Paying For College For Dummies E-Book

Eric Tyson

• Herausgeber: John Wiley & Sons
• Kategorie: Ratgeber
• Sprache: Englisch
• Veröffentlichungsjahr: 2020

Seitenzahl: 374

Beschreibung

Discover a concrete financial plan to finance a college education Financing a college education is a daunting task no matter what your circumstances. Bestselling author and personal finance expert, Eric Tyson offers tried and true strategic advice on how to understand loans, know your options, and how to improve your financial fitness while paying down your student loan debt. Armed with the checklists and timelines, you'll be able to: * Figure out what colleges actually cost * Get to know the FAFSA® and CSS Profile(TM) * Research scholarship opportunities * Quickly compare financial aid offers from different schools * Find creative ways to lighten your debt load * Explore alternatives such as apprenticeships, online programs Paying for College For Dummies helps parents and independent students navigate everything from planning strategically as a married/separated/divorced/widowed parent, completing every question on the FAFSA and CSS PROFILE forms, understanding tax laws, and so much more. No other book offers this much practical guidance on choosing and paying or college.

Leseprobe

If you’re thinking of sending your child to college one day, you have a lot of decisions to make. Decisions regarding how to save money for college, which colleges may be a good fit, whether an alternative to a four-year college may be a better option, plus seeking financial aid, scholarships, and grants. Paying For College For Dummies can help you make the most of your money and guide you through the decisions of choosing which post–high school path is right for your child.

© 2020 Eric Tyson All rights reserved.

Saving and Schooling Options: Tips to Guide You through College Decisions

The prices at four-year colleges and universities, especially private ones, are daunting to most people. So, you should absolutely, positively look around, inspect, and compare to see what you’re getting for all that money.

Increasing numbers of alternatives to traditional four-year colleges offer students lower-cost and shorter-term programs. Take some time to find out and consider what’s out there and compare those options to the best traditional colleges you’re considering.

Raising children is a long-term and costly endeavor. So, get your personal finances in top shape to run this financial marathon. You should also understand how colleges set prices based upon your financial situation, as that may impact how you save and invest your money.

As your kids grow up, be sure to expose them to important money lessons, including helping them to make the connection between working and earning money.

A challenging and rewarding part of raising kids is helping them recognize and develop their talents and abilities. Be careful not to steer them in a particular way thinking that may make them more attractive to certain colleges. More often than not, such perceptions aren’t correct. Teach your kids the value of hard work, integrity, and developing their strengths and interests.

There’s no substitute for visiting and investigating colleges and other programs of interest. Set aside time with your teen to discuss a process for checking out schools and what factors — including the cost and expected benefits — will influence the final selection.

Where appropriate and cost-effective, enlist experts to help with evaluating and applying to colleges. Understand the strengths and limitations of school-based counselors and outside experts. Spending lots of money won’t necessarily lead to better outcomes.

Understand how colleges collect and evaluate your personal and financial information to decide how much to charge you.

Four-year colleges are certainly one of the most popular options for high school graduates. But there are others including community colleges, trade schools, apprenticeships, boot camps, last-mile programs, and more. Visit schools, take tours, ask lots of questions, and do your homework on each.

Generally speaking, parents will be better off regarding financial aid applications and college pricing if they save and invest in their own names (as opposed to their kid’s) and take advantage of retirement savings plans.

Financial aid forms can be intimidating and tedious to complete. Understand how to complete those forms accurately and to your best advantage.

Colleges are the biggest purveyors of grants and scholarships — which are really a reduced price offered to those deemed in need of financial aid or displaying academic or some other merit (for example, sports). While some outside scholarships are significant, most are relatively small in amount and often reduce the amount of aid a given school will provide your family.

Ideally, your teenager will gain acceptance to multiple schools, which enables comparing the value (price and quality) offered by each to one another. You should also realize that you may be able to improve upon the financial aid offered by a given college.

Conduct more due diligence before making your final decision, which should include more campus visits.

Federal and state tax codes include numerous tax breaks for college expenditures. Find out what’s out there so you can take advantage of what you’re eligible for.

Getting through college in a timely fashion can greatly reduce your costs of attendance. Be sure you understand how to evaluate your likelihood of completing a given college program in four years.

