Rachel Cruze, the daughter of financial guru Dave Ramsey, really wanted to go to Auburn University, which to outsiders wouldn't seem like much of a problem. Ramsey's financial success meant the family could pay for any college she wanted.
"But we live out what we preach," says Cruze.
Ramsey told her they would gladly pay the cost of four years of in-state tuition. She would pay anything beyond that.
"I thought that was harsh," Cruze says.
But then she discovered it cost three times more at Auburn University in Alabama than college in her home state of Tennessee. And the education was not three times better, she says.
"I thought, 'Wow! My parents are smart,'" she says with a laugh. "Going to that college didn't make any financial sense."
And so she went to the University of Tennessee and graduated debt free.
This makes her rare. Seven out of 10 students graduate with student loan debt averaging $29,400, according to the Institute for College Access and Success, an education research nonprofit. In June 2010, student loan debt passed credit card debt, and now is $1.08 trillion, according to the Federal Reserve.
With rising college costs, it isn't a wonder many turn to loans. The Department of Education says the average cost of a public, four-year college degree rose from $16,900 in 2000 to $23,200 in 2012. And that's adjusting for inflation. What's worse, the "total" cost doesn't include the interest students will pay over the life of their loans.
Many may feel the cost is worth it; Pew Research Center found millennials in 2013 with college degrees made median annual earnings $17,500 more than their peers who only graduated from high school.
But even with so many resorting to student loans, Cruze, who just finished co-authoring the new book "Smart Money Smart Kids" with her father, insists that graduating debt free is not something that is just for those with well-to-do parents.
Normal is crazy
Michelle Singletary, personal finance columnist for The Washington Post, agrees that student loans are not necessary and teaches to people at her church in the Washington D.C. area how to go to college without debt.
"They look at me like I must be from Mars," she says. "They actually get belligerent. … They can't conceive of having to save enough for college. And even parents who have saved take out loans."
Singletary says many people do not save precisely because they know student loans are available.
"Can you see how crazy that is?" she says.
Cruze says a friend of hers went to college so she could get a dream job. But when that dream job became available, her friend had to turn it down. The job wouldn't pay enough to live and still pay the minimum student loan payments.
Situations like this don't surprise Steven Economides, co-author with his wife, Annette, of "The MoneySmart Family System." The Economides, who live in Scottsdale, Ariz., have five children — all who attended college without debt. Yet, he can see the problem. "You take a 17-year-old kid who earns $4,000 a year working part time and sit him down with a loan officer," Economides says. "And that officer has the authority, without the kid having any real employment history, to loan him $60,000 to $80,000. … How is that even smart?"
Cruze says there is a way to go to college without debt. "There is hope," she says. "It just isn't normal and nobody is doing it."
Choose the right school
The first, and maybe hardest, step is to pick the right college. "Choose the school you can afford," Cruze says bluntly. "Picking the right school is the key."
Cruze learned the huge difference in cost between an in-state school and an out-of-state school. She also says community colleges are a less expensive stepping stone on the way to getting a four-year degree.
Michelle Singletary's oldest daughter wanted to go to the University of Southern California. It cost about $45,000 a year.
"I told my daughter, 'We don't have that, we have enough for you to go to the University of Maryland without any scholarships,'" Singletary says. "Was she happy? No she wasn't. ... But at the end of the day, she is doing perfectly fine, having a ball and hasn't given USC a second thought."
Economides made similar rules for his children.
"It is whether they will work hard that will determine their success," he says, "not what school they attend."
Another way to save money, Economides says, is to take courses in high school that count for college credit — saving thousands of dollars over what those credits would have cost at a college.
"Only 30 percent of people who go to college pay the full retail price," he adds. "Negotiate costs with advisement people at the colleges. What college credits will they accept? Everything is negotiable."
Apply for scholarships and aid
Cruze tells the story of one mother who forced her daughter to apply for two scholarships every day as if it were her job. She didn't have great grades, but kept sending applications in — winning enough to pay for the first three years of college alone.
Cruze suggests applying for scholarships even if they are small: "If you fill out a form and write a quick essay in 30 minutes and get $200, that is not a bad part-time job for 30 minutes' work."
Rachel Wolfinbarger, who graduated with a bachelors in 2010 and a double MBA in 2013, received a full-ride scholarship to California State University, San Bernardino. This didn't stop her from applying for every scholarship she could find to help cover things like gas, housing, books and even studying abroad.
When she received a scholarship, Wolfinbarger asked the scholarship committee people why they chose her. One person told her she went above and beyond by giving more recommendation letters than the minimum required.
