Updated on 09.03.10

Review: Debt-Free U

Trent Hamm

Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.

dfuWhen I went to college back in the late 1990s, my school was pretty much selected for me due to the scholarships I received. I didn’t have any financial resources of my own to help me get into college, nor was the internet widely available and full of easy resources to learn more how to acquire them. In short, I was left with a decision that seemed pretty much made for me.

Looking back, I realize that the decision was not as clear-cut as I originally thought. With my academic qualifications and financial state, I could have chosen from a lot of different schools, and the choice among schools was actually quite a bit different than I thought.

In short, when my children choose a college, the process will be a lot different than my own process was – more open ended, more thorough, and with more ideas out there on the table.

This, of course, brings us to this week’s book review, Debt-Free U by Zac Bissonnette. The idea behind this book is that many of the standards and reasoning people use to select a school and pay for it are way off base. Instead, what makes or breaks success in life is the person and the opportunities they have available to them. Because of that (and some research to back it up), the book comes up with some interesting conclusions on the entire college selection process.

1 – How Much Can You Afford, and Where Will You Get The Money?
Bissonnette focuses this chapter on the idea that scholarships are overrated and loans are dangerous. So, how should one pay for college? The old fashioned way – by saving for it and paying for it out of pocket. Work a second job. Don’t fall into the trap that you have to go to the most expensive school you can find in order to get a “good” education. Most of the rest of the book focuses on these latter points.

2 – Student Loans and Stagnant Wages: A Dangerous Cocktail for Future Graduates
So, why no student loans? Anyone under the age of about 40 probably knows the answer: they can be a punishing load after you’re out of school. Not only have you sacrificed years of income in order to get that degree, you’ve also got huge debts to pay back. Often, even with a much increased earnings potential, it’s a zero sum game – or worse. The better approach is to pay as much out of pocket as you possibly can.

3 – Does It Really Matter Where You Go to College? The Solution to the College Funding Nightmare
That’s great, but great colleges aren’t cheap. Bissonnette’s argument against that is that the idea of a “great” college is overrated. Most people who are successful in their field don’t come from “great” colleges – they come from all over the place. What makes a success story isn’t the school the person goes to, it’s the person. Instead, you should seek out the schools that leave students with the lowest debt burdens after college, which are mostly large state schools.

4 – How to Make Any College an Ivy League College
But how do you get the “ivy” experience at Big State U? It’s all about how you approach it. A great college experience that you can base a career on comes from connecting with people and building your skill set at every opportunity. Networking, acquiring unique experiences, and building specific skills are the trademark of success, not the name on the degree that you get.

5 – Why Large Public Universities Are Better Than Private Colleges
Most of the time, big state schools offer the best opportunities to do those very things, given the large number of people there. There are countless opportunities at a large school that just can’t be found elsewhere. Simply due to the sheer numbers, you’re much more likely to find experiences that really click with you and enable you to build skills that match your talents and interests at big state schools – and that’s what draws attention in the workplace.

6 – The Community College Solution
Another advantage of a big state school is that it’s often easy to transfer community college credits. That means that while you’re in high school, during the college summers, and perhaps even during a year or two between high school and a four year college, you can get general education requirements out of the way at a very inexpensive rate at your local community college, drastically reducing the cost of a four year school.

7 – Make Money, Prepare for a Career
This was my favorite chapter because it so directly matches my own college experience. As established earlier in the book, the best way to maximize the value of college is to earn money while there to reduce your tuition bill. Also mentioned earlier, college is the time to have great experiences and build skills that translate to the post-college life. Why not do both at the same time? Seek out paid internships or work-study positions. See if you can find a job with a professor who is engaged in a field that interests you. Ask, ask, ask – it never hurts.

8 – How Your Child Can Save Money While He’s in College
The stuff here is basically personal finance 101 – avoid credit cards while in college, read your college bill carefully and ask about any and all fees you don’t understand, and so on. It’s valuable, though, because these types of tips can make an enormous difference on how much you have to take out in student loans and how much debt you’ll have after college. The lower both numbers are, the better.

