REAL ESTATE TIPS: Don’t let student loan debt weigh down future plans
Our oldest son is a junior in high school, which means “it” has started. “It” meaning every few days there is some generic pamphlet coming in the mail about some college my son and the thousands of other kids who receive these pamphlets should attend.
Just for fun I have been Googling the tuition of these schools as each brochure arrives. And it blows my mind.
Kids today have a tougher decision than we did picking a college. Not only do they have to decide where to go, but in many cases, what school is going to be the equivalent of their mortgage. For me, it was much simpler. I was just looking for two things when I picked a college: a place with no snow, and a husband.
It sounds ridiculous but I have always been goal-oriented even back then so I had a definite plan for what my life would look like. Because I never wanted to see snow again, I applied only to schools in southern California, Arizona and Texas. Because I wanted to marry a cowboy, I picked Texas.
Up to that point, my entire life goal had been to be a housewife and have lots of kids – like 12. College was just required because my parents expected it and that was where I was going to meet my cowboy. Boots, hat, jeans and all. I even figured that we would meet in the school library where we would both be studying. Because that is what good college students do. Study.
And then my “it” happened. Long story short, I met Andy and stayed in Ohio. We both ended up at BGSU kind of by default. He was already going there and I didn’t know where else to go nor had I applied anywhere. So I followed him. I didn’t come into college with any college credits like many kids today but I finished in three years because I had a goal to get married as fast as I could. Between my three years and his four years of college, our total debt was around $20-25K. I think that I had $8K and he had $12K but I can’t remember. I do remember that it seemed like a lot. We always paid extra on our student loans but I remember hating that payment. When we were done paying, I was glad. While it felt like a long time, it wasn’t long at all, partially because our total debt was so low (and our payments) we just pounded extra money on them to get rid of it.
Today it is different. The amount that college costs is absolutely insane. Yet we push our kids to it. Our intent is good. We want them to do well in life. Growing up my parents never asked my sister and I what we wanted to be but what degree did we want. I get it. They didn’t have a degree and saw what a difference that could make both in terms of career options and finances. What parent doesn’t want better for their children? But when you are talking to your kids make sure they understand what college education means. In other words, if they come home and tell you that they want to get a degree in something stupid, love them enough to tell them that if they get this degree they will be waiting tables for the rest of their life. There is absolutely nothing wrong with waiting tables but I am assuming that is not what they are planning if they are going to college. And remind them that there are other options.
My real estate classes took three weeks Monday through Thursday 8 a.m.-5:30 p.m. with a 30- minute break.
Andy has a bachelor’s degree and a master’s degree and taught for 18 years. His last year of teaching, my gross income was twice as much as his gross income. Think about that next time there is a school levy. Teachers aren’t getting rich. There is a shortage of plumbers and electricians. This is a great skill and doesn’t take a four-year degree.
How does this relate to real estate? I have seen countless times how student loan debt has strapped adults where they have to buy less of a house or felt so burdened by their debt because there was no end in sight on payment.
Here is an example: I have some clients I sold a house to years and years ago. At that time they didn’t have much debt and qualified on one income. The Mrs. decided to go to back to college and ended up financing it all on debt. Then life happened (which means more kids in their case) and she didn’t use her degree. They were stuck in their house because they couldn’t afford to do anything different and her debt was so high that they couldn’t truly imagine it every being paid off.
So when talking abut college with your kids remember these things:
* In most cases it doesn’t matter where you go. Our attorney is one of the smartest guys I know next to Andy and he started out at a two-year college before spending his last two years somewhere else. I have referred a lot of people to him and they all thought he was great. Not one of those people asked where he got his law degree from.
If I could redo it, I would start at Wayne College.
* If you aren’t careful, you will have debt equivalent to a mortgage, which means big monthly payments. This could keep you from buying a house as student loan payments can very quickly mess up your debt-to-income ratio. The debt-to-income ratio determines what mortgage amount you qualify for. Make sure that your college experience means more to you than your future house.
* Parents, don’t buy into the guilt. It is your duty to raise good and honest kids. It is not your duty to pay for their school. After watching a few of our friends at BGSU barely graduate if at all when mommy and daddy were paying the bills, we made the decision that our kids were on their own before we even had kids. And we have told them that since they were little. If you co-sign for someone on anything, whether it be a school loan, a house, or a car, that payment counts against your debt-to-income ratio and will make a difference as to what you can finance in the future. If you pay for their college, you are paying for their dream and not yours. If you choose to do that, great. If you choose not to, that’s fine too.
As you plan for college remember what it is, a way to get from childhood dreams to adult goals. Let it be a four- year experience that you love but think it through hard before letting it be a decades long payment commitment. It might be worth it, just make sure the cost of college is worth the type of home you live in. Maybe it is, that’s up to you. Either way, enjoy this exciting time of dreaming and planning for your future. Your best is yet to come!
Esta Ryder, Broker/Owner
Ryder Realty, LLC