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Student Loans are they worth the risk?

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  • Tue, Jan 06, 2009 - 07:18am



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    Student Loans are they worth the risk?

With student tuition price doubling the rate of inflation is it a wise investment to go to school with the coming economic storm?

 Generally speaking one may say that it is the responsible thing to do.  But as we are moving towards a drop in our standard of living wouldn’t it be more feasible to search for a stable job and prepare rather than rake up a huge debt?  I’m not looking for a "silver bullet" response.  Just wondering if you think in my young college career if it would be financially responsible to do so.

  • Tue, Jan 06, 2009 - 12:39pm



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    Re: Student Loans are they worth the risk?

Good question, and timely for me as my daughter will be starting college next year.  I don’t have good answers, but I’ll share my thoughts.

Interest rates on student loans are as high as I’ve seen them.  From what I’ve seen they are higher than mortgage rates.  This makes sense, since, as a class, they are among the riskiest of loans.  In the past they were always subsidized, and they may be again if Obama decides to throw money at them as he is apparently going to do in a lot of other areas.  Bad for the economy, good for the student.

A general thought.  I consider it a real freedom to graduate from college with no debt.  It gives you so many more options on where you go then.  I had the GI Bill when I went to college in the 70’s.  That combined with part-time work left me debt free when I graduated.  I was able to do a lot of things I wouldn’t have otherwise been able to do.

Choose a good state school (most employers don’t really care where you went to school, only how well you did there), apply for all the financial aid and scholarships you can find and work your way through college if it is at all feasible.

Also, think about going to a trade school.  I have a feeling that skilled trades will be a lot more valuable than they have been in a while, and the skills are easily transferable if you want to move, change jobs or go into business for yourself.  It’s always good to be able to actually do something with your hands.


Good luck

  • Tue, Jan 06, 2009 - 12:56pm



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    Re: Student Loans are they worth the risk?

For those of you interested.

Federal Student Aid FAFSA

What is in my financial aid package?

Your financial aid package is likely to include funds from the Federal Student Aid (FSA) programs. Note that not all schools participate in all FSA programs. These FSA programs, described below, are administered by Federal Student Aid and provide over $33 billion a year to students attending post secondary schools:

  • Federal Pell Grants are available to undergraduate students. Graduate students in a teaching credential program may also qualify. Grants do not have to be repaid.
  • Academic Competitiveness Grants are available to 1st and 2nd year undergraduate students. Grants do not have to be repaid.
  • National Science and Mathematics Access to Retain Talent Grants are available to third, fourth, and fifth (for programs requiring five years) year undergraduate students. Grants do not have to be repaid.
  • Federal Stafford Loans are Student Loans that must be repaid and are available to both undergraduate and graduate students.
    • If your school participates in the Federal Direct Loan (Direct Loan) Program, the federal government provides the funds for the Stafford Loan.
    • If your school participates in the Federal Family Education Loan (FFEL) Program, a private lender provides the funds for your Stafford Loan, although the Federal Government guarantees the loan funds.
    • First-year undergraduates are eligible for loans up to $5,500. Amounts increase for subsequent years of study, with higher amounts for graduate students. The interest rates may vary based on when the loan is borrowed. There are two types of Stafford Loans:
    • Subsidized Stafford loan – A loan for which the government pays the interest while you are in school, during grace periods, and during any deferment periods.
      Unsubsidized Stafford loan – A loan for which you are responsible for paying all the interest that accrues at any point in time.
  • Federal PLUS Loans are unsubsidized loans made to parents of undergraduate students. If your parents cannot obtain a PLUS loan, you may be eligible to borrow additional Unsubsidized Stafford loan funds. The interest rates may vary based on when the loan is borrowed.

  • Graduate and Professional Student PLUS Loan (Grad PLUS) The Higher Education Reconciliation Act of 2005 (the HERA), Pub. L. 109-171, made changes to the loan programs under Title IV of the Higher Education Act of 1965. As a result of the HERA, graduate and professional students are now eligible to borrow under the PLUS Loan Program, effective with loans originated on or after July 1, 2006.
  • Campus-Based Programs are financial aid programs administered by participating schools. There are three Campus-Based programs.

    1. Federal Supplemental Educational Opportunity Grants are grants available for undergraduates only; awards range from $100-$4,000.
    2. Federal Work-Study provides jobs to undergraduate and graduate students, allowing them to earn money to pay education expenses.
    3. Perkins Loans are low-interest (5 percent) loans that must be repaid; the maximum annual loan amount is $4,000 for undergraduate students.

For more information about federal student aid, you can explore the Federal Student Aid Web site at

  • Fri, Jan 09, 2009 - 06:38am


    Amanda V

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    Re: Student Loans are they worth the risk?

Yip.  I agree. 

Actually have a read of "the long emergency" (recommended reading) or other books recommended by Chris martenson.  They give a general idea or picture of what we can expect, which in turn will help you decide what would be good skills to have.

I don’t know what you are interested in, but these I believe will be very valuable depending on the severity of the situation: medical sciences eg nursing, doctor, midwife, vet, other….   farming eg agriculture, horticulture anything that produces food, permaculture would be a goodey,  carpentry, builder, plumber, electrician.

A lot of stuff we throw out now will be needing repairs, so the ability to fix a fridge or a vacuum cleaner will become in high demand.

Go for something that has high demand now, but also in the future.  That way if you do need to borrow any money, you can pay it back.  Can you do an apprentice and get paid at the same time ?

  • Mon, Jan 12, 2009 - 08:27am



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    Re: Student Loans are they worth the risk?

I have a degree and 30 years later I still have student loan debt.

Worse, I have a student loan garnishment that sucks 15 percent of my minimum wage income, leaving me living on fumes and unable to do anything to get ahead.

I rent an overpriced room in a house, but with the garnishment, I am unable to save up any money and thus I am unable to move to a cheaper place.

With the garnishment, I am unable to go to school to learn a skill that might help me earn more money.

With the garnishment, I am unable to come up with any money to start a business.

I have been predicting for years a long, slow decline in living standards for American unskilled workers.  I know that I should be preparing for calamatous times, but with my resources, how?

Going to college carries substantial risk, especially if you take out loans along the way.

I made my first money shoveling snow when I was ten, and had my first paper route when I was twelve.  By the time I graduated high school, I had saved up the equivalent of $20K, whioch I proceeded to blow on college.

So I would think hard about the risks of going to college and especially of borrowing for college.

My childhood savings could have made me a lot of money if I had never set foot on a college campus.

Don’t make the same mistakes I did.



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