9 – Invest in College-Town Real Estate
This chapter felt really out of place, because the rest of the book talks about great ways to minimize expenses and thus reduce any debt you have to incur after college. This chapter really speaks to people who already have a lot of money and are looking for someplace to sink it. Why not buy your child a condo as a gift as they leave for college? They can live there while in college, then rent it or sell it after school is over? Good idea, but it speaks to people with a lot more money than I ever dreamed of having in college.

10 – It’s Not Just a Personal Finance Issue: How to Solve the College Crisis
Bissonnette has a lot of good, if overly grand, ideas here. There’s just one that I really, really wish would take hold in society – I wish society would stop stigmatizing financial prudence. I understand why it won’t happen – marketers don’t make money from financial prudence. Still, if everyone were financially sensible, society as a whole would work much better.

Is Debt-Free U Worth Reading?
If you have children and have at least some intent of directing them towards higher education, or if you’re a high schooler or early college student with the ability to read and digest more than one viewpoint, Debt-Free U is a very, very worthwhile read. It’ll provide a ton of food for thought for your college planning process.

As with any book like this, though, couple it with your own homework. When you’re making such a huge choice, get information from lots of different sources – make this book part of your education about college choices, but never make one book the be-all end-all. It’s very solid and has a lot of great ideas on maximizing every dollar from your college education, but it deserves to be coupled with additional reading, as does any book on a major life decision.

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  1. Joe says:

    This is great.

    I used to think that going to a state university meant that I wasn’t good enough. This kind of thinking is a great example of where I get myself into financial trouble. I found that a school is only as the effort you put into it. My experience has more than prepared me for the big bad world.

    Here is how I did it. I went to a community college part time and worked full time. I saved, and paid cash for my tuition. I had some help form family, but it was never an unreasonable amount. When I had my basic classes done, I transferred to a state university. My Tuition was less than 5k a semester. I will graduate with a dual degree and my student loans are less than 13K dollars. I have friends that owe over 100K for their education. That just seems crazy.

    Thanks for the post, love the website…. keep live’n cheap.


  2. Kathleen says:

    People wrongly assume that Ivy League schools are financially inaccessible… it’s actually the opposite! If you earn admission to an Ivy (and many other top-level schools) and have demonstrated financial need, the school WILL meet 100% of that demonstrated need. In fact, in the last few years I’m fairly sure many schools have promised to meet 100% of that need in grants, not loans.

    When I matriculated at Dartmouth in the late 1990s, my family had an annual income of about $40k-$50k. Not much when total annual cost was well over $30k. Thanks to their generous financial aid, my family paid only a tiny fraction of the sticker price, and I left college with just $13k in loans. I worked throughout college for book money and fun money.

    Regarding quality of school, going to a more selective school doesn’t necessarily make an individual a better candidate for “X” future position. The name on your diploma does, however, serve as a proxy for perceived qualification — especially in the critical first years after graduation. Basically, it opens doors for recent graduates, rather than the graduate having to *push* the doors open. I’m eternally thankful to have a BA and a JD from Ivy League schools, because it eased my entrance into certain positions. From there you have to prove yourself, of course — just like anyone does — but it sure makes it easier to get the job in the first place.

    (Finally, sure, lots of highly successful people came from Big State U — but most people go to something more akin to Big State U than to a smaller, more selective school. My guess is that the more smaller, more selective schools are still over-represented in top positions, if you adjust for numbers of graduates.)

  3. Jenny says:

    I saw this guy on the Today Show (I think?) the other day so I was really glad to see this review. Unless we win the lottery, we probably won’t be able to send our kids off to the schools of their choice without asking them to contribute. I got a couple of scholarships when I went to college and also was able to exempt several classes with AP exams and skipping the 100-level of foreign language. We are going to homeschool and our kids will probably have the opportunity to go to our local tech school and get some credits under their belt if they want to. I’m glad to see ideas like this coming into the mainstream–a little common sense for a change.