As your teenagers enter young adulthood, be sure you’re sending them off with the financial skills and knowledge they can use and benefit from for the rest of their lives.

Know how to best deal with student loans. In addition to keeping track of them, be sure you’re aware of the myriad programs that help reduce your interest costs and repayment.

Praise for Eric Tyson

“Eric Tyson is doing something important — namely, helping people at all income levels to take control of their financial futures. This book is a natural outgrowth of Tyson’s vision that he has nurtured for years. Like Henry Ford, he wants to make something that was previously accessible only to the wealthy accessible to middle-income Americans.”

— James C. Collins, coauthor of the national bestsellers Built to Last and Good to Great

“Personal Finance For Dummies is the perfect book for people who feel guilty about inadequately managing their money but are intimidated by all of the publications out there. It’s a painless way to learn how to take control.”

— Karen Tofte, producer, National Public Radio’s Sound Money

“Eric Tyson … seems the perfect writer for a …For Dummies book. He doesn’t tell you what to do or consider doing without explaining the why’s and how’s — and the booby traps to avoid — in plain English… . It will lead you through the thickets of your own finances as painlessly as I can imagine.”

— Chicago Tribune

“This book provides easy-to-understand personal financial information and advice for those without great wealth or knowledge in this area. Practitioners like Eric Tyson, who care about the well-being of middle-income people, are rare in today’s society.”

— Joel Hyatt, founder of Hyatt Legal Services, one of the nation’s largest general-practice personal legal service firms

“Worth getting. Scores of all-purpose money-management books reach bookstores every year, but only once every couple of years does a standout personal finance primer come along. Personal Finance For Dummies, by financial counselor and columnist Eric Tyson, provides detailed, action-oriented advice on everyday financial questions… . Tyson’s style is readable and unintimidating.”

— Kristin Davis, Kiplinger’s Personal Finance magazine

“This is a great book. It’s understandable. Other financial books are too technical and this one really is different.”

— Business Radio Network

More Bestselling For Dummies Titles by Eric Tyson

Investing For Dummies®

A Wall Street Journal bestseller, this book walks you through how to build wealth in stocks, real estate, and small business as well as other investments. Also check out the recently released Investing in Your 20s and 30s For Dummies.

Mutual Funds For Dummies®

This best-selling guide is now updated to include current fund and portfolio recommendations. Using the practical tips and techniques, you’ll design a mutual fund investment plan suited to your income, lifestyle, and risk preferences.

Personal Finance in Your 20s For Dummies®

This hands-on, friendly guide provides you with the targeted financial advice you need to establish firm financial footing in your 20s and to secure your finances for years to come. When it comes to protecting your financial future, starting sooner rather than later is the smartest thing you can do.

Home Buying For Dummies®

America’s #1 real-estate book includes coverage of online resources in addition to sound financial advice from Eric Tyson and frontline real-estate insights from industry veteran Ray Brown. Also available from America’s best-selling real-estate team of Tyson and Brown — House Selling For Dummies and Mortgages For Dummies (with Robert Griswold).

Real Estate Investing For Dummies®

Real estate is a proven wealth-building investment, but many people don’t know how to go about making and managing rental property investments. Real-estate and property management expert Robert Griswold and Eric Tyson cover the gamut of property investment options, strategies, and techniques.

Small Business For Dummies®

This practical, no-nonsense guide gives expert advice on everything from generating ideas and locating start-up money to hiring the right people, balancing the books, and planning for growth. You’ll get plenty of help ramping up your management skills, developing a marketing strategy, keeping your customers loyal, and much more. And, find out to use the latest technology to improve your business’s performance at every level. Also available from co-authors Eric Tyson and Jim Schell, Small Business Taxes For Dummies.

Paying For College For Dummies®

Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com

Copyright © 2020 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

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Library of Congress Control Number: 2020904217

ISBN 978-1-119-65147-5; 978-1-119-65148-2 (ebk); 978-1-119-65149-9 (ebk)

Paying For College For Dummies®

To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Paying For College For Dummies Cheat Sheet” in the Search box.

