What Should I Do?

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The Money Side of the College Experience

The growing financial monster must be fed
Tuesday, January 14, 2014, 7:02 PM

Going to college in the USA has never been cheap, but those who haven’t been in the market recently may not realize how crazy it’s become.

Harvard now costs $59,950 per year (all except transportation), which is not as much as Northwestern ($63,228) or Amherst ($61,554), but more than Wellesley ($57,042), although Wellesley doesn’t include estimated personal expenses (i.e., pizza, cookies, beer) in their estimate.   

The smaller schools in smaller towns tend to be a bit less.  For example, at Lawrence University in Appleton, WI, the annual cost is listed at $49,722 not including personal expenses.

State schools are also less, although not necessarily for those from out-of-state.  At my state school, University of Illinois, it’s $28,204-$33,028 per year for locals and $42,346-$47,170 for non-residents.  Costs at the neighboring University of Kentucky are less $23,100 in state and $33,300 for out of state – but then, Kentucky’s academic reputation isn’t as good.  Many state schools recruit out-of-state and international students; is it for greater diversity, or the money?

And these annual student costs don’t cover a school’s expenses.  At the University of Illinois, the taxpayers are providing about half the money to keep the Orange and Blue on the field, while also picking up pension costs.  (And it’s not necessarily cheap to put U. of I. employees out to pasture.  According to United Taxpayers of Illinois, 93 of the State’s top pensioners are University of Illinois system retirees with annual pensions from $189,790 to $439,672.  Good work or non-work if you can get it.)

In 2012, Amherst College, Calvin Coolidge’s alma mater, was reported to have an endowment of $1.65 billion not bad, and one of 41 U.S. private colleges with endowments over a billion dollars.  The largest, as one would expect, is Harvard, with $30.44 billion, followed by Yale at $19.3 billion and Stanford at $17.3 billion. 

As the Amherst website states,

The college's actual cost of educating a student at Amherst exceeds the annual fee by more than 50 percent. However, income from our endowment and gifts help subsidize that amount significantly, even for students who do not receive financial aid.

One can wonder where all the money goes.  Adjunct professors and the various part-timers that populate the lesser schools come cheap.  Students are encouraged to pursue many lines of inquiry, but not that one.

Instead, students are encouraged to get into the best college that is right for them.  All students should go to college is now implied public policy, whether students (as the old-timers would say) are “college material” or not.  Cost is not supposed to be an issue; a nice way to think about it if you’re not the one paying, and not necessarily all that helpful, as every aspect of the college experience involves money (lots of it) being provided by one party or another.

The senior year at high school has substantially morphed into being about getting into college, with education essentially stopping for many high-school seniors once they are accepted mid-year.  That’s opportunity costs for the students, and associated labor costs (for the guidance counselors and teachers who spend their days marking time) for the high school districts.

For students and their financiers, it takes a bit more than pocket change to pay the college application fees ($50 to $75 per school), SATs and ACTs (each about $50), subject area SATs (at about $25), fees for AP tests (around $90), and additional fees to send the test scores of each test to each additional school.  And then there’s the cost of road trips to check out the schools.  Students from poor families have a hard time keeping up with the Joneses on this stuff.

On the other side are costs paid by the colleges for masses of direct marketing material (my daughter ended up with a six-foot pile), the salaries of admission officials, and the typical free lunch that comes with the school visit (which, by the way, is the only free lunch in the process). 

Eventually, certain students are accepted for admission by certain schools. 

It’s at this stage that things start to get serious, as, believe it or not, a lot of parents don’t have $60,000 or even $30,000 on hand to pay for a year of college.  In a weak moment, the parent might think that the local community college may seem to have its merits.  (Tuition at Oakton Community College, which serves part of the Chicago suburbs, is $95.34 per credit hour, or $3,000 to $3,500 for a full courseload for two semesters of classes.)  As one practical parent told me of her daughter’s enrollment at the community college, I want her to have enough money to move out when she graduates.

But go to college websites, and you’ll find that one is not to sacrifice the future of your child by sending them to a lesser school, as financial aid is readily available.

To get the money flowing, you first need to fill out the FAFSA (Free Application for Federal Student Aid).  The extensive application requires the parents to reveal substantial information concerning their income and assets.  There’s also a long section asking about possibly tangled family relationships.

