Shakespeare had it right when he wrote, "Neither a borrower nor a lender be." Borrowing money is a costly way to pay for anything. Yet most college students end up taking out loans to pay for some or all of their education. In fact, 71% of all students graduating from four-year colleges in 2012 were in debt, according to the Institute of College Access & Success.
To understand how costly borrowing for higher education can be, consider the scenarios represented by the graphic to the left. A family that saves $23,400 ($25 a week) for over 18 years could have $42,000 to use for college. Another family that bothers $42,000 could end up repaying almost $60,000.*
The family that borrowed paid more than double for the same education! Which family would you rather be? Although you probably won't be able to save the entire amount needed to pay for college, every dollar you save will be less money that you'll have to borrow (and pay back with interest).
*Assumes a 6% earnings rate for the savings and a 7% interest rate and 10-year repayment for the loan.