Table of Contents

Cover

Introduction

About This Book

Foolish Assumptions

Icons Used in This Book

Beyond This Book

Where to Go from Here

Part 1: Understanding Paying for College

Chapter 1: Confronting High College Prices and the Modern Job Market

Confronting the High Prices of Higher Education

Looking at How College Pricing Works

Employment Reality and What Students Say They Want from College

Looking at How the Higher Education Landscape is Changing

Chapter 2: Financial Planning Steps When Your Kids are Young

Kids Are Costly! Getting Your Finances in Order

Finding Saving Methods Given How College Financial Aid Works

Spending on Your Kids without Breaking the Bank

Keeping Spending in Line: Using Youth Sports as an Example

Completing the Personal Finance Olympics of Childrearing

Chapter 3: Exposing Your Kids to Work, Finances, and the “Real World”

Laying the Foundation for Raising Money-Smart Kids in the Early Years

Dealing with What Kids Are Exposed To

Developing the Work-Money Connection

Teaching Your Kids About More Real-World Money Topics

Part 2: Finding Acceptance

Chapter 4: Making the Most of Your Kid’s Academic and Outside Experiences

Understanding the Value of Academic Success (Good Grades)

Jumping Through Hoops: Marketing of High School Students

Chapter 5: Guiding Your Child

Agreeing to a Process for Making Decisions

Conducting the Right Research

Working with and Hiring “Experts”

Dealing with Mental Health Issues

Part 3: Confronting College Costs: Traditional Colleges and Alternatives

Chapter 6: Seeing How Traditional Colleges Decide What to Charge You

Taking All Your (Financial) Clothes OFF!

Valuing Wanting One Another

Checking on Realities for Recruited Athletes

Chapter 7: Surveying the Range of College Options

Considering Four-Year Colleges

Learning and Serving in the Military

Considering Community Colleges

Taking a Year Post–High School to Work or Volunteer

Is College Necessary or the Best Option for Your Children?

Chapter 8: The Best College Alternatives to Consider

Looking at Last-Mile Programs

Getting Oriented with Online Programs

Finding Out about Vocational/Trade Schools

Final Thoughts on Alternatives to Traditional Colleges

Part 4: Getting the Best Education at the Best Price

Chapter 9: Financial Steps You Should Take While Your Kids Grow Up

Determining a College Financial Aid Package

Looking into Long-Term Saving and Investing Strategies

Strategizing to Pay for Educational Expenses

Determining Later-Year Savings Tactics

Chapter 10: Filling Out the Common Financial Aid Forms to Your Best Advantage

Determining Whether to Apply for Financial Aid

Taking an Overview of Financial Aid Forms

Filling Out the FAFSA® Form: Free Application for Federal Student Aid

Getting on Board with the CSS Profile Form

Checking Off School-Specific Forms

Chapter 11: Tricks and Tips for Finding Scholarships and Borrowing Money

Gaining Grants and Scholarships

Borrowing for College

Chapter 12: Reviewing Financial Aid Offers and Appealing Them

Getting Word on College Acceptances and Doing More Research

Taking a Long, Hard Look at the Bottom-Line Price

Part 5: The Part of Tens

Chapter 13: (Almost) Ten Education Tax Breaks and Rules You Should Know About

Contributing to Retirement Accounts

Checking to See if You Qualify for the Saver’s Tax Credit

Understanding the Tax Benefits of 529 Plans

Considering Coverdell Education Savings Accounts (ESAs)

Utilizing the American Opportunity Tax Credit

Taking Advantage of the Lifetime Learning Credit

Understanding the Retirement Account Withdrawal Penalty Waiver

Finishing on Time without High Income Earning Years

Taking the Student Loan Interest Deduction

Chapter 14: Ten Tips for Getting Your College Degree Quicker

Communicating Is Key

Keeping All Your Options Open

Planning Ahead Financially

Picking Colleges with High Graduation Rates

Selecting Colleges that Offer Your Desired Courses and Majors

Choosing Schools with Affordable Housing

Getting College Credit in High School

Making Use of Advisors and Deans

Having Students Work during College

Avoiding Stopping School to Work

Chapter 15: Ten Important Money Management Steps for Young Adults

Getting Financially Fit, Now!

