Avoiding The Perils Of Student Loan Debt

Dana Hinders

If you're thinking about returning to school to make yourself more competitive in a tight job market, it's understandable to be worried about taking on more student loan debt. A new study from Gallup looked at 11,000 college graduates and found that people who took out more than $50,000 in loans rated their physical and financial status at least 10 points lower than those with little or no debt. With high levels of student loan debt, many of the borrowers surveyed found it difficult to buy a home, start a family, or save for the future.

How can you get the education you need without putting yourself hopelessly in debt? When evaluating degrees and certifications, do not look at the "sticker price" of the program to determine if it's affordable. The tuition listed on the school's website ignores your eligibility for grants and scholarships, which can greatly reduce your total out-of-pocket cost for school. Take the time to apply to several different programs, then evaluate your financial aid offers at each school to see which one is the best deal. School-specific financial aid programs for adult students, such as scholarships for working mothers or grants for people entering in-demand career fields, can significantly reduce your education costs.

Online classes can be a more affordable option for furthering your education if they allow you to save on childcare costs, parking, and transportation. However, you'll need to carefully research the program you want to attend. Some for-profit programs have high dropout rates and low employment placement rates for those who do manage to graduate successfully. Overall, students attending for-profit schools also tend to have much higher student loan debt levels than those who attend public or private nonprofit schools.

Working part time while attending classes is a time-honored debt reduction tactic, but you'll make your efforts pay off quicker if you search for a job at an employer offering tuition assistance. Starbucks received widespread coverage earlier this year when it announced an arrangement with Arizona State University to offer tuition assistance for any of the school's 40 undergraduate online degree programs. UPS is also known for offering generous benefits to those lucky enough to snag part-time union or management positions.

If you do decide to take out a student loan to further your education, please keep in mind that student loan debt is not like other types of debt. In most cases, student loan debt can not be erased by filing for bankruptcy. The federal government has the power to garnish your wages, withhold your income tax refund, and even block certain government benefits such as Social Security checks in order to collect the debt. There have been multiple cases of elderly people struggling to make ends meet on Social Security only to realize that the government intended to withhold part of their benefits to pay back decades overdue student loan debt.

Photo courtesy of Tax Credits via Flickr.