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4 Signs You Shouldn't Cosign That Student Loan

When Rachel Ramsey Cruze, daughter of anti-debt guru Dave Ramsey, was a senior at her Tennessee high school, she told her parents that she wanted to attend Auburn University (in Alabama) because her friends were going there. Does this conversation with a college-bound teen sound familiar?

Cruze's parents sat her down and said they would not pay almost double the price of University of Tennessee for her to cross the state line. They showed her the cost differences and said that if she wanted to go to Auburn, she could pay the difference herself.

"That opened my eyes," says Cruze, who is now 25. "I didn't want to pay $18,000 more per year myself, so I went to the University of Tennessee and now see how smart that was."

Not every parent has a similar discussion about college costs with their children. Some parents may even cosign the student loans necessary for a higher-priced education. But if that money turns out to be a poor investment, it can lead to headaches for students and parents alike.

Managing tomorrow's debt

Statistics from show that in 2010-11, about 57 percent of public four-year college students graduated with debt. The average amount owed was $23,800.

"Student loan debt is largely unavoidable if parents cannot afford to pay for all college costs," says Mark Kantrowitz, publisher of, a suite of college-planning websites. "So the trick is to minimize this debt. Show your child that every dollar borrowed costs $2 to pay back and how long it takes to pay it back."

Both Kantrowitz and Cruze stress that the primary purpose of college is to earn a degree that leads to a higher-paying job as soon as possible.

"Living it up or studying toward an impractical major for four years on borrowed money is not the lesson to teach your student," says Cruze. Both say that going to the "best" school is unnecessary in all but a few cases.

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