Adapting and Adjusting Along the Way

Cancelling Consumer Credit

Reviewing Your Budget and Spending Plans

Striving to Regularly Save and Invest

Ensuring that You’re Properly Insured

Continuing Your Education

Always Being Prepared for a Job Change

Evaluating the Total Cost of Relocating

Ensuring Compatibility when Picking a Partner

Chapter 16: Ten Things to Know About Student Loans

Keeping Track of Your Loans

Understanding What Cosigners Means for Responsibility

Knowing the Loan Terms

Using the Auto-Pay Feature to Save Money

Understanding Loan Forgiveness Conditions

Knowing Your Federal Loan Repayment Options

Cautiously Considering Refinance Possibilities

Asking for Relief

Making Use of the Student Loan Interest Deduction

Pausing Your Loans with a Return to Higher Education

Index

About the Author

Advertisement Page

Connect with Dummies

End User License Agreement

List of Tables

Chapter 1

TABLE 1-1 Colleges with best six-year graduation rates

Chapter 4

TABLE 4-1 Merit Scholarship Percentages by School

Chapter 6

TABLE 6-1 Drafted Baseball Players Who Make it to Major Leagues

Chapter 9

TABLE 9-1 How Much to Save for College

Chapter 13

TABLE 13-1 Special Tax Credit for Retirement Plan Contributions

Chapter 16

TABLE 16-1 Loan Processors

List of Illustrations

Chapter 1

FIGURE 1-1: What higher education means for earning higher wages and having low...

Chapter 6

FIGURE 6-1: Percentage of high school athletes who go on to play at the collegi...

FIGURE 6-2: Percentage of collegiate athletes who subsequently play professiona...

Chapter 7

FIGURE 7-1: Yale University’s Office of Career Strategy’s Statistics and Report...

Chapter 10

FIGURE 10-1: Colleges and universities that admit candidates using need-blind a...

FIGURE 10-2: The FAFSA® form: Free Application for Federal Student Aid.

Chapter 16

FIGURE 16-1: Sample federal government student loan promissory note.

Guide

Cover

Table of Contents

Begin Reading

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Introduction

Welcome to Paying for College For Dummies! I know this may be a stressful and challenging topic. But, not to worry! You’ve come to the right place — this book will help you to lower your anxiety, increase your knowledge, and take control of the process.

In this book, I emphasize these important topics:

Making the most of your finances and developing your children’s potential without breaking the bank.

Getting the best education at an affordable price. Spending more doesn’t equate to getting a better education or better employment prospects. You should look for value — meaning seek out service providers that deliver quality at a reasonable, or in some cases even an attractive, price.

Understanding proven alternatives to traditional and costly college education. Increasingly, high-cost, four-year colleges are seeing their enrollment squeezed while far lower cost and faster alternatives to college are seeing enrollment growth.

Navigating and making best use of financial aid. After baring your financial soul to colleges, they will tell you how much they will charge you. They aren’t actually giving you money when they award aid so much as they charge different customers widely differing prices based upon the college’s assessment of your ability to pay. I help steer you through understanding the various ways to get better pricing as well as filling out all those forms.

About This Book

College price increases, for too many years and decades, outstripped the general rate of inflation. While particular degrees from leading schools do still seem to provide a ticket to some well-paying jobs and careers, now more than ever families are questioning the value of a college degree. A recent Wall Street Journal poll found that 47 percent of Americans no longer believe that having a college degree will lead to a good job and higher lifetime earnings. Among Millennials, only 39 percent continue to believe in college.

Paying For College For Dummies helps you to sort through the range of post-high school options, including attending a traditional four-year college. If you think buying a car or a home was complicated, just wait until you begin to understand the intricacies of how colleges set their prices. Colleges charge each of their customers different prices based upon their own (hidden) analysis of your supposed ability to pay. I will explain how various colleges determine what to charge you and how you can best complete college financial aid forms and position your finances to receive more favorable pricing.

As a former financial counselor, I have counseled thousands of clients on a variety of personal finance, investment, and spending decisions, including higher education and college. With four years at the “best” private colleges having broached $300,000, and the best public college educations costing well into the six figures, more and more people who aren’t wealthy are questioning the value that such an experience will provide. And increasingly, folks are wanting to evaluate and consider the alternatives, which this unique guide will also help you to do.