At the well-heeled schools, one is also required to fill out the College Board (financial aid) Profile.  This worthy document goes a step further and asks the questions “the Gov’ment” deemed a bit too prying – What’s your house worth, how much do you owe on it, when did you buy it, how much is in each of your retirement accounts, and – by the way – are you getting an annuity?  I’m sure all of this information is secure once it gets onto the Internet. 

Once this is done, the first party to possibly kick in some money, despite being deep in hock itself, is the Federal Government. 

But before you go the route of the defense contractors and the other lobbyists, consider the possibility of dipping into one of the two other pots of lucre available at many of the schools.

The largest pot is dedicated to sports scholarships, as one would expect in this sports-crazed nation.  Most schools have sports teams, and those in Division 1 and 2 give sports scholarships.  Those in Division 3 do not, or at least not officially.

Because of Title 9, for each male sport scholarship, there’s one on the female side.  The big-time, manly sports programs – football and basketball – tend to exploit the boys with long practices, inevitable injuries, scarce professional careers, and little book-learning.  But things may be different for girls, who may actually have the opportunity to be a “scholar athlete” of sorts.

Next, and from a smaller pot, are the merit scholarships.  At the most prestigious schools, however, these are no longer available all the students are meritorious, as one admission officer intoned.  For those aspiring to become one of the best and the brightest, aid is based on financial need.  

The second-best schools, in their attempts to stay in the game, may provide merit scholarships, which typically equal one-third to one-half of tuition, reducing annual costs to the $35,000 to $40,000 per year range.  This makes these private schools financially competitive with the better public universities.

If one is okay with $35,000 to $40,000 per year, one need not hit the “SEND” button on the FAFSA or College Board Profile.  However, once the button is pressed, the school’s financial aid office becomes the conduit for the river of funds that float the students through their undergraduate years. 

For those who qualify for financial aid (or filled out the forms in such a way as to qualify), first are the Pell grants, a gift up to $5,500 per year from the Federal Government to scholars of all stripes of for education costs. 

Next are the Federal Government’s Stafford Loans $3,500 yearly for freshmen, $4,500 for sophomores, and $5,500 for juniors and seniors for those in need.

Then, for those with exceptional need, there may be Perkins loans $5,500 per year.  The Stafford and Perkins loans have very favorable loan repayment terms. 

However, even with all three – Pell, Stafford and Perkins – that only gets the freshman to $14,500, about half the cost of University of Illinois, or a quarter that of Harvard.

It’s at this point that the school may dip into its piggy bank.  Like a chef’s best recipes, the exact calculation of how much you get remains a secret of the admissions office.

In an admittedly non-exhaustive search, I found only one book (a 2008 publication), Pay for College without Sacrificing Your Retirement by Tim Higgins, which makes a stab at showing how financial aid is determined.  Apparently the student’s (i.e., parent’s) Expected (annual) Financial Contribution (EFC) is equal to up to 47% of parental income and 5.6% of parental assets (both above a certain level) plus 25% of any assets in the child’s name.  The assets assessed for contribution may or may not include things like home equity and the value of an annuity.

An interesting facet of this calculation is that the EFC is calculated collectively for all the students that the parents may have in college at a particular time, so that parents of three children each spaced four years apart and stretching over twelve years of college might end up contributing three times as much as the parents of triplets. 

For students with parents of limited or no means, college can be quite a good deal.  One fellow we know reports that Harvard is covering all but $2,000 of his freshmen year costs.  A young woman we know is spending $9,000 for her freshman year at Northwestern.  In Chicago, a poor scholar with good test scores may find that it costs a lot less to go to Northwestern than the University of Illinois, which has little to give other than what can be funneled through the Federal programs described above.  A parent with a few bucks might be a little resentful paying $55,000 per year to send their child to the private college, knowing that the roommate might be going for only $5,000 or $500, for that matter.

With so much money on the line, there’s a tendency to want to game the system legally (shifting assets/income, low-ball estimates of asset values), illegally (not quite telling the truth on the FAFSA or College Board Profile, unreported “cash” income) or questionably (having a child adopted by a poor relation).  As with the “liar loans” that were so popular with home loan seekers a number of years ago, I haven’t heard of anyone going to jail for falsely filling out the FAFSA or College Board Profile.  I do know, however, that I do not want to be the first.

