There's been speculation for years that the college tuition bubble is about to burst, but so far it shows no signs that it's ready to pop. Quite the opposite: The Project on Student Debt just released its 2014 data, and lo and behold, a whopping 69% of 2014 graduates from public and private nonprofit colleges took out loans to fund their educations, and those who borrowed racked up an average of $28,950, which is 2% more than the previous year's average burden. Even more troubling is that 17% of 2014 graduates who took on debt resorted to private loans, which are notoriously less flexible and more costly than federal loans.
Of course, taking on large amounts of debt wouldn't be so troublesome if doing so guaranteed gainful employment, but even the fanciest of degrees won't automatically translate to post-college job security. To make matters worse, salaries aren't rising fast enough to keep up with swelling college costs. With the average starting salary for 2014 college graduates hovering around $48,700, those leaving college deep in debt just aren't earning enough to make those colossal loans worthwhile.
Until that bubble bursts, college costs can't be expected to go anywhere but up, but you can take steps to keep your borrowing to a minimum.
Start off at community college
Given how many jobs require a college degree, you may feel as though you have no choice but to pursue that diploma. However, you can do so in the most cost-effective manner possible. This means skipping that pricier private education and sticking to public schools -- or, better yet, starting off at your local community college. For the 2015-2016 school year, tuition at a two-year community college will cost an average of $3,435 per year, compared to $9,410 for a public four-year in-state college, $23,893 for a public four-year out-of-state school, and $32,405 for a private nonprofit four-year college.
Community college is clearly a bargain. Even if you decide to transfer to a more prestigious and expensive school later, by attending community college for a couple of years, you can knock off some early prerequisite classes on the cheap.
Pursue a career with a shorter payback period
It's a great idea in theory to follow your dreams regardless of salary, but college is an investment, so you need to determine whether it will help you earn enough to make college worth the upfront cost. It's one thing if you're pursuing a career in finance, where you could be pulling down six figures within a few years of graduation. But if your heart is set on teaching, for example, then you're better off sticking to a low-cost school where your post-graduation debt will be minimal. Case in point: According to Glassdoor, the average national salary for a financial analyst is $63,793, compared to $45,486 for a teacher. That $18,000 pay gap could make the difference between paying down a loan balance quickly or having it carry for years or even decades.
If you're going to take on a load of debt, find a career that will help you pay it off as quickly as possible.
Work, work, work
Whether it's on the weekends, over summer break, or in the rare free time that's not spent studying, working before and during college can make it much easier to cover your expenses. If you work even 10 hours per week and earn $15 per hour, that's a good $600 a month, minus taxes, that you can apply toward your student loans.
Let's say you need to borrow $30,000 to cover your tuition costs and intend to take out a 10-year loan with a 6% interest rate. Your monthly payment will be $333.06. But if you can work part-time for an even a year and reduce your loan balance to $25,000 upon graduation, then you'll be looking at just $277.55 per month. Over the course of a 10-year repayment period, you'll save about $1,700 altogether. You can apply for a work-study arrangement through your school or try your luck finding part-time work in town.
Skip the dorm
Where you live during college may influence your social life, but it won't affect your ability to get a job after you graduate. For the 2015-2016 school year, room and board will cost $10,138 for a public four-year college and $11,516 for a four-year private nonprofit college. Rather than rack up debt in exchange for the privilege of living in a cramped dorm room where you can't so much as plug in a hot plate without repercussion, consider commuting and living at home if your school is a reasonable distance away.
We don't know what the future holds as far as college costs and borrowing trends are concerned, so for now, the best you can do is pick your financial battles wisely. If you're going to take on debt to attend college, make sure you understand what you're getting into. If you're like the majority of last year's graduating class, that could mean years of loan payments looming over you.