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Naughty and nice solutions to cut college costs and increase home ownership

Both home prices and student debt rise
Both home prices and student debt rise
Photo by Joe Raedle/Getty Images

In addition to student debt, housing prices are on the rise according to the Federal Housing Finance Agency (FHFA) News Release today. The big economic worry is college student debt will stop the American dream of home ownership for loan-burdened graduates according to College or home, not both posted yesterday in The Journal Gazette. To prevent this Solomon-style choice, various solutions have been proposed ranging from nice to naughty when it comes to future finances.

FHFA House Price Index

The House Price Index (HPI) shows “U.S. house prices rose 1.2 percent in the fourth quarter of 2013,” the FHA reported today. This is considered a significant rise but also reflects a much slower growth than the previous nine “consecutive quarterly price increases in the purchase-only, seasonally adjusted index.” Time will tell whether this is a beginning of a housing market slowdown, a price adjustment, or a consequence of high student debt.

Why worry now

“An analysis by the Mortgage Bankers Association found that loan applications for home purchases have slipped nearly 20 percent in the past four months compared with the same period a year earlier,” according to The Journal Gazette. If college grads who would be first-time home buyers aren’t able to save enough for a down payment or qualify for a home mortgage, the economy will be adversely impacted. The economy “relies heavily on the housing sector for growth, regulators and mortgage industry experts said,” reported The Journal Gazette.

Student solutions

Worrying about the future has led some enterprising students to find creative alternatives to help pay for college.

One student started a business collecting bottles and cans. “To avoid borrowing money, she started turning empty containers into college money. Her family was there to support her one can at a time…They say a good weekend nets a little over $100,” posted.

Another student had a brainstorm to turn his graduation into a money-maker. He, “a senior at the University of Michigan, came up with the idea to sell ad space on his graduation cap,” posted Barrister on a Budget blog

To date, he has raised $5,366 towards his $30,000 goal.

Legislator solutions

While students are focusing on reducing debt, the newest legislative solution from states and Congress is to delay paying. ”Instead of paying up front and taking out student loans, state Rep. Larry Seaquist’s “Pay it Forward” program would let students pay for their education after they graduate by deducting a set percentage of their future income for up to 25 years,” according to USA Today College last Friday. Rep. Seaquist is from the state of Washington but 19 other states and the federal government are considering similar legislation, USA Today College explains.

Many groups oppose the “Pay it Forward” concept because it may:

  • Divert government funding of higher education from grants
  • Produce more higher earning college programs at the expense of other important fields
  • Increase financial risks for students because they don’t know college costs ahead of time
  • Develop serious financial planning problems for students because it is based on unknown jobs and salaries
  • Cost students more in the long run
  • Lead to life-style difficulties based on financial unknowns

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