Despite filling out of the forms in the most advantageous way possible, some students won’t qualify for the federal programs for the needy, merit scholarships, or sports scholarships, at which point the parents and students may receive financial aid from the school itself, based on the EFC.   Private colleges, individually and collectively, report that on average, around half of tuition money is never collected, a result of the sports and merit scholarships and direct financial aid.  The other half of tuition money comes from the student/parent/relative’s wallets, the federal government’s programs for the needy (Pell grants and Stafford and Perkins loans), and the now titled and federally backed Direct Loans.  Since the Direct Loans are guaranteed by the federal government, they are available to any shaky borrower (which describes pretty much every student) for both tuition and living expenses.  Being federal claims, however, they are hard to get rid of during bankruptcy. 

According to the U.S. Department of Education, National Center for Education Statistics, Project on Student Debt, 71% of The Class of 2013 (bachelor degree programs) will graduate with debt averaging $29,400.  Over the past twelve years the average debt is up 67.5% (versus a CPI increase of 31.4%), while the percentage of students owing something is up seven percentage points, from 64% to 71%.  

Debt of $29,400 is less than the average cost of a new car ($31,252, August 2013), which would seemingly be manageable if the graduate can get a decent job.

However, there are apocryphal tales of students owing a lot more.  One friend heard (an urban legend? or perhaps not?) of a recently graduated poetry major owing $100,000, who will undoubtedly be waxing poetically on debt.  The WSJ ferreted out a recent law school graduate (Cutting Down Student Debt, May 10, 2013) who owes $300,000. 

Total outstanding student debt stood at $966 billion in 2012 versus something around $250 billion in 2003.  Apparently schools have few moral qualms regarding students and student debt. The aggregate indebtedness (up about 300% over nine years) doesn’t jibe with the average reported debt (up 67% over twelve years) for those receiving bachelor's degrees.  Perhaps the additional hundreds of billions of this may reflect a ballooning of graduate/professional school debt as undergraduates find their degrees relatively worthless (perhaps because their education was relatively worthless, but that’s another matter).  Part may be attributable to students who load up on debt for a year or two but don’t graduate, particularly at the “For Profit” undergraduate institutions which are no-money or low-money-down kinds of places. 

Many would-be scholars have difficulty paying back these loans.  One way out, according to the government website, https://studentloans.gov/myDirectLoan/index.action, is through Income Based Repayment (IBR), which is calculated based on the borrower paying 15% of their discretionary income, with discretionary income defined as income over 150% of the poverty level.  At present, this 150% cut off point in the continental 48 states is $17,235 for a single person or $35,325 for a household of four.  A single fellow making $30,000 per year under IBR would pay a maximum of $159.56 per month.  (i.e., 15% of $12,765).  Another provision of IBR is that after twenty-five years of monthly payments, the balance of the loan is forgiven.  

In comparison, the average outstanding loan balance of $29,400 at a 4% interest (a present direct loan rate is 3.86% for undergraduate loans) requires a monthly loan payment of $302 if amortized over ten years or $157 if amortized over 25.  For the graduate who can find a decent job, these payments are likely no big deal.  For those who can’t find a decent job, it’s a different matter as for one who spent, say, $200,000 for graduate or professional school, with a typical loan rate of 6.8% or so. 

For these debtors, whose dreams of a high paying position are only dreams despite their expensive advanced degrees, the IBR can be a way out.  Amortized over 25 years, the monthly payment for a $200,000 loan at 6.8% is about $1,400; the break-even point (where the IBR payment of 15% of discretionary income equals the amortized payment) for a single person is around $130,000 in annual salary.    

Moreover, for those that work for a non-profit or for the government, the loan balance can be written off after ten years rather than twenty-five.  Workers whose salaries depend on the kindness (or coercion) of others take care of their young under the IBR.  There’s a lot of fine print in the description of all these programs, so anyone hoping to duck his or her obligation to the U.S. Treasury should read carefully. 

Under typical banking rules, the federal government would be setting aside reserves for expected losses on these loans.  If they did, the annual federal deficit would be tens of billions of dollars a year higher, so clearly this is not a route anyone wants to go.

