coach, or great teammates who are awaiting your child. It is about the final cost. Can your family afford it or not?

Consumer Reports put together a list of 10 questions every family should discuss about money. I have listed them here:

  1. What does your student want to get out of college?
  2. How much will college cost, bottom line?
  3. How much federal financial aid can our family really expect?
  4. Are financial aid offers good for four years?
  5. How much debt can one student manage?
  6. Should parents contribute, and if so, how much?
  7. What about community college?
  8. Any other ways to cut costs?
  9. How can we know if this expensive education will pay off?
  10. What if my student has trouble repaying his debt?

The Number of Years in School Matter

According to the National Center on Education Statistics, only 39 percent of college students graduate in four years.

  • Can you say one or two more years of additional loans!
  • Can you say athletic eligibility is only four years, plus one for a redshirt (if you get one)!
  • Can you say one to two years less in the workforce (which will account for approximately $60,000-100,000)!

Students who spend six years in school owe about 40 percent more in student loans than those who graduate in four.

The True Cost of College

How much will you be expected to pay? When looking at colleges, few people pay the actual sticker price. How much you pay depends on many factors including: GPA, test scores, family income and assets, athletic aid, academic aid, and federal aid.

After all these are calculated the school will give you the “net cost”. This is how much will come out of your pocket or in a loan. Undergraduate colleges that receive federal aid are required to have a net price calculator on their website to help you figure out the actual cost. Click here for an example of one.

You won’t get an exact cost until you have been accepted and received your financial aid letter, but it will give you a good estimate.

Is the public university automatically the cheaper option?

Not really. Public school tuition has been increasing rapidly. Although the sticker price is generally lower than private schools, so are the scholarships. Depending on the family and the situation, the public university may or may not be the best option.

Is There Any Hope?

When I was coaching college soccer at a private university, I always had about 20-25% of my roster on, or near, full tuition scholarships. Why? I looked for the players who had the right profile for my school. The right profile for any school almost always includes doing well in the classroom!Student Loans

There is hope. Here are a few final tips to get you moving.

  1. Do your due diligence and spend the time researching those schools that may be a fit for your student-athlete, including schools whose coaches have been recruiting your child.
  2. Don’t be afraid to walk away and look at other choices.
  3. Work through the entire application, acceptance, and financial aid process with several different types of schools. Often you won’t actually know the affordability of a school until you get all the way to the end.
  4. Have the discussion with your child, “Is college really the best choice for you?”

From one parent (with one in college and three more quickly approaching) to another: Don’t be afraid to have the honest conversations with your child and make the difficult decisions.

If this has been helpful for you, please share it with other families in your circles who are struggling with the same issues.

Thanks for reading,

Bryan

Next, take a look at College Financial Facade: What You Need to Know.

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