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The blessing and curse of student loans part one; an introduction

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“Congratulations 2014 College graduates. Now get a copy of Student Loans For Dummies,” Jim Cramer of CNBC’s Mad Money tweeted recently. His tweet had a joke-like tone upon reading it, but it also made me think about my one student loan of $25,000. It won’t be paid off for a while as student loans take quite a bit of time to repay for most graduates, even if they find jobs right away. His tweet further prompted me to contribute to the parade of articles about this important and complex issue; student loan debt.

“What you’re going to have to do son is take out a student loan,” my father told my brother early on in his first year at the University at Buffalo in the early 1990s. Being the younger sibling allowed me the advantage of sitting, watching and taking notes as my older brother (and in this case my mother) figured out how to navigate this crucial life decision.

“Your father told you to take out a student loan?” Mom asked terrified. “You shouldn’t have to take out student loans for your education. You will be paying it off for years,” she continued.

This dilemma our family faced was one that many lower and middle class households in the United States have faced; how to fund a child’s college education. This dilemma has become even bigger in today’s economy where college tuitions are skyrocketing and where the uncertain job prospects for new graduates is creating an even more tenuous situation for families with a host of long term ramifications.

Depending who is on your Twitter feed, there are articles from periodicals such as the Wall Street Journal pretty much daily about student loans:

• Hampering the economy.
• Causing graduates to have to work multiple jobs.
• Causing graduates to move back in with their parents.
• Causing graduates to put off getting married and starting their own families.
• Causing graduates to consider the debt levels of potential spouses before getting married.

So what is a student loan and why take one out in the first place? Just briefly, a student loan is just that, a loan. It is money lent to someone else with the understanding by both the lender and the lendee that it will eventually be paid back with interest. Student loans specifically are financial products that institutions such as the federal government lend out to college students so that they can pursue their college educations.

The blessing of these loans is that they provide a means to pay for college for families who haven’t proactively saved the money, or can’t afford to pay the tuition in cash. The curse is that they’re debt, which works against wealth building and having a prosperous, which is the main reason most students pursue higher education in the first place.

Some would consider student loans to be good debt; that which will put money into your pocket versus bad debt which takes money out of your pocket. In this case, the good debt label assumes that graduates will have the money to pay back the loan which isn’t necessarily the case, and even if they do, it could take their entire working life.
Other aspects of this topic will be further examined in this series including:

• What parents can proactively do to rescue their children from student loan debt.
• Why some parents don’t prepare for their child’s education.
• Considerations students and families should think about before taking out student loans.
• How some families are being frozen out of higher education altogether.

Part two will discuss what families can do to prevent students from having to borrow large sums of money to finance their college educations.

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