If a student/parent works hard, is flexible, seeks out bargains, and has a bit of luck (or is wealthy), one can make it through the minefield of college finance and emerge at a good spot on the other side.  Like many things, it shouldn’t have to be this way, but, as with many things, it is what it is.  One can hope that someday, someone will do something about it. 

The WSJ has had a number of articles over the past year or so concluding that colleges need to get their costs down.  A recent article (January 4-5, 2014, Page C1) suggests that one culprit for the high college costs may be administrative bloat.  The article also references a number of schools that have taken efforts to cut costs and/or others that have experienced declines in enrollment.

Stats from the National Student Clearinghouse Research Center indicate that there has been a decline of enrollment from 20.1 million enrollees in Fall 2011 to 19.5 million in Fall of 2013.  However, their data also shows that all of this decline has been in the four-year “For Profit” sector (down 256,000 to 1,321,000) and at the two-year public schools (down 421,000 to 6,498,000).  In comparison, the four-year State and private universities collectively are up 41,000 enrollees (to 11,558,000), which leads me to think that major changes in financing the “traditional” university experience (four-year public or not-for-profit schools) are not going to happen any time soon.

So what should one do?

Conclusion

One hates to make suggestions or give advice, but here are some thoughts.

If you are flush, pay whatever it costs and be grateful that you can.  If you don’t want to be grateful, cackle gleefully.

If you have something less, suggest that your student become a “scholar of fortune,” going for the best deal at a place to which he or she wouldn’t mind being associated.  Channel your own (or others') college experience and relive some of those classes which were near-wastes of time; there are few indications that the college experience has improved in that regard.  Don’t use up all of your ammo in your student’s first battle as an adult. 

Most people will end up filling out financial aid forms to determine the EFC (Expected Financial Contribution), and, on the positive side, to get a discount on costs.   Be aware that there are legal ways to minimize the EFC and maximize the discount; the devil, as always, is in the details.  Since that’s the case, it’s probably fair to say that there may be an advantage to knowing the details!

My family feels that we ducked a bullet regarding the money side of college for my first-born.  My older daughter found a good school that she wouldn’t mind going to (Cooper Union in New York City) that has a tradition of not charging tuition to any student a tradition, however, that ends with the Class of 2017. 

Many colleges at some point in their history didn’t charge tuition, and state school tuitions used to be low.  However, as some school administrators may admit, somewhere along the line, mistakes were made.  Burdening millions of young people with tens of thousands in debts seems to be a major mistake in the making.  You probably don’t want to see your student similarly mired if you can help it.

~ Larry Jakus

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12 Comments

Amanda Witman's picture
Amanda Witman
Status: Peak Prosperity Team (Offline)
Joined: Mar 17 2008
Posts: 409
Thanks so much for this article, Larry!

My oldest is coming up on college age.  We are not in a position to "afford" college, and for years now I've strongly resisted the idea that college is cost-effective or should be a given. 

In my family, not encouraging my kids to go to college is a radical move -- my father (who is highly intelligent and accomplished) does not have a college degree, and he always felt his career options and advancement opportunities were seriously curtailed because of this.  (He is effectively a mechanical engineer.) 

Because of this negative consequence of not having a college degree, he insisted that all of his children attend "good" colleges and graduate with degrees.  I appreciate his logic and can see how that made sense to all of us at the time.  I graduated from college in 1995 with a degree that cost somebody -- in  some combination of personal debt, family financing, and financial aid -- about $80,000.  I only needed that degree once, to procure an interview for a job that lasted two years before I became a parent and opted for a more "flexible" path than a corporate career would afford me.  I've not since had reason to assert my diploma.

And now, with two teens and two preteens, you bet I am priming them with the idea that college is not a given -- it is useful for some paths and unnecessary for others.  And in our family, we are not planning to go into debt to finance college.  (When push comes to shove, I wonder if I will give in on that point?  I may not have the option of loans due to the particulars of my situation.)

But my oldest is academically inclined, loves math and science (esp. physics), and is hungry for college- level academics.  I have no doubt that he'll be successful in a college program, and as long as we can come up with a satisfying path for him that leads to a job field where there's a good chance he'll be employed, we'll both be happy.  We're not exactly sure yet what those jobs are, but we're slowly talking with people, doing the research, figuring it out. 