Foolish Assumptions

Whenever I approach writing a book, I consider a particular audience for that book. Because of this, I must make some assumptions about who the readers are and what those readers are looking for. Here are a few assumptions I’ve made about you:

You want the best for your kids and would like to understand the pros and cons of different options before making an informed choice. (

Note:

While the vast majority of readers of this book are parents, I expect that some inquisitive teens are readers too — that’s great! For simplicity, please accept my apologies for choosing to write as if parents are the readers so that sentences like the one before this aside aren’t more complicated.) Because money doesn’t grow on trees and you’re not super-wealthy, you want value for your money and need to contain costs.

You have some understanding about the reputation of particular colleges but don’t know how that translates into post-graduation job and career prospects.

You’ve heard some rumblings from young adults and perhaps even your own teenagers about alternatives to college, and you’d like to know more about those options and whether they may make sense for your offspring. It’s not unusual these days for parents and teenagers to have different aspirations and expectations. I hope and expect my book to get both sides to see the other’s point of view and bring you closer to a happy agreement or compromise!

You’d like a more detailed understanding of how college financial aid, scholarships, student loans, and such works.

If any of these descriptions hit home for you, you’ve come to the right place.

Icons Used in This Book

Throughout this book, you can find friendly and useful icons to enhance your reading pleasure and to note specific types of information. Here’s what each icon means:

This icon points out something that can save you time, headaches, money, or all of the above!

Here we’re trying to direct you away from blunders and boo-boos that others have made when making college and other post–high school decisions.

Here we point out potentially interesting but nonessential stuff.

Look for this icon to find real-life examples of college decisions to help exemplify a point.

We use this icon to highlight when you should look into something on your own or with the assistance of a local professional.

This icon flags concepts and facts that we want to ensure you remember as you make your college and other post–high school decisions.

Beyond This Book

In addition to the content of this book, you can access some related material online. Head to www.dummies.com and type in “Paying For College For Dummies Cheat Sheet” in the search box to find additional tips.

Where to Go from Here

If you have the time and desire, we encourage you to read this book in its entirety. It provides you with a detailed picture of how to best make post–high school decisions to maximize your returns while minimizing your costs. But you may also choose to read selected portions. That’s one of the great things (among many) about For Dummies books. You can readily pick and choose the information you read based on your individual needs. Just scan the table of contents or index for the topics that interest you the most.

Part 1

Understanding Paying for College

IN THIS PART …

Check out college prices, the job market, and the value of higher education.

Find out how to save and invest for college and other goals while your kids are young.

Get your kids on board with making a connection between working and earning money.

Chapter 1

Confronting High College Prices and the Modern Job Market

IN THIS CHAPTER

Scrutinizing the steep sticker price of many traditional colleges

Understanding the employment reality upon graduation

Getting the best pricing by understanding how colleges see your situation

Seeing the disconnect between college academics and what some employers are seeking in graduates

Comprehending how the college landscape is changing and evolving

Planning ahead. When you have kids, even if you’ve been a live-in-the-moment, what’s-up-today kind of person, it’s hard and could be costly not to do some thinking about your children’s future.

Think ahead to an important and often bittersweet milestone - high school graduation. Many parents look back at the prior 18 or so years and wonder where all that time went and how fast it flew by. When your child graduates from high school, you may breathe a sigh of relief and feel a sense of accomplishment. But, what will Johnny do next and how will he (along with you) make that difficult decision?

Most parents envision their kids heading off post-high school graduation to a hopefully “good” college for four years. If that’s what you did and had a mostly positive experience, of course it’s natural to want the same for your own kids. Maybe you didn’t attend college and have felt that you missed out on particular career options or some needed time to grow up and explore what’s out there.

You may have concerns about the path you did or didn’t choose or have spoken with others who do. A recent Wall Street Journal poll found that 47 percent of Americans no longer believe that having a college degree will lead to a good job and higher lifetime earnings. Among Millennials, only 39 percent continue to believe in college. And for some good reasons — high and rapidly escalating costs, increasingly specialized jobs which most college educations don’t prepare you for and the political climate on many college campuses that may not match what you want for your children’s formative young adult years.

