Tips to Help Save Young Grads From the Student Loan Housing Trap

According to a new joint survey on student loan debt and housing released by the National Association of REALTORS® and SALT®, a consumer literacy program provided by nonprofit American Student Assistance®, 71% of non-homeowners repaying their student loans on time believe their debt is impeding on their ability to purchase a home.

The results also revealed that student debt postponed four in 10 borrowers from moving out of a family member’s household after graduating college. A little over a majority of those polled (52 percent) expect to be delayed by more than five years from purchasing a home because of repaying their student debt.

In the last 10 years, students themselves have gone from paying 30% of college costs, to paying close to 50% of their own college costs.  This has resulted in driving up the outstanding student loans in the US from $350 billion to a staggering $1.2 trillion over the past 10 years.  

Here are three things you can do right now to help your children or grandchildren prepare for the first major investment of their lives:

1. Engage the student early on so that they start thinking of college as more of an investment in their future vs. simply another life experience. Otherwise, it could be one heck of an expensive experience for them and for you!  Talk to them about what it may be like to pay off $30,000, $50,000 or $100,000 in debt over a 15-20 year timeframe.  Calculate the monthly payments and help them understand that studying hard to get a scholarship could literally mean saving $500 - $1,000/month for the next 20 or 30 years!  Then, pull out some travel catalogues and car magazines.  Help them visualize all the amazing life experiences they can buy for $1,000/month.  Now, ask them to choose between THAT and the alternative ways of spending time that don't result in scholarships.
2. Start budgeting as soon as possible.  Click here to view a great college savings calculator on the College Board web site.  This can help you determine how much you need to start saving each year.
3. Talk to me about restructuring some of your debt, cash flow and home equity while interest rates are still low.  You never know what your options are until you have the conversation.