  4. AndreaS says:

    When my oldest daughter was looking at colleges, we did look for scholarships. It was really clear that to get scholarships one to had to be an amazing athlete, be really low income, have really superior grades, or be a minority. None of these things was my kid. Sure, here and there we saw where she might win a really small scholarship if she did a ton of community service, or wrote an essay, or made a prom dress out of duct tape (no kidding, this was real). But in these cases it was clear one could do a great deal of work and not win the scholarship. And even if you got it, it might be for just a couple hundred dollars. I turned to the guidance counselor and asked, “Wouldn’t my daughter be better off working a part-time after-school job and saving the money? Because for the same investment of time, a pay check would be a sure thing.” The guidance counselor looked at me like no one had ever asked this question before. Further, she had to agree I had a really good point.

  5. Becca says:

    My daughter goes to a state school, works in the school library sorting documents, and so has access to public records that detail the pay of the dean and professors. She is surprised a tenured professor who might teach just a couple classes makes so much money. Further, her school offers an increasing number of online courses, which she thinks are mostly useless. And why pay for a dorm room, to be taking online courses? This year her tuition is going up $4000.
    If you think about it, college tuition should not be going up faster than inflation, as if you break down the costs (cost of maintaining buildings, teachers pay, heat, insurance, etc.), these various costs should be reflecting the general inflation trend. The market place should be setting the cost of tuition… if people could not afford it, then the price would not go up. So when a commodity goes up faster than inflation, you have to wonder why. Usually there is some outside factor that is skewing the market place. With college tuition, that outside factor is the student loan program. You take an 18-year-old, who is really clueless about debt means, promise him the world if he goes, and encourage him to take out these massive loans. Tuition goes up because government loans make the money available.
    Without these loans, people would have to work and save to go, and I believe the price would come down.

  6. valleycat1 says:

    I agree with the premise that the student makes the difference between a great school experience (from kindergarten on up) and a mediocre/failing experience. And that for k-12 grades, the parents are the other major factor. Teachers can only do so much. You get out of school what you put into it.

    My experience, and my daughter’s, was more in line with commenter #1 rather than commenter #3.

  7. Mani says:

    Trent – I have two children who will be joining college in a couple of years. I think keeping debt at the minimum while providing good education is very important. To teach your children about the value of money does not just save money but builds a discipline and culture for a lifetime. I also agree that children should be encouraged to earn some money while in college. This is a great and obligation free way to get started with working.

  8. Johanna says:

    On the choice between big state schools and selective private schools, I think there’s another side to the story. Kathleen mentions part of it. Here are a couple of other points:

    Does he mention taking into account how long it’s likely to take to graduate? I always had the impression that at state schools (at least compared to top-tier private schools), there was a much greater danger of not being able to get into all the classes you need for your degree, and therefore not being able to graduate on time. If you take 5 or 6 years to graduate from a state school versus 4 to graduate from a selective private school, suddenly the state school becomes much less of a bargain. That’s *especially* true if you consider that an extra year in college is not just an extra year of paying tuition – it’s also an extra year of your life that you’re not working a full-time job with the benefit of a college degree.

    Rather than looking at which school’s students have the lowest debt burden at graduation, I’d think a better measure of a school’s value would be the average debt burden 6 or 8 or 10 years after *matriculation*. I’m not sure if anyone collects statistics like that, though.

    Another important thing to consider about a school is the percentage of students that fall through the cracks and don’t graduate at all. Probably the worst bargain of all is paying several years’ tuition and devoting several years of your life to college study, but ending up with no degree. And the last time I looked at those statistics, the highest graduation rates were all found at the top-tier private schools.

  9. Ruth says:

    I second Kathleen’s comment on Ivy league schools giving a lot of financial aid. Stanford pays 100% of tuition for students from families making less than 100k annually, and Harvard has been paying 100% of tuition for families making 60k or less since 2006. For incomes up to 180k, the tuition at Harvard is no more than 10% of the yearly family income.

    A lot of people assume that Ivy league schools will be expensive, but unlike many private schools, they are often cheaper than state schools for low-income students.

  10. Leen says:

    I don’t like the thought of writing scholarships off completely. I got scholarships and ended up getting through undergrad and law school without any debt or loans. Especially for undergrad, there are lots of scholarships based purely on grades and not other status. If you work hard enough and get good grades you can get a lot of money. I had summer jobs where I saved all my money but never worked during the school year in high school. It totally paid off. Unfortunately, it took ten years to pay off my husband loans from both undergrad and law school but we did it last year! Neither of us are lawyers, and because I didn’t spend any money on law school I don’t feel bad about letting it “go to waste”.

  11. Kate says:

    Your impression that it takes longer to graduate from big state schools may be based on truth. I know that it is true for at least one state school in my home state. I personally know of several kids who are lacking one course to graduate and have not gotten their degree because they have to wait a year or more before that one course is offered again.
    Another thing to look at is how soon a student is tied into a major–i.e. if he/she chooses to change majors, how many more semesters that will add at the end.
    I wonder if that kind of information is available anywhere for families of prospective students.

  12. Claudia says:

    I think the biggest problem with colleges and that the focus of so many in the past 20 years or so has rapidly become making money not educating their students. I’ve worked with people who have graduated from private colleges, public colleges and technical schools as well as the experiences with taking college courses myself and with my own children. I’ve been significantly underwhelmed with the educations received. Some of the courses I have taken were so slow-paced and simplistic, it was ridiculous.
    My son has a masters from B.U. – big deal. It cost him a fortune even with some assistance and it has not given him the advantages in hiring implied by being a private school alumni. I think Ivy league etc might help a bit when initially applying for jobs but after that first job no one really looks at your schooling anymore as you now have a job history.
    There are colleges now who promise you will graduate in four years as the trend in both state “U”s and public schools to increase revenue has been to adjust class availability so that a four year degree inevitably takes five years.
    One way not mentioned to get college funds is the military. My nephew is a Psychologist all through military assisted schooling.

  13. WendyH says:

    The military (National Guard) is how I paid for most of my college, although the current situation has changed significantly from when I went through, I never had to serve full-time like my nephew’s do today.

    Depending on the career, one other thing to look for is relationships schools have with companies and other schools. It may be easier to study abroad or get an internship when starting out.

  14. Ben says:

    From my experience, it is rarely the schools fault alone if a student takes longer than 4 years to graduate with a bachelor’s degree. If you plan ahead to make sure you are taking the courses that are only offered in either the spring semester or the fall semester when you should (and pass all of your classes, of course) then you should be fine. A counselor can be a great resource to make sure that this doesn’t happen but ultimately the responsibility lies on the student. Now if you change your major 18 times, that is a different story. However, in the end it just comes down to a little proactive planning, which I think is the answer to a lot of life’s troubles.

  15. Denise says:

    Regarding the responses about the state schools taking five years to graduate instead of the four years to graduate with the bachelor’s degree. A person needs to be in contact with their advisor throughout their stay at the college. You are able to see what courses are offered in the spring and fall semesters and plan accordingly. You take the classes when they are offered and pass them. My first son is now graduating from a state college, a semester early with a double major, magna cum laude. He will now be going for his masters degree. My next children will hopefully do as well. I have seen some kids take five years to complete college, I think it is because they have not been on top of their courses like they should have been. It is not hard to do so.

  16. Johanna says:

    @Ben: Certainly there’s something to be said for proactive planning, but the situation I had in mind was one where you know you need to take a particular class in a particular semester, but you can’t take it because it’s full to capacity with other students who also need to take it. I’ve heard that this can be a big problem at some schools, but I don’t know. But certainly it’s something to keep in mind when choosing a school.

    And regarding the overall graduation rate, there was an excellent article recently in the Washington Monthly, called “College Dropout Factories,” that pretty well refutes the “it’s not the school, it’s the student” mantra.