"Some times they have formulas to make it simple and so they will give you a point or a couple of points for every recommendation letter you have — and so if I sent twice as many as everybody else I get more points," Wolfinbarger says.
Wolfinbarger, who now works as an assistant to the founder of Logos Lifetime University, a financial education company based in Rancho Cucamonga, Calif., says while doing more than expected is great, it's also important to not go beyond other requirements like the maximum number of pages of an application essay.
Applying for financial aid is also important. Grants, like scholarships, are free money. Cruze, however, warns that "financial aid" can be a confusing and even misleading term because it includes loans. "Just be aware that obligations can be tied to grants," she says.
The parents' responsibility
The Ramsey family's stand on parental responsibility for higher education was clear. They had no responsibility to pay for college. But that didn't mean they didn't want to help their kids out.
Cruze says it is important to start saving early using an Education Savings Account or a 529 plan. "Start that plan and communicate with your children," she says. "Letting your 18-year-old dictate her future by going $100,000 into debt is not being a good parent. Step in and hold their hand through this process. They may be frustrated and mad with you, but I promise when they graduate from college and are 24 or 25 years old, they are going to be so thankful you did that."
Singletary says she tells her kids she feels some responsibility to help them go to college. "College is the admission price for middle-class life in this country," she says. "So because we know that and decided to have you, that is part of our parental responsibility. However, we are going to do our best to save as much as we can, but you can't take on debt. Nor will we."
But many parents think that going into debt is their responsibility, Economides says, and so they co-sign a loan, mortgage their home and pull savings out of their retirement.
Living like a student
Jonathan Moore didn't get a lot of financial help from his parents to make it through college — although his grandparents helped some with the tuition at California State University Fullerton where he graduated in 2006. Moore avoided any student loans by working his way through college, selling cellphones full time and then selling cars part time. "I had my own apartment with roommates," he says. "I had to worry about bills, credit card payments, etc. but it was a great 'out of the frying pan into the fire' learning experience."
Cruze says the key to avoiding debt is to live like a college student when you are in college. This might mean living at home, for example. "That way, when you graduate, you don't have to live like a student," she says.
Mark Kantrowitz, the senior vice president and publisher of edvisors.com, an education finance advice website based in Las Vegas, says it is easy for a student to waste money in college. For example, buying a $10 pizza every week using student loan money will end up costing $4,000 by the time it is paid back, he says. "That's a lot of pizza."
Debt is not always bad
Even though Kantrowitz says students need to be very careful about their expenses, he doesn't think that getting student loans is a bad thing if done carefully.
"There has been a trend of shifting the cost of college from the government to the families," he says. "And family incomes have been flat, so that means more debt at graduation."
Where people go wrong, he says, is when they get loans that are too large for what their occupation will be.
"Total student loan debt at graduation should be less than your starting salary — and ideally a lot less," he says. "Keeping your debt in synch with your income ... means that you'll be able to pay back your student loan debt in 10 years or less."
Otherwise, Kantrowitz says, people will struggle and have to rely on extended repayment plans, income-based repayment or the like. Such plans, however, extend the loan and increase the amount of interest that will be paid over the life of the loan. "You will still be paying back your own student loan debt when your children are graduating from college," Kantrowitz says.
Mike Cummings, who just finished his BS at Grantham University in Kansas City, Mo., and now lives in Boise, Idaho, decided that he was not going to go into any debt to go to college. He tried a semester in college back in 1985, but decided to go to work instead. Now, years later, scholarships and the G.I. Bill made it possible for him to get that degree.
A large part of the reason Cummings didn't want any debt is because his wife, who has an associate degree from 1995, had some earlier financial struggles and is still paying off her student loan debt. "I didn't want to take a chance and it was keeping our agreement of no debt," he says.
With some people, there is a chance for some loan forgiveness if they work in a public service job — a category that is defined very broadly. Public service loan forgiveness isn't a cure-all and kicks in after 10 years.
Graduation without debt
Economides proudly points to his son Joe who just graduated from Grand Canyon University, a private, for-profit Christian university located in Phoenix, with no debt and moved out on his own. "He has a positive net worth of $3,000," Economides says. And he's going to hit the ground much faster than his peers who may be $40,000 in debt, he says.
Jonathan Moore likes the opportunities he has. "The lack of student loan debt was really nice," he says. "It enabled me to travel the world … instead of worrying about a $200 to $400 monthly payment."
For Michelle Singletary's daughter, the lack of debt contrasts with her friends. "She is breathing easier," Singletary says. "She can see the pressure her friends are under and their stress."
Rachel Cruze knows her situation and the situation of people who graduate without debt isn't normal — and revels in it. "Normal is broke," she says. "We want to be weird."
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