My goal throughout this book is to present you with the facts and the pros and cons of alternatives. While I understand that many people reading this book will end up at a traditional four-year college, I know from the statistics that increasing numbers of families are choosing alternatives to that route. Despite the fact that I attended a four-year college, I truly want what is best for your kids. Your children are unique and the post-high school options best suited to them should reflect what fits them. Choosing a particular college because it’s on someone else’s “best” list won’t be a good idea if it’s not what’s best for your child’s situation.

In this chapter, we confront the high prices at many colleges and universities, look ahead to the employment reality students face upon graduation and discuss how the college and post high school landscape is evolving to address these important trends.

Confronting the High Prices of Higher Education

Okay, let’s get the bad news out of the way. Yes, college is expensive. Consider the supposedly “best” private colleges which on most lists includes colleges and universities like Brown University, Carnegie Mellon University, Colgate University, Columbia University, Cornell University, Dartmouth College, Duke University, Georgetown University, Harvard University, Johns Hopkins University, Lehigh University, MIT, Northwestern University, Princeton University, Rice University, Stanford University, Tufts University, University of Chicago, University of Notre Dame, University of Pennsylvania, University of Southern California, Vanderbilt University, Washington & Lee University, Washington University, and Yale University.

Tuition, room, board, books, and other fees will run you $250K to $300K or more over four years! Stop and think about that high cost for a moment.

If that’s not daunting enough, getting into these schools is ridiculously difficult and competitive to do. High school students are packing their schedules with Advanced Placement and honors courses, burning the midnight oil to get that elevated grade point average, playing sports, running for student government, playing in the band, volunteering regularly and jumping through other hoops.

In the hopes of making their future college applications tempt admissions officers, students must also often seek other ways to stand out and be different. Being from a small state, rural or non-wealthy area certainly helps. Living in a non-wealthy area and attending a not so great public school may help your case also.

While quite a bit less expensive if you qualify for in state tuition rates, public colleges are getting more and more expensive and can easily set you back for well over $100K for a four-year education. If you attend a top public college as an out of state resident, expect to pay upwards of $200K for the four years — about the same freight as those going to a typical private college.

Looking back over the past 50 years, after adjusting for increases in the general cost of living, tuition and fees at four-year colleges have jumped in real terms (that is, above and beyond the general rise in the cost of living) by more than 240 percent at private colleges and 340 percent at public colleges according to data from the National Center for Education Statistics. This trend obviously can’t continue because few families can afford to pay the already big dollar amounts today.

A brief historical overview of colleges and who completes it

High-priced four-year college degrees are a relatively recent and not entirely attractive phenomenon. After World War II, with the GI bill (designed to help servicemen returning to society) and massive investments at the state public university systems and federal levels with the availability and promotion of Pell Grants and student loans, adults with college degrees mushroomed from just 5 percent of the adult population to more than 30 percent.

The most recent figures show that about 35 percent of U.S. adults age 25 and older have completed a four-year college degree. 48 percent of 25 to 34-year olds have a college degree. About 13 percent of all adults have completed an advanced degree — that is a master’s degree, professional degree, or a doctorate degree.

That said, here’s another and truly shocking and important to know statistic: only about 55 percent of those who enroll in a four-year college degree program actually complete it. Think about that for a moment — this means that a whopping 45 percent of those who head down that costly road end up with no credential and therefore have probably wasted their time and money. In case you’re wondering, community college is no better in that regard (although it’s a lot cheaper) as 81 percent of students who start at community college believe they will eventually earn a bachelor’s degree but in fact only 12 percent do.

These college graduation percentages highlight an important topic. Whenever you’re examining specific colleges, you should always evaluate the school’s graduation rate. Higher percentages are better, of course. If a college you’re considering has a relatively lower graduation percentage, inquire and investigate why. Is it because of a lack of on-campus housing and nearby affordable rentals? Is it because the college accepts students who are having trouble staying on track? Is it because students are uninspired by the overall education and experience they are having once on campus for a period of time?

According to a Chronicle of Higher Education analysis of U.S. Department of Education graduation rate data, overall private nonprofit colleges have a six-year graduation rate of 66 percent, public colleges graduated about 59 percent while for-profit colleges lagged far behind, graduating just 21 percent of their first-time, full-time students within six years. As another point of reference, Table 1-1 gives a short list of the ten private (non-profit), public, and for-profit colleges with the highest six-year graduation rates.