  17. A dear lady I know had not worked most of her adult life. (Husband supported the household.) When it was time for her kids to go to college she sent them with her blessings and took a full time job to pay for it. Her entire check went to the college. The marketable skill she had at the time was typing so she became the typist for a pool of about six. Then came the first of the PCs. She cried and cried as she learned how to format documents without deleting the whole thing. Many times she had to start over after hours of work. She perservered. She faithfully worked until her kids graduated and then retired. We loved her and she was a very inspirational member of our team.

  18. jim says:

    Seems to me the best solution in general is to go to a top tier public school. There are many public schools rated in the top 50 universities in the nation.

    Johanna : I went to a large West coast public school with over 40k students. I only had a problem getting a class one time and I graduated in 4 years. From what I heard students in English major had a problem, but not in other degrees as far as I knew. My wife’s school on the East coast had over 30k students and she didn’t have problems either.

  19. Deb says:

    My husband and I went to our local public university as nontraditional students. I went to a regional branch and he went to another branch because he was majoring in engineering technology. The local public university gave us all sorts of fits with our credits. Our children grew up watching the hassles we had with the local public university. When it came time for our daughter to choose a college, we told her if she went to an in-state public college we could help her for 4 years, but if she went to a private college, she’d have to cover her last 2 years. She chose the private college because of the problems that we had with the local public college, another public college has a reputation for being a party school (it’s been in the news for student behavior problems), and another one was way too big (it’s one of the largest universities in the nation). Our son, however, will probably wind up at the local community college because he will need to prove that he can handle college classes first.
    And that brings up another point. What I have been seeing is a push to send just about every student to college. Maybe we should rethink this push and give students other options.

  20. Sophie says:

    Another issue in the public versus private debate is how prepared your child is to take the reigns on his or her own education. I received my undergraduate degree from a small university (3500 students), where I received in depth attention and guidance, not only from my advisor but from all of my professors, and where even my lecture classes were capped at 30 students. Now as a graduate student, I’ve been a teacher’s assistant in humanities courses for up to 250 students. In some ways these young people benefit from the size of their school: many of their professors are top researchers in their field, they can choose from an abundance of courses and extra-curricular choices, and they gain a “real world” vision of the type of competition they’ll face after graduation. On the other hand, even many of their upper level seminars are too big to allow a full discussion involving everyone in the class, and their professors (or often, their TA’s–masters or doctoral students with only slightly more experience than they have) are too busy to comment on their papers with much depth. The courses I assisted often included a handful of students who excelled despite what I perceived as a relative lack of attention (and often these young men and women gained important faculty’s attention by demonstrating this independence), another handful of students who were happy to quietly earn their “C” with considerably less work than they would have had to put in at a smaller school, and a sizable group who would have benefited from more guidance. I know that I would have been part of that last group and am glad that I chose a smaller, though slightly more expensive, private school.

    I suppose also that this distinction would help or hurt graduates differently across different fields.

  21. tentaculistic says:

    I was lucky because I had 5 older siblings to teach me how to go to a good college on the cheap. So here’s the biggest secret out there for getting a good scholarship:

    People tell you to study for the SAT, which is the score that colleges ask you about, but they don’t realize that the National Merit Scholarships are based on PSATs. The other thing is that people think that the SAT/PSAT is an intelligence test and so they shouldn’t study – BS. Studying makes a huge difference, in learning how to pace yourself, what logic the test writes to, tricks for how to get yourself unstuck. I actually had a tutor every morning for 1/2 hour for the math SAT prep, which I found difficult… paid off BIG-time, to the tune of nearly $120,000 in saved college tuition.

    From personal experience, having a National Merit Scholarship opens doors like nothing else. Even though the Natl Merit scholarship itself is pretty small ($750/yr if I remember right), you’d be hard pressed not to get a full academic scholarship from your college. I ended up with 4 scholarships total (2 to fully cover studying abroad), and only had to pay room and board.

    That said, I sorely regret the prestigious university I attended, and wish I had gone to the highly-respected state school that would also have been free. People have all kinds of odd ideas about state schools, and I think they over-estimate the importance of school attended. Unless you’re in a super snobby profession, the key part of the resume is the “bachelor” part rather than the school. I think school has more import for master’s and doctorate degrees though.