So here is what we're doing so far:  Our state has just recently announced a new program by which the state will pay for the first year of community college (options are limited) for any student who chooses to do their freshman year of college "concurrent with" (= instead of) their senior year of high school.  Yes, please!  That takes care of one year...

There are also some state programs here that allow high school students to take college classes or earn college credit for high school ("dual enrollment") courses.  Juniors and seniors get two vouchers to spend on community college classes of their choosing.  Yes, please!  My kiddo chose Calc I and Calc II.  Might as well get those out of the way early on.  We are lucky that the community college system offers them.

There is also another local college that offers one free class for credit to any high schooler (though they do have to apply and be accepted).  Yes, please!  So he's taking a computer programming class this coming semester.

While the state is offering these programs to incent high-schoolers to dive into college-level classes, we'll take advantage of whatever we can get. 

After next year, he'll have 3 semesters worth of credits done for free.  The following year, we anticipate that he'll be going to school part-time and working part-time to pay for it.  That should enable him to complete his associate's degree at the community college.  Lucky for him, there seems to be a lot of support right now (financial and otherwise) for students in the STEM path (science, technology, engineering, math), which is right up his alley.

The plan after that -- and we'll be researching this well in advance, to make sure his credits will transfer and he's otherwise prepared and optimizing his chances -- is for him to apply at a college where he can be further challenged and complete his bachelor's degree. 

We have heard from parents of college kids that the swankier colleges have deeper pockets and more to offer in financial aid (as your article supports, Larry).  When the time comes, we'll find out.  In a perfect world, he'd apply to several schools, gather a few offers, and at least one would be "affordable" to us without loans.  He could either go full-time or part-time (while working to pay for it). 

I've been emphasizing all along that the key here is for him to make himself into an attractive investment for the colleges he's interested in.  We know they won't just give their endowment money to any random schmo who asks.  It's interesting for a student to think of themself as an "investment" for a college, but that's basically what colleges and universities do -- they are investing in students who they think will bring something back to the college, either by reputation or donation.

The whole higher-education landscape is so different from when I was his age just 25 years ago.  At that time, it was assumed that everyone at our high school would be applying to several colleges and choosing one based on the campus subculture more than anything else.  I wasn't encouraged to strategically target a career that would pay the college bills.  I ended up choosing a major after determining in which academic area I'd taken the most classes (typically chosen on a whim) up to that point.  It wasn't financially strategic at all.  And to my dad and most adults in my life, that didn't seem to matter -- only that I got my degree.  Things are so very different now.

In fact, I'd still be paying on my student loans as my oldest enters college, if it wasn't for a bit of luck in selling a home at the peak of the housing market, where the profit enabled us to pay off student loan debt in advance.

Anyway, that's my experience as the mom of a teen who is just about at that point.  It is pretty scary, especially to someone without extra financial resources to draw from, because college is yet another (expensive) investment in the current economic game that may or may not yield a return.  And like many other investment vehicles right now, the game has changed enough that it's all new territory now -- not to mention bubble territory. 

Some families, like mine, can't afford for it not to at least pay for itself, but it feels impossible to reliably predict that outcome.  I won't allow my kid to be saddled with debt that we can't be sure he'll be able to pay when he's out in the world, and yet (if traditionalists are right) there may be no better way to get him through young adulthood to a decent-paying job and an independent financial existence.  It's so hard to know what to do and what to encourage them to do.

I am very interested in hearing what others here think of these things, especially those (or those with kids or grandkids) who are about to enter, currently attending, or recently graduated from college or university.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1890
Thanks Larry

Very awesome summary.

Christopher H's picture
Christopher H
Status: Silver Member (Offline)
Joined: May 29 2009
Posts: 148
Happy not to have college-aged kids right now!

Larry, first off -- thank you for this excellent summary.  I work with another engineer who has a daughter in her freshman year of college, and another 2 entering college in the next 4 years.  His oldest daughter, because she wasn't sure what she really wanted to do, is going to school for "business".  At the tune of over $40k per year.  I would never say it out loud, but I shudder every time I hear him talk about that, because chances are her degree may not be worth the paper it's printed on in another decade.