TABLE 1-1 Colleges with best six-year graduation rates

Four-year private colleges

1.

Yale U.

97.4%

2.

Princeton U.

97.3%

3.

Harvard U.

96.4%

4.

Dartmouth College

95.9%

5.

Harvey Mudd College

95.9%

6.

U. of Pennsylvania

95.7%

7.

Duke U.

95.4%

8.

Bowdoin College

95.2%

9.

U. of Notre Dame

95.2%

10.

Amherst College

95.2%

Four-year public colleges

1.

U. of Virginia

94.6%

2.

College of William & Mary

92.1%

3.

U. of Michigan at Ann Arbor

91.6%

4.

U. of California at Berkeley

91.1%

5.

U. of North Carolina at Chapel Hill

90.9%

6.

U. of California at Los Angeles

90.9%

7.

U. of Florida

88.0%

8.

U. of Wisconsin at Madison

87.2%

9.

College of New Jersey

86.6%

10.

U. of Maryland at College Park

85.4%

Four-year for-profit colleges

1.

Los Angeles Film School

78.6%

2.

Monroe College (N.Y.)

73.6%

3.

Pima Medical Institute at Tucson

73.0%

4.

Santa Fe U. of Art and Design

69.6%

5.

New York Film Academy at Los Angeles

69.4%

6.

SAE Expression College

68.9%

7.

Bob Jones U.

65.6%

8.

School of Visual Arts

64.1%

9.

International Business College at Fort Wayne (Ind.)

59.3%

10.

Neumont College of Computer Science

58.8%

Now, I must point out here something that may seem obvious. These high graduation rates, especially at the traditional non-profit colleges, shouldn’t be viewed in isolation and don’t, in and of themselves, necessarily tell you much about the educational quality of the school. Or stated another way, the schools on these lists don’t deserve all the credit for these high graduation rates! After all, these schools (at least the non-profit ones) are some of the most selective in the country so there’s a so-called selection bias going on here. These colleges only take well-prepared, high achieving students and the vast majority of these students come from families that highly value this type of educational experience. And, because these more selective colleges have so many applicants, they generally have plenty of more affluent families that can afford the high-ticket price and can afford to keep their kids in college for the duration of the four years. So, of course these students are more likely to succeed at completing college and graduating in a timely fashion.

By contrast, colleges that have more open enrollment, that take more risks on less prepared students are naturally going to have a lower graduation rate. But that doesn’t mean that some of those schools with less impressive graduation rates necessarily provide an inferior quality of education or an inability to graduate your child on time.

Don’t college grads make more money?

There are plenty of studies and analyses that show that those who have more education generally enjoy lower rates of unemployment and higher employment income. The graphic in Figure 1-1 clearly shows that those with higher levels of education reap considerably higher wages from work and lower unemployment rates.

Source: U.S. Bureau of Labor Statistics

FIGURE 1-1: What higher education means for earning higher wages and having lower unemployment.

There’s no question that education is a good thing and can develop your brain, critical thinking skills, interpersonal skills, etc. What jumps out at me from the graphic is that it looks like there’s value in completing high school, completing college if you’re going to attend and possibly considering an advanced degree. But that doesn’t mean that all education, or formal education, is worthwhile regardless of the cost. You should always consider the expected cost versus benefit or the return on the investment since attaining a college degree takes a good deal of time and money.

Another important point about Figure 1-1 — the “income premium” associated with college (compared with a high school degree) peaked in the year 2000 and declined about 10 percent over the next 15 years. College costs of course continued rising rapidly over this period further undermining the potential value of a college degree.

Parents and families should also be aware of the research report entitled, “Is College Still Worth It? The New Calculus of Falling Returns” by William R. Emmons, Ana H. Kent, and Lowell R. Ricketts, published by the Federal Reserve Bank of St. Louis Review, Fourth Quarter 2019. That report found:

“The college income premium is the extra income earned by a family whose head has a college degree over the income earned by an otherwise similar family whose head does not have a college degree. This premium remains positive but has declined for recent graduates. The college wealth premium (extra net worth) has declined more noticeably among all cohorts born after 1940. Among families whose head is White and born in the 1980s, the college wealth premium of a terminal four-year bachelor’s degree is at a historic low; among families whose head is any other race and ethnicity born in that decade, the premium is statistically indistinguishable from zero. Among families whose head is of any race or ethnicity born in the 1980s and holding a postgraduate degree, the wealth premium is also indistinguishable from zero. Our results suggest that college and postgraduate education may be failing some recent graduates as a financial investment.”

