08/31/2010 09:10 am ET | Updated May 25, 2011

How Student Debt Will Ruin Your Life

In my book Debt-Free U: How I Paid For An Outstanding College Education Without Loans, Scholarships, Or Mooching Off My Parents, I show families how anyone can get a great education without loans. But the question I'm most often asked is this: "What's so bad about student loans? Everyone has them!"

The problem is that, because the growth of student loan debt is such a relatively recent phenomenon, most people really don't have any information on the long-term impact it has on borrowers' lives. We simply don't have enough old people with huge amounts of student loan debt to know what happens to borrowers.

But the most recent evidence suggests that their fate is often not good.

The Chronicle of Higher Education reported last month that, of federal student loans that entered repayment in 1995, fully 20 percent have since gone into default.

And with those defaults come severe consequences: trashed credit, wage and tax refund garnishment, an inability to renew professional licenses or enlist in the military, and more. Check for a full list of the consequences of student loan default. Worse, student loans -- unlike almost any other kind of debt -- cannot be discharged in bankruptcy and, in part because of that, you generally can't negotiate a "pennies on the dollar" settlement the way that you often can if you get behind on your credit card payments. And unlike a mortgage or a car loan, there's no asset to sell once you realize you're in way over your heard.

One in five borrowers face the consequences of default within 15 years of leaving school -- and that's based on grads in 1995. Given the exponential increase in student debt loads since then, the 15-year default rate in 2025 will probably look a lot worse. And we're not talking about a small number of people: According to financial aid expert Mark Kantrowitz, the amount of student loan debt outstanding in the United States has, for the first time in history, surpassed credit card debt.

And yet that's only a small sample of the havoc student loans are wreaking in the lives of borrowers. Looking at the default rate on student loans to assess how bad the problem is is like analyzing America's obesity epidemic in terms of "What percentage of the population is so obese that they are unable to leave the house?"

For every borrower who defaults on a loan, there are many, many more who have had the course of their lives irrevocably altered by their loans. Here's some data on the life consequences of student loan borrowing - and this includes all borrowers, not just those who borrowed huge amounts of money or went into default:

* A 1998 Nellie Mae study found that 38 percent of student loan borrowers reported that their debt had prevented them from pursuing grad school. With the bachelor's degree opening far fewer doors than it once did, graduate school will be a necessity for an increasing percentage of students: save your borrowing capacity for grad school.

* Also according to that Nellie Mae survey, "In 1997, 40 percent of borrowers said that their debt had caused them to delay buying a home. . . 22 percent said that their student loans had caused them to delay having children." And remember: That was in 1998, when students were borrowing far less to pay for college than they are now.

* A 2007 study published by the National Bureau of Economic Research found that "debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid "public interest" jobs."

And remember: Those are outcomes related to the sacrifices borrowers must make when they do make their loan payments. Borrowers who fail to make their payments can have their financial lives literally permanently ruined by the consequences of default.

The college years should be all about building a solid foundation for the rest of your life: one that will allow you to build the career and lifestyle you dream of. As all too many debtors are learning, it's very hard to build dreams on foundations of debt.

So what can families do to avoid the debt that is trapping graduates into lifetimes of indentured servitude to Sallie Mae?

Before taking out a single dollar in student loans, do everything that you possibly can to lower the cost of college and raise the money to pay cash. According to MSN Money, "The cost of a pack of cigarettes averages around $4.50 to $5, including taxes, depending on where you live. Using the lower number, a pack-a-day smoker burns through about $31.50 per week, or $1,638 per year." A student who spends $1,638 per year on cigarettes during college and graduates in four years will have spent $6,552 on cigarettes during college - That's a full one-third of the average debt load of a borrower who graduates from a four-year college according to

The point is not to pick on smokers. The amount of money that students generally borrow to attend public colleges could be avoided in most cases through efforts to increase income and cut costs. I've shown the math behind this on DailyFinance.

WATCH: Zac talks about his book on the TODAY show.

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