  22. Katie says:

    Another issue in the public versus private debate is how prepared your child is to take the reigns on his or her own education. I received my undergraduate degree from a small university (3500 students), where I received in depth attention and guidance, not only from my advisor but from all of my professors, and where even my lecture classes were capped at 30 students.

    This is very true. I went to a huge state school and I did fine academically, but on a lot of levels I think at that point in my life I would really have benefited from more personal attention and saved myself a lot of trouble and flailing. Not every eighteen year old will thrive in the kind of fast-paced, self-directed environment one finds at huge schools, and I don’t think that’s a bad thing to keep in mind and be honest with yourself about.

  23. Dan Brantley says:

    I would advise everyone entering this stage to find out what the priority financial aid deadlines are and make sure you meet them (Many are Dec 1 of HS Senior Year) It can be surprising what is offered…
    My son graduated from High School in May and was accepted at the University of Southern California, $55,000 per year tuition room & board etc. He received a total aid package of $40,000 per year. He was also accepted to Boston University, $54,000 and received $39,000 per year in assistance. He was not in the top 10% of his class, did OK on ACT and SAT, but not stellar; but he was captain of the Cross Country, and Soccer teams, active in church activities and an Eagle Scout. He chose to attend another private college that was “only” about $44,000 but their aid package made it comparable to USC or BU. And interestingly enough, comparable to the cost of attending the public University of Texas.
    I would also argue that being in a larger school can make it harder to gain attention and experience than in a smaller school. One example is sorority rush at the University of Texas, 900 girls vied for about 500 slots. Chances are many of the 400 not accepted would be excellent members and leaders, but won’t get the chance.
    Another note: there are other savings that people may neglect as well; for example since both sons are away from home with no vehicles, dropping them from the auto policy saves over $200 a month. I just call and add them for a month at Christmas and during the summer, then take them off again in the fall.
    All that being said, saving for college is without a doubt the best, but to “forget about scholarships” and leave money on the table is crazy. And to not apply for a wonderful private college just because of the cost is also crazy. Apply, see what kind of package they put together and then decide.

  24. jgonzales says:

    I have to chime in on the idea of the classes being not available. I’m just beyond the traditional age for college and have many friends who either graduated recently from college or are current students. Many of them did have to take more than 4 years due to class availability. One of the biggest issues my friends ran into was classes being cut due to budget problems. We live in California, which has been known for its budget problems over the last few years. A lot of my friends would sign up for a class they needed to graduate only to find that since only half the expected number of students signed up, the class was canceled for budget reasons and they would have to wait another semester or year. I personally have tried to sign up for classes, only to find that half of the “basic requirement” classes were canceled due to budget cuts, leaving too many students trying to sign up for not enough classes.

    While that’s happening at public universities, my sister attended a private university nearby. She did graduate in four years, but only because she took on 18 hour loads every semester including summer. Her private university also had problems with class offerings, so she took some of her classes, like PE, at a nearby community college during the summer. She worked her tail off and is the only person I know in our age group to graduate in four years.

  25. Georgia says:

    Our local high school superintendent had 8 children and knew the costs would be high. He went to the town our nearest state university was and bought a 2 story home. His kids were able to live there and he rented out the other 5-6 rooms and made enough to pay for the loan and most of the rest of the college fees. When his 4th son graduated, he sold the house and came out ahead.

    His next children to go were triplets. So he found a bargain on a mobile home and bought it with the gain from the house sale. His last child also used the mobile home & it was sold after graduation for a profit.

    There are many ways to finance some or much of college. Be creative. I didn’t have to be. I worked for one year before college and the summer between lst & 2nd years. I had no debt when I left. However, I went before student loans were available and my cost for tuition and room for the two years, at a private Christian college, was $1600. Yeah, not $16k, $1600. See what a difference student loans have put into the mix. As Thomas Sowell says, when you put a third party into the mix it causes all kinds of problems. Think college and medical costs.

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