I’d like to take the liberty of amending an age-old adage:

“The road to suffocating student loan debt is paved with good intentions”

I understand you want your children to succeed. I acknowledge that education is the ladder that allows people to be upwardly-mobile in the workforce. I believe higher education to be very important for many reasons, and I want to see every student that is qualified and able to attend.

But it cannot and should not be done at any cost. Student loan debt has exceeded credit card debt in total outstanding balances. Think about that for a minute. That is insane!

While college tuition rates have risen, student loan debt have exploded. According to Forbes (source) since 1985, the overall consumer price index has risen 115%, while college education has inflated nearly 500%!

Why is this? Well, there’s probably a lot of blame to go around. There is evidence of administrative bloating, with college administrator salaries increasing rapidly and new staff being added. I can definitely make an argument for excesses in the realm of student amenities, with colleges featuring lazy rivers and other ridiculous things.

But honestly, I see these as lagging indicators or results of the real issue.

The fact is, both demand and supply for college has skyrocketed

Our society has trained both parents and students alike that college is something that must be done after high school in order to obtain gainful employment. We have college visit days. We have billboards showing where each student is attending school after graduation as if it is a rite of passage. Our schools spend much of their energy preparing students for college entrance exams (ACT, SAT). We simply have imbued into everyone’s mind that in order to enjoy the American Dream we need to attend college after high school. This is the demand aspect.

The other half of this equation is admittedly more political since it deals with the government. Since the federal government is the number one originator of student loans by far, I will focus on them. The federal government, with good intentions, originates loans for any student who can get accepted to an accredited university and doesn’t have parents that can obviously pay for tuition. There is no credit check, there is no stipulation on what degree the student is working towards, and the federal government charges the students interest, to the tune of making $50 billion last year in interest. In effect, this rather easily available source of college funding bloats supply to an artificial level.

This is why I see the excesses as a result, not a cause of tuition increases. The colleges feel rather confident that if they raise tuition, the federal government will still be there to lend the student money, which the college then receives. It’s a conveyer belt of young students trying to better themselves with a pocket full of government money, and the colleges, let’s just be honest here, are eating it up.

So, how do we navigate our children through this reality?

1. Financial Education: First, we need to make sure they understand the financial side of all this. The days of “take out loans, figure it out later” need to end, or your kids will likely face a financial crisis of their own, and you probably won’t be too happy when they move back in. Too many college students have no idea how much they’ve taken out, what the interest rates are, what their payments will be upon graduation, or any of that. Parents, this is your job. The high schools will not do it for you. You can certainly bet the colleges won't either. Students need to understand the serious weight of debt and how it can affect them. Find out the average starting salary for their career choice, divide it by twelve, and start doing budget simulations on how much the loans will hold them back from purchasing a car or a home when they graduate. They need to understand any money borrowed now will detract from their life upon graduation.

2. Smart Career-Pathing: The days of “you can study whatever you’d like, honey” also need to end. Yes, you should encourage children to follow their passions and find a career they will enjoy. This does not mean your child is entitled to taking out $100,000 in loans with a $900 minimum monthly payment to get a philosophy degree. Be a better parent then that. These degrees do not guarantee a job in that field. If you don’t believe me, go ask a few college-educated 20 somethings. As a country we also need to invest more and divert more students to the trades. You can earn a very healthy salary learning a trade, without all the debt. Many people like working with their hands and building things.. There’s nothing wrong with taking this path, in fact, it’s often times smarter.

3. Force Them to be Frugal: Would you rather live at home during college or after? Would you rather have the $10,000 dorm room or be able to get a car when you graduate and get your first job. Can I work nights and weekends while attending school to cover all my living expenses instead of putting the money on the student loans? I am, for one, incredibly guilty of this, and now I’m paying interest on all these expenses I had in college that I could have done without or paid for with work. If your child is indecisive about a career path, they should be attending a community college taking general classes that can be transferred later. This last tip could save tens of thousands of dollars while receiving the exact same education.  Cost matters, and if you’re going to borrow money, it better be for something that you can’t live without.

There is enough uncertainty and challenge in being a recent college graduate, you don’t want your kids going through it with massive debt over their heads. Trust me, they will thank you later.