In recent posts we introduced you to Jason and his friends and the student loan problems they all have. Jason and two of his friends, Terrell and Kate, are seniors in college, just months away from graduation. Olivia is a junior. We focused on Jason and told you something of his loans.

To summarize, Jason has taken five years to get to graduation and has borrowed the maximum amount of federal student loans, a total of $31,000. Because no more than $23,000 in subsidized loans is permitted, the remaining $8,000 in federal loans is unsubsidized. Jason also has two private loans totaling $15,000 which his uncle cosigned. Jason’s first payment on his federal loans is not due until six months after graduation but his first private student loan payment is due 60 days after graduation.

Another factor is that Jason has not received a job offer, although he has been interviewing with various corporations for jobs in human resources. The average starting salary in human resources is $53,000. The rule of thumb is not to borrow more than your anticipated first year salary. Therefore, Jason should be able to repay his loans without difficulty, even with the accrued interest added to his loan total. But he’s going to have to upgrade his job search now.

A look back often helps us to see forward more clearly. So, let’s take a look at what contributed to Jason being where he is now.

Jason and his sister were raised by their mother after his father became gravely ill and died a short time later. Jason was just nine years old and his sister two. Jason’s mother had to work full-time and eventually earn enough money to keep the family together. In fact, she had done well enough that Jason was not eligible for a Pell grant when he applied for financial aid to college. (Students whose total family income is $50,000 a year or less qualify.)

During high school, Jason had taken a mix of business and machine shop courses as well as college prep courses in English, math and science, but he was not interested in school and graduated with just a little better than a C average. Nevertheless, along with his group of friends, he assumed he would go to college. He attended a less selective college among his state’s several regional colleges where he changed his major after freshman year to psychology and then to physical therapy. He will graduate with a GPA similar to his high school average.

Jason is not unlike many students. And like many students, his decision to attend college was made without considering any alternatives. Upon entering college, his goal was unclear and he changed majors twice. This extended his time to graduation, costing him another year of college as well as the lost income he would have earned if he had graduated on time. Additionally, this required borrowing more money for school and more time during which interest continues to accrue.

Your homework is the following:

  • review our previous four blog posts about Jason and student loans:

Jan. 10; Jan. 18; Jan. 26; Feb. 2

  • reread this post carefully; and
  • make up a list of things Jason might have done to change the outcome.

In our next post about Jason, we’ll discuss some of the ideas you suggest and some you might have missed.

2 thoughts on “College Planning – Mistakes you don’t want to make

  1. It seems to me that Jason had an opportunity after he changed his major the first time to take a year off to think about what he wanted from a college education. I know a young man who is now an attorney, but who took a year off in the middle of college because he didn’t want to go too far down the wrong path. During his year off, he lived with his parents and worked in the restaurant industry, so he was able to improve his financial situation while he thought about his next step. He ultimately returned to college and made sure he took classes that would facilitate his future application to law school.

    Jason had some machine shop training from his time in high school, so he could have worked in a machine shop while living at home if he had chosen to take a year off from college to think about his major, his plans, etc.

    Because your earlier post about Jason said he was having a discussion in a dorm with his friends, I assume he is living on campus. If he is attending a regional college in his own state that isn’t particularly selective, he probably could have chosen a school closer to home, where he could have saved money by living at home, so he wouldn’t have to pay room and board. Another friend of mine (also a lawyer) lived at home for college and for law school. She did have the expense of buying and maintaining a car, but it was far lower than seven years of room and board.

    I think one of Jason’s major issues was that he didn’t manage his expenses. It is very easy when you’re buying something big on credit–a house or a college education–to think there is very little difference between, say, $100,000 and $120,000. However, with interest, the difference can be quite large, and the payments will be due every month, including during months when you might be unemployed or underemployed.

    Frankly, I’m a little surprised that Jason’s uncle didn’t put some pressure on him to live at home, given that he co-signed for some of Jason’s debt. Live and learn, I guess.

  2. It seems to me that Jason had an opportunity after he changed his major the first time to take a year off to think about what he wanted from a college education. I know a young man who is now an attorney, but who took a year off in the middle of college because he didn’t want to go too far down the wrong path. During his year off, he lived with his parents and worked in the restaurant industry, so he was able to improve his financial situation while he thought about his next step. He ultimately returned to college and made sure he took classes that would facilitate his future application to law school.

    Jason had some machine shop training from his time in high school, so he could have worked in a machine shop while living at home if he had chosen to take a year off from college to think about his major, his plans, etc.

    Because your earlier post about Jason said he was having a discussion in a dorm with his friends, I assume he is living on campus. If he is attending a regional college in his own state that isn’t particularly selective, he probably could have chosen a school closer to home, where he could have saved money by living at home, so he wouldn’t have to pay room and board. Another friend of mine (also a lawyer) lived at home for college and for law school. She did have the expense of buying and maintaining a car, but it was far lower than seven years of room and board.

    I think one of Jason’s major issues was that he didn’t manage his expenses. It is very easy when you’re buying something big on credit–a house or a college education–to think there is very little difference between, say, $100,000 and $120,000. However, with interest, the difference can be quite large, and the payments will be due every month, including during months when you might be unemployed or underemployed.

    Frankly, I’m a little surprised that Jason’s uncle didn’t put some pressure on him to live at home, given that he co-signed for some of Jason’s debt. Live and learn, I guess.

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