I'm glad to not have to go through this right now, because I'm largely convinced that by the time my two reach that age (they're 6-1/2 and 2-1/2 now), circumstances will have largely reverted college to what it was prior to the Second World War -- the domain of the elite and the immensely talented.  I hope that my children both fall into the second category (because we're definitely not in the first), but even if they don't I hope to help them develop the kind of competence and self-confidence that can only come from actually DOING things.  Frankly, I think that competence will once again become more important than knowledge in finding a life path that gives you the opportunity to thrive.  Since I'm now 40, I grew up in a time where knowledge had outpaced competence in a number of ways, and it makes me feel like I have to play catch-up by developing capabilities that I never fully developed in my youth (even with growing up in a "homesteading" family before it was cool).

Thetallestmanonearth's picture
Thetallestmanonearth
Status: Gold Member (Offline)
Joined: Feb 28 2013
Posts: 323
been there

I didn't go the traditional college route and instead got started in sales building a pretty solid middle-class income for myself by the time I reached my early 20's. Seeing all my friends coming home from 4 year schools and experiencing the subtle pressure of society to waste money and time on an education I decided to go back to school (despite the fact that I was already "successful" by most measures and debt free).  I didn't want to give up the lifestyle I had built and become a poor student for 4-6 years.  I had always been fascinated by aviation so I decided I would go "get my ratings" and then finish up college online once I got a job as a regional airline pilot.  That was the plan anyway in early 2007.  I finished my commercial-pilot ratings in September 2008. Only one of the dozens of people from school that I keep in touch with is flying today. The rest of us are licking our proverbial wounds.  I've only flown 2-3 times since school and all with other friends who were going up for the day and wanted someone in the right seat.

Because it was a trade school federal loans aren't available. No problem! In 2007 Wachovia (now Wells Fargo) jumped at the chance to give me an $80,000 private loan to pay for it.  Immediately following flight school I spent about two years un/under-employed living at home.  I had to defer the loans during that period.  I've been in repayment for probably 3 years now and luckily haven't missed a payment. I've been blessed to get back into the industry I was in before school and make a good "middle-class" income again.  But, barring a lottery win or the collapse of our money system, I will be paying almost $800 a month in loans for the next 27 years. I still don't have a degree.

I share this not to complain, but as a warning to anyone considering an expensive education. My sister went the law school route and despite that her story is not too different from mine.  Same for friends who went to school to be teachers. 

My advice to anyone advising kids about school is to pick a trade that is necessary (nursing, EMT, farming, electrician, etc.) and master it. Spend as little as possible on the education using apprenticeships, community college, trade school, grants...whatever is available.  Once you finish school pick a community with some resilient traits and people of like-mind to you and practice your trade remembering always to make yourself useful to your community.

This is the old model and I think it will be made new in the coming decades. The world doesn't need more airline pilots or patent attorneys, (though we could probably use a few more skeptical nuclear engineers if you want to go that route).

Good luck!

jtwalsh's picture
jtwalsh
Status: Gold Member (Offline)
Joined: Oct 1 2008
Posts: 268
Urban Myth

There are options which are cheaper than a traditional four year college.  State community colleges are one of the best kept secrets of the academic world.  In my part of the country (New England) the four year colleges are so desperate for money, many of them will accept the credits from the community college just to grab the final two years of tuition from the student.

I have been a part time instructor at a community college for twenty-seven years.  I have had students go on to become doctors, dentists, attorneys, engineers, teachers, business leaders and politicians (God help me, I failed there).  Many community college faculty are situated like me.  I teach because I enjoy it, but I also operate my own business in the subject that I teach.  My students receive not only academic knowledge but have the opportunity to learn about my day to day, real world encounters in the field.

There is a great urban myth about the need to live away from home at a four year school and to have a “college” experience.  Most middle class parents seem to have bought into this without any thought process at all.  If you do not indulge your child in this you will be judged by other parents and family members as cruel and/or stupid. Unfortunately many families mortgage their homes and/or retirements to feed this myth.