You can read this study at: https://files.stlouisfed.org/files/htdocs/publications/review/2019/10/15/is-college-still-worth-it-the-new-calculus-of-falling-returns.pdf.

SUCCESSFUL PEOPLE WHO NEVER GOT A COLLEGE DEGREE

You’ve surely heard of a number of “successful” people who accomplished significantly without a college degree. This would include folks like Michael Dell founder of Dell Computers, Steve Jobs founder of Apple, Bill Gates founder of Microsoft, John Mackey founder of Whole Foods Markets, Travis Kalanick founder of Uber, Larry Ellison founder of Oracle, performers Russell Simmons and Ellen DeGeneres, fashion designer Anna Wintour, and food guru Rachel Ray to name a few. These folks obviously are outliers in terms of their high level of professional success and associated financial earnings.

And there are plenty of lower profile people who have done quite well for themselves without a college degree including some plumbers, landscapers, dental hygienists, MRI technologists, commercial pilots, physical therapist assistants, respiratory therapists, air traffic controllers, transportation inspectors, diagnostic medical sonographers, electricians, construction managers, licensed practical nurses, web developers, elevator installers, radiation therapists, massage therapists, medical assistants, firemen and police officers. I chose to highlight some of these occupations because they are populated with relatively high numbers of people without a college degree.

Now, this is not in any way to suggest that the majority of people or your kids should bypass college! Each person’s situation is unique and different. But the point is that there are many paths to career success and some of those paths include going to college whereas others do not.

Clearly, there’s likely to be value in completing a college degree and getting a degree from a program with a good reputation and track record for graduates with that type of degree. Conversely, those who don’t complete their degree or who get a degree from a program with a subpar or mediocre track record will probably get a poor return on their invested education dollars.

In Part 3 and especially in Chapter 8, I discuss the increasing numbers of shorter term and lower cost alternatives to traditional four-year colleges such as bootcamps, apprenticeships, trade schools, last mile programs, etc. The best of those programs have well-documented and impressive track records for the employment and compensation of their graduates.

Mushrooming student debt and its underlying causes

Why does college cost so darn much?

Don’t plenty of schools pack a few hundred students into a lecture hall? That can’t be too expensive, right?

Well, not so fast! Look at the course offerings at most schools and you will be surprised at how many courses they do offer and the fact that most don’t have a large number of students enrolled. Also, only $0.21 out of every college tuition dollar is actually spent on teaching.

So where are colleges and universities spending their money? On administrators, the number of whom has grown twice as fast as the number of students, on facilities and athletics, and schools prioritizing research over teaching.

Colleges and universities have increased tuition prices at twice the rate of inflation while jacking up room, board, and student fees at four times the rate of overall inflation. Ouch!

Student debt is a major problem for many college students. The total amount of student loans outstanding in the U.S. has surpassed $1.5 trillion, making it the second largest form of debt outstanding by consumers, exceeded only by mortgage debt. And, more than one million student loan borrowers default annually on their loans and only 57 percent are current on their payments.

According to LendEDU’s analysis of student loan debt figures at nearly 1,000 four-year private and public higher education institutions across the United States, the average graduating borrower received their diploma and left campus with $28,565 in student loan debt. That’s a pretty hefty number.

According to the National Association of Colleges and Employers (NACE), the average starting annual salary for college graduates is about $50,000. These averages can be deceiving and not super relevant to individual situations. For example, some college grads complete their degree with more debt than the amount of their starting annual salary. Conversely, some have little to no debt and a salary a good deal higher than average.

Looking at How College Pricing Works

Now, time for some better news. Despite having dropped a bunch of respected college names on you earlier in this chapter that most people believe are “top” or “premier” colleges, I’m not suggesting that you need to attend a brand-name college and spend hundreds of thousands of dollars for your child to get a great higher education. You and they don’t have to do that in order to find a fulfilling job or career with good compensation.