Thoughts on college finances: loans, grants, community college
By Stew
I have worked in college education, pretty much since I graduated from college. At times I have been a full-time college employee, at other times I have been a part time employee. I have also been able to work a number of “real world” jobs along the way – construction, roofing, wood finishing, painting, teaching – so I am not a complete academic. Today, I thought I would share just a few thoughts about college, specifically about paying for college.
Community College can be a nice option – not necessarily the most exciting option, but certainly practical in terms of saving money. There are two ways to take advantage of the relatively low cost of community college. One is to simply stay home, work a part time job and knock out your first forty or fifty credits. This is not a lot of fun if you are looking forward to getting away from home or if you plan to participate in college athletics. However, it is possible that you could earn your associate’s degree and save up almost enough money to pay for your junior year at a four-year college after two years.
Another way to take advantage of community college is to begin to earn credits while you are still in high school and then continue to pick up classes when you are home on summer, Christmas and spring breaks. You can save yourself almost a year’s worth of expenses at a four-year college by using this method.
It is possible to graduate from college debt-free. However, the education that you desire might require some financing depending on your area of study. My rule of thumb is that $20,000 in student loan debt, especially if it is subsidized debt, is not too bad. The payment on this amount is manageable and it is relatively easy to accelerate loan pay-off. Furthermore, delaying your college education could end up costing you more than $20K in the long run.
If you think that a particular school or course of study is going to leave you college loans in excess of $20,000, then you need to reconsider your options.
I am amazed by the number of college students that I observe who do not work at all while in college. Almost every student is able to work ten to fifteen hours a week without negatively affect one’s studies. I have even known students who earn high marks even while employed thirty or forty hours per week. Obviously, working twenty plus hours a week is not an ideal situation for everyone, but if you can simply earn enough to cover expenses – laundry, clothes, a little food, walking-around money – you will be ahead. There is no need to constantly beg for money from your parents.
I once knew a college administrator who counseled a single-mother to take out a second mortgage on her home in order to send her son to a private college. Very bad advice, very bad advice
There is a lot of government money available in the form of loans, subsidized loans, state grants, Pell grants, etc. Remember that while this money is a help to many students, the ultimate truth is that government aid has primarily contributed to the meteoric rise of the cost of a college education.
I do not know when it became “necessary” for college students to take expensive vacations at a time in their lives when their whole life is a vacation, but college students do not need to go to Mexico on spring break, cruises in the summer or ski trips to Vail at Christmas. I know that to an 18, 19 or 20 year old, college might seem hard, but it is nothing like real life. College campuses are more or less resorts with all-you-can-eat food, free entertainment, work out facilities and places to hang out with your friends. Save your money for when your really need a vacation after working a real job during your first few years out of school.
Parents, do not give your college-age child a credit card to take to college, especially one for which he never sees the statement or pays off the balance.
Athletic scholarships are nice, but there is far more scholarship money for students who have high academic numbers. Encourage sports participation if that is something that your child enjoys, but be balanced in your approach.
I could go on all night . . . feel free to ask questions.
Article by Stew
Photo by SBA73
April 28th, 2010 at 10:10 am
Serious problems with college:
We are generally asking kids with very poor decision making skills to make decisions that will affect the rest of their lives. Not just their financial future, as in debt, but also taking courses of study which are not worth the money it costs.
Think about it this way: would you trust your 17 year old to make decisions like what field you should work in? What kind of income you should be satisfied with? How much debt you should have? Of course not! Virtually no child has the ability to make such decisions. And yet many parents (including my own, alas) allow their children to make exactly those decisions for their own future, sometimes without any serious advice or counciling!
How many times have I wished I could grab that foolish young 18 year old and shake him up, and give him better advice than he ended up getting. Because of the decisions that young boy made, I am paying the price 20 years later with a much more difficult life that I might have had.
Granted, God has a plan, and I am not bitter. However I made a promise to do better by my children than I received in this case. I will seriously advise them about debt, course choice, applying themselves, and yes, even consider the possibility that college might not be the right choice for them. What’s the use of spending $50,000 and 4 years if the degree will not be useful to you? These questions should at least be asked if your child has little sense of direction.
April 28th, 2010 at 11:14 am
Dan – I work in the industry, but I have to say that you speak a lot of truth . . . I can’t deny it. I think a college degree is valuable, but might be overvalued at current prices . . .
April 28th, 2010 at 11:25 am
Thanks for the article. It comes at a time when we are struggling for answers to the question… How to pay for the next year of college?
My husband and I used a Parent Plus loan for the first year of college for our two daughters. They are on-line students with an art college. They are seeking a degree in animation. The tuition is roughly $18,000.00 per year. This year the girls will have to seek funding on their own. We have completed the FAFSA and were awarded the standard subsidized and unsubsidized loans but are still in need of the balance. Where is the best place to look? The entire process is confusing and tiring at best. They were told by their advisor to wait to apply for loans from places like Sally Mae because applications are only good for 90 days. Trouble is if you wait to apply and things do not go well, time becomes an issue.
