Final notes on Midmorning student-loan chat

Here are my notes from the last part of Midmorning’s chat on student loans.

In this part, Zac Bissonnette joins Kerri Miller and finance author Erica Sandberg. Bissonnette is a reporter with Daily Finance and author of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents. He is a senior at the University of Massachusetts.

How does someone get through college without much debt, Zac?

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ZB: Paying for college without racking up a lot of debt – and possibly with no debt -- is not an insurmountable task, especially with student working and parents cutting budget and chipping in. I have what’s called the Airplane Rule: Please make sure you have your own oxygen mask on before assisting your child. Don’t loot your retirement. Just take on short-term measures, not long-term risk.

Some research shows students who worked during college had slightly higher GPAs. College is not a full-time job. They only thing that working during college will affect is your beer consumption.

If you look at those students who graduate with the least debt, they come from elite colleges with huge endowments, and large state universities. You won’t have as much debt there. The trouble is in the second- and third-tier private universities. The worst is New York University.

Caller: So in order to do what Zac says, you need to romanticize student poverty and get no sleep because you’re working all the time and sacrificing grades.

ZB: Whehhh (whine). Employers are looking for people willing to work. The Generation Y stereotype is that they’re lazy. You can counteract that by working through college and showing employers you’re diligent.

How much should a student work?

ES: However much students can handle. I agree with Zac. Whehh. My parents had seven children. We all went to college. I took seven years to graduate, worked hard and had a great time. My sister’s kids are doing the same thing. Will there be some sacrifice? Yes. Top Ramen every night.

ZB: Very few things that help your life are easy. Graduating without debt is one of those things that are worth it.

Caller: My parents are paying for my college. I’m going into education and want to contribute. How much can I help when I’m working three jobs at $8-9 per hour and taking 20 credits?

ZB: You’re not going to grad school, I assume, so if your parents have the cash, accept it with grace. You’d be better off saving your money for something important: securing your future.

Caller: I graduated three years ago. I have a ton of debt, more in loans than for rent –about $80,000 to $90,000. I want to get my PhD. I hear you can get it without loans. How?

ES: I know someone in grad school getting a PhD. They’re paying her to do it. But you’ve got a lot in student loans, private loans with interest adding right now, so it’s very expensive. I’d say that while in grad school, concentrate in paying those loans now. It’ll be a tough road.

Zac, are you going to grad school?

ZB: No. But remember this about private loans -- they have variable interest rates. They’re low interest rates now. But they could explode in the future. So if you can get a job and throw everything at your loans over the next few years and then get a PhD, do so. I don’t like the idea of keeping the loans around with the interest rates being so low.

ES: You can’t walk away from those – not even in bankruptcy. They stick with you.

ZB: A Sallie Mae study showed 30 percent of the students who borrowed said the debt prevented them from going to grad school. A Yale study showed for every “X” number of dollars in debt, students were more likely to pursue careers in finance and not service. So they have high salaries in the start -- but not necessarily later. Which means many students are forced into high-paying starting jobs through short-term greed, but sacrifice their long-term future.

What about community college?

ES: It’s a fabulous idea. If you can finance the first two years of college that way and then transfer into a more prestigious university, it’s a great way to save money. The great thing about them, too, is that many have evening courses. So you can work, too.

ZB: The angriest letters I get are from parents reacting to my suggestion about community colleges. The colleges have a stigma. But studies show people at community colleges learn just as much if not more, and students there have higher graduation rates after they transfer. That’s why schools like Stanford recruit heavily from such colleges.

Caller: I’m a college instructor and future parent. How should I invest early? What are two resources everyone should know about?

ES: For parents, I love for investing. For debt: It includes information for student loans and credit cards. 529 plans are a good thing, like a 401(k). They tend to have higher management fees than they should, but the have a tax advantage. I like them. But any kind of saving plan is good. But you need to understand investing, and many don’t.

ZB: I like But don’t look at the US News & World Report Web site. The advice is horrible, and there’s too much emphasis on prestigious schools, and it pooh- poohs dangerous student loans. Really, no one cares where you went to study. One bit of research shows you can make just as much money after graduating from a less prestigious school. The college degree depreciates dramatically after your first job.

ES: So if you go to college, study something you love. I studied art history.

ZB: So did I. Studies show people who major in history earn just as much in business as those who majored in business.