Have a Student Going Off to College? Teach Your Child about Student Loan Debt

If you have a soon to be graduating high school senior, she has hopefully been accepted to several schools and is in the processes of deciding which to accept.

Your high school students should be blissfully debt free right now, but as soon as she decides what school to attend, that may all change.

Far too many students decide what college to attend because they like the campus or the atmosphere or because they want to move far from home.

Ideally, before she even begins to apply to colleges, you, as the parent, should sit down with her and discuss finances.  This conversation should occur no later than before your child makes a decision as to what college to attend.

Most parents would like to pay for their child’s entire college education, but that is often not possible due to the current economy and rising tuition costs.

Chances are, if your child attends an expensive university or private college, she will have to take out student loans, sometimes tens of thousands of dollars worth of student loans.  The cold reality is that she may be paying these loans for the next 10 to 20 years, and she may have to delay important life events such as getting married, having a child and buying a home all because of her student loan debt level.

Ignorance Is Not Bliss

High school and college students are notoriously optimistic.

They will find a good paying job in their field and be able to pay off the student loans, they say.  Yet, they have been living in your house for 18 years, and you have probably paid the majority of their expenses.

student budget

Teach your child how their student loans will fit into their budget.

A good activity is to sit down with them and write down what a working budget will look like after they graduate from college.  Calculate how much their rent, car payments, insurance, and other monthly expenses will be.

Then, add in how much their monthly student loan payments will be.

The truth is that most students don’t know how much they will have to pay back monthly.  Help them understand.  Show them how difficult it will be to save for retirement, a house, a new car, and emergencies if they are mired in student loan debt.

If your high school student can’t see far enough into the future to imagine saving for retirement and a house down payment, consider addressing more current desires.  When she graduates and obtains a good paying job, she will want to have free money to go out to eat with friends sometimes, to get a nice apartment, to buy a car.

If she is saddled with student loan debt, paying for these small luxuries may be very difficult, if not impossible.

Let you child know that student loans are not dischargeable in bankruptcy. 

The student loan lender will get the money one way or another.  According to Kiplinger’s, if you default on your student loan (meaning you have not made payment in 270 days),

“the feds can demand payment in full, assign your case to a collection agency, garnish your wages, pocket any state or federal refunds, and even come after your benefits in your old age.  ‘We see people who defaulted on loans in the 1970s and 1980s whose Social Security benefits are being garnished,’ says Paul Combe, of American Student Assistance, an agency that guarantees federal loans.  Worse yet, old, neglected loans carry decades’ worth of fees, interest and collection costs. ‘A $2,000 loan that defaulted 20 years ago is now $30,000,’ says Combe.”

These people may have defaulted decades ago because they did not have the money to pay due to job loss or disability or any other number of causes.  Chances are their financial situation may still be compromised once they are retired, and now their Social Security is being garnished, and their student loan debt has grown tenfold or more.

Not paying your loans has serious repercussions that your children must understand.

If you couldn’t afford to pay the full price of college years ago, student loans used to be one part of the financial aid package.  Now, student loans are often the majority of the financial aid available, and students take out as many loans as they are offered without much thought to how they will pay them in the future.

The best way to help your child secure her financial future is to teach her about the perils of student loan debt before she has any.

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Published or updated March 29, 2013.


  1. I don’t know if anybody has been listening to the Dave Ramsey radio show lately, but he has talked to several people that have student loans of $130K. This seems to be a new trend of the amounts getting higher and higher. I was able to use pale grants for 85% of my school and I’m not sure that people know there is help out there. It doesn’t apply to everybody, but I wonder if more kids would go to college if they knew about the help they might receive from FAFSA. Great article!

  2. A friend of mine and his wife racked up over $180k. Ignorance is not bliss and hoping for a salary that covers a mortgage-payment-sized student loan is just as bad.

    I think settling on an amount to spend on college up front makes lots of sense. You’d be foolish not to do this with any other purchase. I’ve heard that you should not borrow more than your expected first year of wages.

  3. Hi,
    I like your post since I will be senior in high school next year too, and I’m thinking about schools that I want to apply to. I already had two schools that I want to go mostly. One offers me lots of scholarships but I’m not sure about its coop reputation and chances of getting job after graduation, but the other one offers very little scholarships but have a great job co-op system that will allow me to gain experiences in my field.
    It’d be great if you can advise me on this 🙂

  4. I’m working on a student debt project for Monroe on a Budget and my newspaper, The Monroe Evening News. I don’t have a publication / posting date for the main feature other than late July but I’ve been loading a lot of background onto the blog in the meantime.
    What I’m finding out from students I’ve talked to are that grants, scholarships, parents’ savings, and part-time work go only so far. It’s also very difficult to predict the four-year impact like is suggested because student aid and loan programs come and go on short notice. A resource may exist one year, be gone the next. I’ve seen a lot of that in recent years but it happened in my day too. (1988 college grad).
    More than one student I’ve talked to said they were glad they started at community college where the costs are lower. But as the journey continues to a bachelor’s or advanced degree, expenses run up as do the student loan totals.
    The further complication is that a four-year plan isn’t always holding up for a BA/BS work. Some change majors too late, some add extra certifications in hope of getting better job prospects. Also those who stop out for any reason may have repeat classes or pick up ones that just got added to the requirements – which compounds the issue.
    If you are interested in this topic, statistics you’ll want to look up are Sallie Mae’s “How America Pays for College 2012” report – it was just released this week; and Accounting Principals Workonomix 2012 study released in June discussing loan payments as compared to starting salaries.

  5. I wonder who gets out of student loan with such humongous interest!

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