The harsh reality is that many young people beginning college have difficult social experiences. If you live a stable, hard working family life, sending your eighteen year old off to most colleges is dropping them into an alien world. Their fellow students come from backgrounds and have attitudes that can easily overwhelm the most capable young adult.  One of my daughters was placed with freshman roommates whose goal for their “college experience” was to drink, drug and sleep around.  My daughter was verbally and physically harassed for not participating.  The college was allowing the situation to be handled by a twenty year old resident assistant until I emailed the president of my intent to sue for breach of contract and seek the return of my twenty-five thousand dollar check.

 Many students have difficult academic experiences.  High school often does not prepare the students for the level of work, or teach them how to organize and work without supervision. They often drop out without finishing, but they or their families still owe tens of thousands of dollars for the failed experience.  Many students cannot finish in four years.  Five or six years has become the norm, which just adds more expense and deepens the debt.  For those who do finish, the employment market is very bleak at the moment.  Many are forced to move home and continue to be supported by parents.

Many eighteen year olds have no idea what they want to do in life.  To spend over a hundred thousand dollars only to find out you do not want to work in that discipline is a very expensive learning experience.

Not everyone should go to college.  Even those for whom college will be useful do not have to pursue the four year, full time, live away from home model.  There are other alternatives.  Volunteer in a field of interest for a semester or a year.  Work part time and go to school part time.  Attend a lower cost college for undergraduate work.  Families really need to think about the possible alternatives before committing the time and treasure demanded from most four year traditional programs.

Thanks for the article Larry.  It really set out the complicated steps and issues faced by many parents approaching the whole college funding question.  It also gave me a excuse to vent some of my frustrations with the "academic community."

JT

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Think Smart

Definitely consider a community college. I'm currently putting my wife through nursing school at a California community college. It's about $46 per semester unit. So around $1,700 per year after adding up the tuition, fees, parking, etc. Books are another several hundred dollars per semester. She'll graduate and can take the exam to become a licensed RN. Now, because hospitals are nowadays almost exclusively hiring RNs with bachelor degrees, we'll probably have to shell out for that. But an RN to BSN program can be paid for from between $12,000 to $30,000, earned in about 18 months. Not too bad.

Definitely make sure your high school kid takes AP and/or CLEP exams to place out of courses and possibly earn college credit. Save time and money: Why take high school biology and then college Biology if you can just take AP Biology in high school and pass the AP exam? If your high school kid has steadily been taking the right math classes (Algebra in 7th grade, etc.) by the time they are seniors in high school, they'll be taking AP Calculus. After passing it, they're that much further ahead in their quest to graduate college within 3 years or 4 years (in a difficult subject or with a double major), instead of the typical 5 years. Remember: 60% of college freshmen have to take remedial classes in English and/or Math. That adds a lot of time and money to the cost of college.

Poet

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Grover
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Joined: Feb 16 2011
Posts: 841
College is a business investment

I remember when I was young, college was the ticket to success. The reward exceeded the cost for just about anyone who graduated. Now, we read about many college graduates who can't find employment. Their loans and lost opportunities aren't being recovered. Their futures just aren't as bright.

I don't have children, but I've established myself in my neighborhood and many of the neighbor children feel comfortable enough with me to seek my advice. I tell them that they should view college as a business venture. Will going to college make them more successful or happier? I tell them that there are other alternatives that they should investigate. An education can be had for free on the internet. Unfortunately, a free education doesn't come with a diploma from a prestigious school.

The truly serious children are willing to do whatever it takes to get an education. One neighbor girl is particularly smart. She wants to become a doctor. I believe she can and will become one. She shared her counselor's financial package with me. With a scholarship, expected grants, and student loans, she can expect between $100K-$200K of debt when she completes school. I pointed out one of the neighboring houses and said, "that's what your education will cost." I could tell that the trade-off finally felt real for her.

She is going to the local community college to get as many courses as possible while living at home. That will get her about 2 1/2 years closer to her goal. The community college courses will transfer to the State University and she can then get her B.S. for minimal cost. Once she has her B.S., she can reevaluate the situation and choose the best option available to her. She will do well.

Not everyone is as focused as she is. I advise them to research potential careers before going to college. If only half the graduates get job offers in the field of study, they better be in the upper half of the class. That equates to taking studying seriously. If a kid isn't willing to put that commitment into it, it is better to wait.

