Ask Gen Y Planning: Is Student Loan Debt Worth It?

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This question was submitted by a reader! Do you have a money question you’d like Gen Y Planning to answer in a future blog post? Submit it to genyplanning.com/askgyp.

I am a high schooler getting ready to apply to colleges soon and would like to ask for your expert financial opinion. Do you think it is a smart decision to go out of state to university? If I do, I would have undergrad debt around $250,000 for a business administration degree, and my salary coming out of undergrad would probably be $55,000-$70,000. Is this a smart decision, or should I stay in state and have a debt of around $120,000?

Also, How should I be looking at financial aid for college? I do not qualify for need-based scholarships, but will private and public schools give me money to reduce my costs of attending school?

Ethan M. 

You are really thinking about this at a good time. I am a big fan of in-state public colleges and universities because they tend to be much more affordable than out-of-state schools or private colleges. I was convinced I was going to go to theatre school to get my BFA in Musical Theatre from a private school out in the East Coast and I ended up going to Minnesota State University, Mankato. I was a double major and graduated in four years, and it was very affordable for me and my family. I was also able to get a theatre scholarship.

From what I’ve seen, the ROI (return on investment) is rarely worth it to spend more than you need to on your undergrad. I have a lot of clients who I work with that are in their 30s and are still paying off debt from their undergraduate degrees, and they often regret spending six figures on college. Many people are going back to school to get their MBAs, law degrees, and other higher education and would rather have saved money on their undergrad to use for grad school instead.

Speaking of money: I think that $250,000 is a TON of money to spend on your undergrad. (It’s debt the size of a house!) To pay this debt off over 25 years, you’re looking at a monthly payment of $1,700!

Even $120,000 is a lot to spend on your undergrad. I would see what scholarships might be available. You could also live at home to cut your cost of room and board.

Since you’re still in high school, I would consider taking college classes during your senior year through a community college, or taking as many AP classes as possible. If you can go into college with a semester of college credits under your belt, you’ll save a significant amount of money.

In addition, if you can live at home for a year or so and get your associate’s degree from a community college or nearby state university, you’ll be in a great position to transfer to the school of your dreams. If you’re able to keep a high GPA, you may qualify for more scholarships later on.

Here’s what I would do if I were you:

  • Start taking college classes now, whether online or in person
  • Apply for a ton of scholarships
  • Live at home while you’re getting your associate’s degree and do it in half the time of other students
  • Transfer to an in-state or out-of-state college for the last two years to finish your undergrad
  • Work your way through school and take out as few of loans as possible.

I love getting questions from high school students like you! It’s wonderful to see you weigh your choices so thoughtfully.

Here are some posts from the Gen Y Planning blog that might be helpful to anyone who has their bachelors and are either paying off loans or considering grad school (or both):

  • Is Student Loan Debt Worth It?
  • Student Loans: Pay As You Earn, IBR, ICR, PSLF, and OMG This Is Confusing!
  • How to Pay for Grad School, Law School, or Your MBA

The post Ask Gen Y Planning: Is Student Loan Debt Worth It? appeared first on Gen Y Planning.

Original source: https://genyplanning.com/2018/05/20/ask-gen-y-planning-is-student-loan-debt-worth-it/

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