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Some experts believe that while repayment programs such as Pay As You Earn can make it easier for people to repay their student loans that they are basically just bandages and do nothing about the real problem, which is the ever-increasing cost of college.
According to the Labor Department, the price index for college tuition grew by almost 80% between August 2003 and August 2013. There are several reasons for this. First, most states have cut back on financial aid to their schools. In fact, states spent $2353 or 28% less per student on higher education in 2013 than they did in 2008, Every state but North Dakota and Wyoming are spending less per student on higher education than they did prior to the Great Recession. And in many states, those cuts have been severe. Eleven states cut their funding by more than 1/3 per student and two of them (Arizona and New Hampshire) cut their spending on higher education per student in half.
Second, many schools have spent lavishly on new athletic facilities, dormitories that resemble upscale hotels, other new buildings and on big name professors so they can become “elite” colleges and universities.
What to do if you’re just starting out in school
If you will be starting college this or next fall, the best student loan is no loan at all. If you and your parents can figure out a way to pay for your education without borrowing money so that you could start life after college without a cloud of debt hanging over you this is the best option by far. However, if you’re like most students, you will have to borrow money to finance your schooling. So what should you do?
First, always be on the lookout for “free” money in the form of grants, scholarships, work-study options and work grants before taking out any student loans. Depending on your athleticism or field of study you might qualify for a sports or academic scholarship at your school. There are also many scholarships available from other sources such as your state and community groups. As an example of this where we live there is a scholarship for boys and girls who worked as golf caddies and another underwritten by a local foundation that pays for a full four years of college including tuition, room and board and even miscellaneous expenses.
Second, once you’ve gotten a loan and are in school be sure to meet with a financial aid counselor so you will understand your loan and how you will be expected to repay it. Third, create a budget to help keep your spending under control so that you won’t have to borrow any more than is absolutely necessary.
Finally, if possible get ahead on your payments while you’re still in school. If you can make interest-only payments on any unsubsidized student loans this will lower your overall balance and might even shorten the terms of your loan -- or the number of years required to repay it.
College can be some of the best years of your life. And most experts believe that its cost is still a good investment as studies have shown that college graduates earn 84% more than high school graduates over the course of their lifetimes. This is up from 75% in 1999. In addition, Georgetown University researchers estimate that by the year 2018 a full 63% of American jobs will require some kind of postsecondary education or training. This means that if you don’t have a college degree or some type of specialized training you could be shut out of 63% of all available jobs.