When I got my undergraduate degree, one professor was showing us the advantages of getting a graduate degree. When it came to the financial rewards, an advanced degree in engineering was expected to return 5% on an annualized basis. That was back when bank savings accounts returned more than that. I expect the return on investment on college education has plummeted since then as well as bank savings interest.

In summary, college should be viewed as a business investment. Not all investments make sense. Of course, there is more than money involved in the decision. Unfortunately, the debt will persist much longer than the fleeting memories of good times.

Grover

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solana314
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Joined: Feb 20 2014
Posts: 9
Debt-Free U

About 12 years ago right after graduating with my masters' degree with no debt or help from my parents or the government, I would have disagreed with you, jtwalsh, but my perspective has now entirely changed and I agree wholeheartedly.  I still think college has value even beyond a degree specifically leading to a certain kind of employment, but there is a point where the cost can outweigh the benefit.  I will encourage my young children very differently now, and will not expect or even encourage them to go to the "best" school they can possibly get into no matter the price tag, and will strongly discourage debt for college.  I read a book a couple years ago, Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off my Parents, by Zac Bisonette. See http://www.amazon.com/Debt-Free-Outstanding-Education-Scholarships-Mooch...  .  I got it from my local library.

Zac explains that many beliefs about selecting a college and major and paying for it are complete myths, including the US News and World Report ranking system, and many other things.  He gives a lot of evidence that community colleges can be excellent first choices to start college, even for great students, not just last resorts, and I now think they are a good option that society should begin to encourage, not look down on people for.  He also gives many common-sense tips for paying for college that many average families could legitimately handle.  

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solana314
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Posts: 9
Another possible myth: going to elite colleges increases income

Another thing to consider about college choice is the possibility that it isn't always true that going to an elite university leads to higher income after graduation.  One study shared in the book I mentioned in my last post (by Zac Bisonette) found that students who had been accepted at Ivy League schools but then went to other colleges instead that were less reputable still had as high of incomes as those who had attended the Ivy League schools.  The conclusion was that students who go to Ivy League schools have high incomes after they graduated because they were already highly motivated, very intelligent students capable of being very successful before college, so they couldn't be compared in income to those who were not accepted to Ivy League schools, so saying that students who went to Ivy League schools make more money after they graduate is like saying that people who sleep in cribs weigh less than people who sleep in beds (also from Bisonette's book).  Zac's conclusion: You can make a low-cost college a great college for yourself if you are motivated, intelligent and hardworking.

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solana314
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Posts: 9
AP Exams -- pros and cons

I took 5 AP classes in high school and passed the exams for them (5s on 2 of them), and only ended up with usable credit on 3 of them, two of which were calculus, since my program required certain classes and some AP exams gave credit for different classes that didn't apply to my major.  I couldn't have known this when I took the AP class because I didn't know which college I would go to yet or for sure what I would major in yet to know all those details, and most students don't know all that exactly at that time.  I think the "take lots of AP classes so you can graduate in 3 years" advice rarely works out doing that for students--I know many excellent students (all 4.0) who took every AP class possible and I don't know a single one who graduated in 3 years, including myself.  It's theoretically possible, but rarely reality.  

That doesn't mean the AP classes were a complete waste, though.  

The calculus credit was the most helpful even though 2 years of high school calculus only got me a semester of college calculus credit, since it made me eligible for some engineering classes that other students couldn't take as a freshman since they needed calculus as a prerequisite, so I had a slightly easier time graduating in 4 years (still requiring taking maximum credits ever term and sometimes more than maximum)

Even without AP classes giving college credit that ends up saving tuition, though, I felt the AP classes prepared me better for college than regular high school classes, and they had students in them who were motivated to learn, which creates an energy and environment that leads to cooperation, sets a higher bar, and creates better learning.

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Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1988
The Real Student Debt Problem No One is Talking About.

The Real Student Debt Problem No One is Talking About. “Graduate students make up just 14% of university enrollment, but account for nearly 40% of student debt.”

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SPAM_Liam897
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Joined: Nov 23 2015
Posts: 1
Thaks..

Aspects of interest of this calculation is that is calculated for all students whose parents may be in college at the time, especially for the parents of three children, each spaced four years apart. and extends over twelve years of college is over. Contributing three times as much as the parents of twins.

Examcollection 1Y0-201

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