Careful Considerations for College Financing

by Dena Wise, Ph.D., Professor & Consumer Economics Specialist, The University of Tennessee Extension

Students face a hard lesson after graduation. As a young person, debt penalizes you in two very critical ways. First, it limits your ability to invest for your future during the time when that investment can really pay off. Money invested when you’re young has the potential to compound over your working life, and every dollar you pay to reduce your debt is a dollar that can’t produce earnings invested for your future. The second way a heavy debt burden can hurt your financial future is by forcing you into the subprime lending market where you will pay higher interest for long-term home and auto loans.

A few days ago, I had the opportunity to interview Tennessee state finalists in the 4-H Consumer Education project. I was so impressed that each of these 11 young people, all 9th through 12th graders, had made solid plans for financing their college educations. And even more impressive was that each of them said they planned to get through college borrowing as little money as possible. How I wish every young person had getting through college with as little debt as possible as a serious goal! As a professor on a major college campus, I all-too-often see students borrowing as much money as they can qualify for, spending it for entertainment and “extras,” and often not even keeping a running total of their loan debt.

Here’s my advice for graduates, current or prospective students, and parents regarding financing college: 

If you’re still a student…

If you’re a parent…

If you’re a graduate...