They are not working at the present. Their work load for school is massively intense which leaves little time for anything. They have some things lined up for the summer to help pay for next year but will still be in financial need. Any information you can give would be greatly appreciated. Thank you.
April 28th, 2010 at 11:51 am
Stew, etc. Let me share another disturbing trait I see in today’s economy: Kids who graduate going to post-graduate work simply because they can’t find a job. I discussed with one woman who said her son graduated in finance, couldn’t get a job, and so went to law school! I delicately asked how much this would cost. About $20K per year!!!
So, let’s think about this. He’s going to pay not only the $60K, but also interest on his current loans which are now deferred (I’ll estimate $10K). He is also forfeiting any income he might be able to earn from any job he can get. Let’s say he flips burgers for 3 years. That would be $14K per year x 3 years, or $42K in earnings (at minimum wage!!!) He’s also forfeiting any chance he might have had to get a job in the interviening 3 years that’s he spending at law school.
So, $60 + $42 + $10 = $110K for his 3 years of law school. How’s that grab ya? And thinking about the market for new law school grads, which isn’t really any better than for new finance grads, and you’re risking $110K on a bet than the market will substantially improve in these 3 years.
But that’s not all! If the market improves in these years, then presumably you will be able to get a job in finance. The starting salary for law school can vary quite a bit (http://taxprof.typepad.com/taxprof_blog/2008/01/national-jurist.html), so consider that you’re likely to get a starting salary in law of maybe $60K, while in finance it will be averaging $50K (http://www.myfootpath.com/mypathfinder/accounting-engineering-computer-science-salaries-on-the-rise/).
Hmmmmm, risking $110K for an extra $10 per year starting salary? If you factor in interest on your student loans, it will take literally decades to make up the difference. And that’s if you’re lucky enough to get a job as a lawyer upon graduation, and assuming you wouldn’t have had any job other than flipping burgers during that 3 years.
Bottom line, it’s very, very, VERY hard to justify going to law school or grad school on your own (or borrowed) dime unless you have a passion and dream to do it. You can easily run these numbers and that will tell you so. Why then do so many kids, and even their parents, willingly make such a bad decision?
The only reason that I can come up with is we over-estimate the benefit of higher education. Many people automatically assume that the more school you have, the better your life. It ain’t that simple, and unless you wake up and seriously consider these things, you’ll be making mistakes which may wreck the future lives of your children, or yourself.
April 28th, 2010 at 11:58 am
And Cyndee, have you talked to the school about having your kids go half time, and using the other half of the year for them to earn the cost? Maybe they will be able to help them get jobs in the industry in their 6 months they will be working! If they live at home, they can earn most of the $9K per year (I assume that’s per student) they’ll need for their school.
True, this will delay their graduation, but on the other hand they’ll have little to no debt. If they are paying $18K per year, that will be a lovely little $54,000 incentive to put off their graduation (not including interest!), along with possibly some real industry experience for them.
Good luck.
April 28th, 2010 at 12:56 pm
It’s a little difficult in late spring to find funding other than loans for fall semester. FAFSA deadlines vary by school and program, but are frequently in the Feb. 15-March 1 range.
On the scholarship detail, I have noticed a shift toward recognizing students for community service and less emphasis on the high grades. There are still scholarships written for the top students; however, a sizeable number of the scholarship notices that are sent to my newspaper in Michigan are honoring students who have volunteer work, leadership experience and similar credentials on their applications.
As I’ve told my readers repeatedly: The scholarship game is not a fair playing field.
It takes a lot of time and effort to fill out those applications. (Jan-March is the peak application season for many of the awards that southeast Michigan students really do get).
And there is no magic cut-off point where everyone who has a grade point above a certain level gets money for their education. Reason: Whoever sponsors each individual scholarship grant gets to decide where that money goes.
There are, however, two ways in which you can build up your chances in getting whatever money that foundations, sponsors, donors and colleges make available:
* Keep your high school (and college) grades at least 3.0 GPA.
* Get involved in a volunteer or community service project or cause that you are passionate about.
Where do you find those scholarship notices? The best resource will be the files and postings at your high school counselor’s office and your college financial aid office. A lot of scholarship awards are based on where students live, went to high school, or are attending college. Poke through your school-based archives before you spend any time searching on the national databases.
April 28th, 2010 at 1:58 pm
Thanks for the insightful article. I managed through college WITHOUT a job, though looking back, I should have spent my time more usefully like getting a job and studying. I got a small scholarship and took out student loans. Since I was going to an in-state university, I ended up with a little less than $20k in debt. I was pretty cheap (frugal) back in the day as well, so I minimized expenses as much as possible.
