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Tim Twellman
Tim Twellman


Today, there is an increasing number of college graduates with student debt. While the sources and numbers may vary, recent estimates suggest that the average student debt for a college graduate is rising from around $25k to $35k. While many factors play a part in this national average, the fact remains that the college graduates are graduating with more and more student debt every day. And, many of these recent grads don’t even have jobs…

According to a recent article, “No Room At The Top,” written by Sarah Wilson, “the unemployment rate of 16.2% for workers under age 25 was slightly more than TWICE as high as the national average.” So, we have a growing number of graduates with debt and no money or jobs to pay it off…. Does this alarm anyone else? For many, the growing amount of student debt is a big enough problem… the fact that they can’t get jobs is alarming. 

For now, let’s concentrate on student debt and how parents and families today can make better decisions. Why? … Because this is something that ultimately is in our control. This is directly affected by our decision-making.  So… what are the types of things that parents and families need to do to prevent from over-borrowing for college? 

I call it Live From The End.” This is a simple exercise to prevent parents and families from borrowing too much for college. It asks you to use your imagination & envision what your financial outlook could be on graduation day. This simple exercise aims to have parents sit down with their children and talk about what this decision means in the long-term and not just for the next four years. If parents and families look at their future financial responsibility and map out a plan, they will understand the magnitude of this decision and make a more educated choice. 

Here is a simple way to “Live From The End.” It is called Your Post-Graduate 1:1 Ratio. This “rule” has been around for a very long time, but it has been hidden in the fine print of course… and ultimately, it is a very simple and straightforward concept that is easy for most people to understand and use when making their college decision. According to this ratio, Your Total 4 Year Student Loans Should NOT Exceed Your Child's Expected First Year Salary After College. Just like “Live From The End,” your post-grad ratio requires you to look into your future in order to make a more educated decision today. The reason you do this is to help you manage your debt after graduation… it’s very simple. See the Post-Grad formula below:

Maximum 4 Year Student Debt ÷ First Year Post-Grad Salary = 1:1

Immediately, many of you might say… Well, how do I know what my son or daughter is going to earn four years from now? The simple answer is that you do not know. However, you can absolutely look at what your child is interested in studying in college and research what the national average salary is for recent college graduates with that major. Looking into the future, this will provide you and your family with a framework or a guide as to the maximum that you should borrow for your child’s college education. 

Of course, you should borrow as little as possible for your child’s college education… but, in my mind, there needs to be a CEILING for how much you should borrow. Many college graduates have in excess of $100k in debt… which, for many, could represent in excess of 3 to 4 times their earnings… a clear violation of the post-graduate 1:1 ratio. 

And, if you cannot meet this criteria and if you cannot “Live From The End” when making this decision, then FIND A DIFFERENT COLLEGE. 

Here are some questions that each parent and family should be asking themselves when they are making this college decision:

  1. Does Your Child Understand What Student Debt Means?
  2. Does Your Child Understand What This Means When They Graduate?
  3. Have You Mapped Out What Your Potential Debt Payments Could Be?
  4. Can You & Your Child Afford These Payments?
  5. Have You Saved Enough Money To Pay The Difference?
  6. Are You Committed To This Post-Grad 1:1 Ratio?
  7. Do Your Colleges Allow You To Follow This 1:1 Ratio?
  8. Have You Talked About The Money With Your Child?
  9. Have You Set The Proper Expectations With Your Child?
  10. Have You & Your Child Created a Plan of Action?

James Twellman

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