In America, there is the social stigma that college is the next step after high school. Arguably the most frequent question you face after high school is “where are you going to college?”
Yes, the college experience is unforgettable. The experiences you face and friends that you make will hopefully last forever. I wouldn’t do anything differently.
But more and more affluent companies are dropping the college degree requirement. There are also several new alternatives that provide a much cheaper option than attending college.
You could explore community college, Google certified credits, gain knowledge on any topic imaginable on YouTube, and Twitter and other financial publications provide real-time applicable information. Also, entering a trade is a great opportunity as there is a huge scarcity of skilled tradespeople.
But for those that do go down the college route, you are doing yourself a disservice if you don’t acknowledge the cost of attending a college/university. Going to these prestigious universities may sound great – until you are left to foot the bill.
A look into the rising costs of college education:
Source: College Board, Annual Survey of Colleges; NCES, IPEDS Fall Enrollment Data
Parents and students want to get the best education and experience possible, which is understandable. But rather than focusing on the prestigious universities, it’s important to remember that your academic major and the experiences you have on a resume are far more important than what the name of the school you attended was.
Also, with the total amount of student debt in 2020 nearing $1.6 trillion, many students are digging themselves a hole by attending a school that they could not afford. Not only has the cost of tuition continued to increase, but you also have to take into account all of the “indirect costs” that come with colleges.
These include the cost of books/access codes, laptops, and other accessories. According to Education Data, in 2021, the average cost of full-time undergrad students at a four-year university paid $1,240 per year for books (hopefully most realize you don’t open half of them). Then you factor in off-campus housing (I paid $936/month for one year of off-campus housing at UNH!), meals, and other personal expenses.
Regardless of your plan, it is vital that you prepare.
How To Prepare?
Parents should have the conversation with their children before they apply. Explain to them the financial burden they may put themselves in if they attend a school with costs greater than $40,000/year. Some are fortunate with funded 529 plans or the family has enough funds to cover the cost.
But for the majority, it takes planning to determine what is realistic. There are tools, such as the family contribution calculator, which shows how much you could get in financial aid and then how much you may need to borrow. As a general note, the max Federal Loan amount you can take out is $12,500 annually. Obviously, you have access to private student loans as well.
Once you graduate, one of the first steps you should take is realizing the amount of money you owe and creating a plan to pay it off. As a general guideline, some experts typically recommend that 8% to 20% of take-home pay can safely be allocated toward student-loan payments.
Before taken out a loan, consider using a loan simulator, which allows you to compare estimated monthly payments under all federal student loan repayment plans. Another important note is when you set up automatic payments for most student loans, you receive a 0.25% decrease in your interest rate. May not seem like much, but anything helps to pay off your debt faster.
There are also different strategies to pay of students’ loans, such as income-based repayment plans. If your student loan payments are high compared to your income, consider an income-driven repayment plan. This type of repayment plan sets your payment amount that is intended to be affordable based on your income and family size. There are four basic plans that are laid out on the Federal Student Aid website.
Attending a college/university can have a profound effect on your life. But never feel obligated to do something just because everyone else views that as the ‘norm’. Make the decision that is best for you and always be cognizant of the cost of your decisions.
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual.