Crushing Student Loan Debt

The typical college graduate leaves school with a diploma and about $35,000 in debt, factoring in student loans and unpaid credit card bills, according to a survey by Fidelity Investments.

Of course, this is only the average. Many undergrads rack up much more during their four years on campus. The current default rate on student loans is 11.7 and it looks as if this is likely to rise. This money must be repaid, and it won't be forgiven, even if someone declares bankruptcy. The interest continues to accumulate, even after you stop making payments.

Not making good on this debt can have devastating consequences, such as wage garnishing and the inability to renew a professional license. Having a terrible credit report can also prevent you from landing a good job.

The job market for new college grads is at an historical low. More than half of adults under 25 are either unemployed or working at jobs that don't require a college education, noted an Associated Press report.

However, there's no question a degree gives you an edge in life. Nowaday it's practically a necessity.

So, is there a way to obtain a diploma, from a respectable university, without crushing debt?

Finding the Right College is the Key

One of the first books I fortuitously stumbled upon when my oldest child was getting ready forcollege was written by Lynn O'Shaughnessy, who's become a national expert in the college admissions process.

She penned The College Solution: A Guide for Everybody Looking for the Right School at the Right Price, after her son embarked upon his college quest.

O'Shaughnessy is open minded and flexible when it comes to difficult circumstances. A pricey East Coast or Midwest private school might be the right option for some families, if they have the money for tuition or their child has the academic ability to land big institutional scholarships.

Someone of more limited means though, will find a better fit living at home and commuting to a community college or a public college. More than half of all college students in America still live with their parents.

O'Shaughnessey's book stresses, repeatedly, that what's right for one student is wrong for another.

The High Cost of College
Credit: Flickr image by 401(K) 2013

How Scholarship Money is Allocated

One thing I wasn't really aware of, until reading O'Shaughnessy's book, is that schools allocate grant and scholarship monies to students they want to attract. Although I realized this, on one level, I didn't understand quite how calculated this process was.

I labored under the impression that colleges had a sole mission, and that was to educate. I assumed they always gave money to the neediest students, in order to give them a chance to earn a degree. This is still true, but just a little bit. I was ignoring the business model.

The colleges want to survive. They also want to raise their profile. In order to do this, they need to attract top students.

Big-name institutes have no trouble. But some of the smaller schools must compete for these elite scholars.

Most scholarships come from the institutes themselves. The way these monies are allocated is in direct proportion to a student's high school GPA and SAT or ACT scores.

At some cash-strapped universities, being financially needy can actually be a hindrance to gaining acceptance.

Applying to a Match Versus a "Reach" College

I had never heard the term "reach school" until I read O'Shaughnessy's writings. What this means is that a student applies to a top-flight school that's very selective, and hopes to get in.

The acceptance letter might arrive in the mail. But adequate financial aid might not be forthcoming, especially if this particular student's GPA and test scores are a little below the average.

However, a "match" school, one that's a good academic fit, and you can probably plan on getting into, will likely give more generous aid.

Students can expect the very best financial aid package if their academic standing is much higher than the norm.

So, as O'Shaughnessy points out, an elite university may not be the best choice for a low-income student with very good grades. An acceptance letter means little if the cost of attendance is prohibitive.

The Cost of Attendance is Only the "Sticker Price"

However, O'Shaughnessy doesn't advise not applying to a particular school just because you think it's too expensive. On the contrary, she points out that the published tuition, room and board are just the "sticker" price. Colleges often give deep discounts, especially if they happen to like you.

Among the other advice in her book is sending acceptance letters outside of your geographical area, if you don't mind living far away from home. (However, not all students are ready for this experience.) Colleges like to increase their campus diversity. An admissions officer will likely find you all the more attractive if you come from somewhere else.