But I do regret not picking up some type of campus gig and taking cheaper community college courses during the summer. Thanks for bringing back my past mistakes. ;)
April 28th, 2010 at 3:32 pm
I took 4 yrs to complete a 2 yr degree at a local community college – awarded Pell grant for all of it (1987). I took another 4 yrs to complete my Jr/Sr yr at a in-state university. Yep, it took me 8 yrs to get a 4 yr degree b/c I worked my way through the WHOLE TIME to pay for it myself, at least what the grant (later a sub loan) didn’t cover. I graduated only owing $5k – my part-time job as a teller at a bank earned me $1k more than the minimum for my Pell Grant so I was awarded a subsidized loan of $5k for my sr yr at the in-state university (one of the top 10 business schools in the country). I was SO PROUD when I got that degree (1995).
I did a lot of volunteer work too as a way to network with other business people.
Fast forward 15 yrs … do I regret taking 8 yrs to complete a 4 yr degree? NOPE! Do I regret missing all the parties/vacations that my other “non-working” college friends were doing while I was working or studying? NOPE! I still had a great time when we had spring/winter break.
AND, all the business contacts I made while working my way through college helped me get every job I’ve ever had. If I had it to do all over, I wouldn’t change a thing. I am a better person b/c I worked my way through college.
April 28th, 2010 at 4:46 pm
I worked full time and went to school part time, it took 8 years to get a 4 year degree, but I had no debt. The thing that made this even harder was the various ‘required’ courses. Many many degree programs and colleges limit what really works toward the degree. Personally, I believe some of this is done on purpose to keep you paying for longer.
Also, you have to be very careful when using communitiy college coursework as while it will transfer for the hours, it may not meet your degree requirements. So it could end up wasting time. I am a huge fan of community colleges, but you may end up taking more time if you don’t plan carefully.
One other item to save cost on is to live off campus if you can’t live at home, I have found that dorms and campus food can be over priced.
April 29th, 2010 at 12:51 pm
One option is to work part-time for an employer who offers tuiton reimbursement. I have used this on and off over the past few years to gain some more credits towards my degree.
I am not a big fan of large debts but little by little, with an annual tuition reimbursement policy of $3,0000 a year up to $21,000 lifetime, I am grateful for the ability to go to the local community college here and gain specific certificates that will count towards my degree whenever I finish.
It’s refreshing to see a college employee talk about college in this format because no one ever explained to me what it was like paying the tuition. I had a free ride through college which I gave up and never looked back from. It taught me a lot about why a free ride was easy to take for granted.
April 29th, 2010 at 1:02 pm
This stuff needs to be taught in high school!!!
I will be graduating from UCSD this spring with a degree in biophysics, a minor in chemistry, and a minor in biology. I earned 3 AS degrees from junior college while working part time, breaking even (never saving…who saves money?). UCSD was freaking expensive, circa $40,000 in loans, but thinking back, I could have worked 30-40 every quarter, like I have been the last year. Moreover, I could have worked 30-40 while in JC and saved enough to pay for the first year here. All in all, I could have came in with $10,000, earned $10,000 more, and graduated with $20,000. It is possible.
That said, I will be starting medical school in the fall, and although I am married and my wife makes ~$70,000 as a nurse, I am struggling to figure out how to make it through without being another $100,000 in debt. In the doctor world, $140,000 isn’t too bad, trust me, and with her $30,000, we are looking to be about $150,000 in debt (we want to at least make the interest payments during my residency years) once I actually start earning a doctor’s salary. I will be 33 after 10 years of school + 5 years of residency. Doctors do not get overpaid.
With all those commas and zeros, information like this, early on, can mean the differences in the $100K range. The sad thing is that I have friends who are ~$100,000 in debt as undergraduates, planning on going ~$300,000 by themselves. Let alone if they marry into debt. On the other hand, I know people whose parents payed for everything, and they will graduate debt free, but have NO real world work experience.
The best part of my medical school application was showing that I could handle 20 units while working 40 hrs a week as an EMT. Yes, money was a huge reason why I couldn’t just volunteer 10 hrs a week like some people who have school payed for or are in major debt, but honestly, real world schools and businesses like the work experience and show of responsibility. All parents should make their kids read this blog
April 29th, 2010 at 2:12 pm
The bottom line here is the price of college has made the most important choice you will ever make affecting your lifelong finances, even more important than buying a house! Young people need to be guided before committing to any school, and need to be held accountable for the financial implications of the choices they make.
I would propose that all kids be taught to consider not only the academic quality of their school choice, but all aspects of it: Cost, probably future earnings as a result of one school over another, choice of major, everything. When they are out of school, they will, or should, approach every major (or even minor) choice with such caution, why not college? Why allow children to choose schools based on otherwise arbitrary factors such as where their friends are going, following a boy or girl, or a good foreigh language program. Use college as an opportunity to teach kids about cost benefit analysis, team them about utility, show them that if they want to be a teacher, maybe choice A at $10,000 per year is just as good as choice B at $20,000. If a lawyer, maybe the school can make a difference, but how much? Enough to justify the cost?
Too often student loans are treated as free money without regard to if it is being spent as wisely as possible. Too often college is seen as a given, and the choice is left to those least equiped to make important choices, usually without regard to cost. This needs to change, and if we cannot change society, we should at least change our own families attitudes.