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No loans: How to graduate from college debt free

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

Singletary says she tells her kids she feels some responsibility to help them go to college. "College is the admission price for middle-class life in this country," she says. "So because we know that and decided to have you, that is part of our parental responsibility. However, we are going to do our best to save as much as we can, but you can't take on debt. Nor will we."

But many parents think that going into debt is their responsibility, Economides says, and so they co-sign a loan, mortgage their home and pull savings out of their retirement.

Living like a student

Jonathan Moore didn't get a lot of financial help from his parents to make it through college — although his grandparents helped some with the tuition at California State University Fullerton where he graduated in 2006. Moore avoided any student loans by working his way through college, selling cellphones full time and then selling cars part time. "I had my own apartment with roommates," he says. "I had to worry about bills, credit card payments, etc. but it was a great 'out of the frying pan into the fire' learning experience."

Cruze says the key to avoiding debt is to live like a college student when you are in college. This might mean living at home, for example. "That way, when you graduate, you don't have to live like a student," she says.

Mark Kantrowitz, the senior vice president and publisher of edvisors.com, an education finance advice website based in Las Vegas, says it is easy for a student to waste money in college. For example, buying a $10 pizza every week using student loan money will end up costing $4,000 by the time it is paid back, he says. "That's a lot of pizza."

Debt is not always bad

Even though Kantrowitz says students need to be very careful about their expenses, he doesn't think that getting student loans is a bad thing if done carefully.

"There has been a trend of shifting the cost of college from the government to the families," he says. "And family incomes have been flat, so that means more debt at graduation."

Where people go wrong, he says, is when they get loans that are too large for what their occupation will be.

"Total student loan debt at graduation should be less than your starting salary — and ideally a lot less," he says. "Keeping your debt in synch with your income ... means that you'll be able to pay back your student loan debt in 10 years or less."

Otherwise, Kantrowitz says, people will struggle and have to rely on extended repayment plans, income-based repayment or the like. Such plans, however, extend the loan and increase the amount of interest that will be paid over the life of the loan. "You will still be paying back your own student loan debt when your children are graduating from college," Kantrowitz says.

Mike Cummings, who just finished his BS at Grantham University in Kansas City, Mo., and now lives in Boise, Idaho, decided that he was not going to go into any debt to go to college. He tried a semester in college back in 1985, but decided to go to work instead. Now, years later, scholarships and the G.I. Bill made it possible for him to get that degree.

A large part of the reason Cummings didn't want any debt is because his wife, who has an associate degree from 1995, had some earlier financial struggles and is still paying off her student loan debt. "I didn't want to take a chance and it was keeping our agreement of no debt," he says.

With some people, there is a chance for some loan forgiveness if they work in a public service job — a category that is defined very broadly. Public service loan forgiveness isn't a cure-all and kicks in after 10 years.

Graduation without debt

Economides proudly points to his son Joe who just graduated from Grand Canyon University, a private, for-profit Christian university located in Phoenix, with no debt and moved out on his own. "He has a positive net worth of $3,000," Economides says. And he's going to hit the ground much faster than his peers who may be $40,000 in debt, he says.

Jonathan Moore likes the opportunities he has. "The lack of student loan debt was really nice," he says. "It enabled me to travel the world … instead of worrying about a $200 to $400 monthly payment."

For Michelle Singletary's daughter, the lack of debt contrasts with her friends. "She is breathing easier," Singletary says. "She can see the pressure her friends are under and their stress."

Rachel Cruze knows her situation and the situation of people who graduate without debt isn't normal — and revels in it. "Normal is broke," she says. "We want to be weird."

If you go: “The Legacy Journey Live!” event on investing, retirement and teaching kids how to handle money. Dave Ramsey and his daughter Rachel Cruze Wednesday, May 14 Abravanel Hall Tickets start at $10

Email: mdegroote@deseretnews.com

Twitter: @degroote

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