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No loans: How to graduate from college debt free

Published: Thursday, May 1 2014 5:00 a.m. MDT

Recent college graduates pose for a picture April 25, 2014, at Brigham Young University in Provo, Utah. Student debt continues to increase, now topping $1.08 trillion. But even in a world where it seems impossible to attend college without student loans, it may still be possible to graduate free from debt.

Courtesy of Beki Winchel and Amy Christensen

Rachel Cruze, the daughter of financial guru Dave Ramsey, really wanted to go to Auburn University, which to outsiders wouldn't seem like much of a problem. Ramsey's financial success meant the family could pay for any college she wanted.

"But we live out what we preach," says Cruze.

Ramsey told her they would gladly pay the cost of four years of in-state tuition. She would pay anything beyond that.

"I thought that was harsh," Cruze says.

But then she discovered it cost three times more at Auburn University in Alabama than college in her home state of Tennessee. And the education was not three times better, she says.

"I thought, 'Wow! My parents are smart,'" she says with a laugh. "Going to that college didn't make any financial sense."

And so she went to the University of Tennessee and graduated debt free.

This makes her rare. Seven out of 10 students graduate with student loan debt averaging $29,400, according to the Institute for College Access and Success, an education research nonprofit. In June 2010, student loan debt passed credit card debt, and now is $1.08 trillion, according to the Federal Reserve.

With rising college costs, it isn't a wonder many turn to loans. The Department of Education says the average cost of a public, four-year college degree rose from $16,900 in 2000 to $23,200 in 2012. And that's adjusting for inflation. What's worse, the "total" cost doesn't include the interest students will pay over the life of their loans.

Many may feel the cost is worth it; Pew Research Center found millennials in 2013 with college degrees made median annual earnings $17,500 more than their peers who only graduated from high school.

But even with so many resorting to student loans, Cruze, who just finished co-authoring the new book "Smart Money Smart Kids" with her father, insists that graduating debt free is not something that is just for those with well-to-do parents.

Normal is crazy

Michelle Singletary, personal finance columnist for The Washington Post, agrees that student loans are not necessary and teaches to people at her church in the Washington D.C. area how to go to college without debt.

"They look at me like I must be from Mars," she says. "They actually get belligerent. … They can't conceive of having to save enough for college. And even parents who have saved take out loans."

Singletary says many people do not save precisely because they know student loans are available.

"Can you see how crazy that is?" she says.

Cruze says a friend of hers went to college so she could get a dream job. But when that dream job became available, her friend had to turn it down. The job wouldn't pay enough to live and still pay the minimum student loan payments.

Situations like this don't surprise Steven Economides, co-author with his wife, Annette, of "The MoneySmart Family System." The Economides, who live in Scottsdale, Ariz., have five children — all who attended college without debt. Yet, he can see the problem. "You take a 17-year-old kid who earns $4,000 a year working part time and sit him down with a loan officer," Economides says. "And that officer has the authority, without the kid having any real employment history, to loan him $60,000 to $80,000. … How is that even smart?"

Cruze says there is a way to go to college without debt. "There is hope," she says. "It just isn't normal and nobody is doing it."

Choose the right school

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