Strategies to help reduce the high cost of college
(Part 1): Turning the College Crisis into an Opportunity
Chances are, if you’re reading this article, you may be a parent, high school student or even grandparent of a student and concerned about the seemingly insurmountable cost of college that is almost upon your family. If you’ve browsed the internet in search of answers, you’ve probably seen articles that may have confused you and even some advice that contrad
icts other advice. In this series, I hope to show you that making college more affordable is quite possible for many families. It’s not rocket science, nor magic… but, it does often heavily rely on knowing the ins-and-outs of the financial aid and college admissions process. In these articles, we’ll cover not only the problems… but the solutions, too. I’ll discuss topics like “how to graduate college in 4 years” (rather than the national average of 5.5), mistakes to avoid in planning, financial aid myths, how different colleges make financial aid decisions, 529 Plan “praises and pitfalls”, cost cutting strategies that can help shave thousands off the cost of college, and how sometimes students can get a private college education for about the same as that of a public school.
But, before we dig deeper into these areas, it’s important to set the stage and understand what I consider the “College Crisis.” Unfortunately, there are multiple problems with college affordability, today. Many, you may have already encountered. In fact, less than 50% of families are saving for college (Sallie Mae, “How America Saves for College 2015”). The number is actually closer to 48%, and I would assume even less are actually planning for their child’s post-secondary (ie. college) education. So, CONGRATULATIONS! By even reading this article, you may be well ahead of most families!
Though the percentage of families saving for college is the lowest in years, I think that most families realize our kids are the future (I have four of them myself – all currently between elementary and college years). Today’s students are future educators, decision and policy makers, health care workers, scientists and engineers. If you’re like me and in your 40’s (or older), then you realize that this young generation is important to our future. They will be the ones who are taking care of us in the not too distant decades ahead. And the current college age generation, the Millennials, are a large group. It is estimated that they are as large, if not larger, than the Baby Boomer population (and much larger than Gen X). Why is this so important? For this young generation currently making their way through school and their early careers, I believe that a solid college education is even more important than ever. Their working careers will be more fierce, more volatile, more global and potentially last much longer than any generation that preceded them. With modern health care, it is quite possible that they may need to thrive in their careers well past the 45+ years that previous generations had to work. Changes to the future of Social Security and increasing life spans may have this generation working much, much longer.
So, up until now, college planning for your child may not have been high on your list. In fact, for many parents, concerns like dying before their children are fully grown, saving for retirement, and fear of job instability often rank higher than saving and paying for college. However, once your kid reaches high school, especially Junior or Senior year… that concern starts to work it’s way up the list! If you haven’t noticed, the average cost of a public college education is over $19,000 and a private college will run you, on average, over $42,000 (College Board – Trends in College Pricing 2015). In fact, college costs have been going up almost twice as fast as inflation!
In the late 80’s and early 90’s, I went to both public and private colleges (including graduate school). The total debt that I graduated with was a relatively small percentage of my first salary. However, I routinely see today’s students graduating with debt loads from attending college that are multiples of their first salaries… it’s an entirely opposite financial situation for these students, today! Yes, not only is their debt sometimes as much as I paid for my first house… some of their loans are often due within about 10 years of graduation (compared to the 30 years that I had to pay off my mortgage).
Why is this so? Well, let’s not kid ourselves. Colleges are in business to make money… they are not entirely altruistic. They need to be competitive in both attracting students, athletes, professors, researchers, administrators, etc. This comes all comes at a cost. I believe that this cost is over inflated for many reasons that are not always necessary… but that’s not the point. The point is that tuition increases have been dramatic over the past few decades and do not seem to be slowing down. The fact is, the tuition you pay for your student in their last year of college is most likely going to be significantly more than what you paid their Freshman year of college… probably about 12% higher!
Statistics from the NCES (National Center for Education Statistics) show that average graduation rates in four years are not only extremely low (around 38%), they are surprisingly low even after six years (only about 59%)… and many students never even graduate at all! So, I guess we can establish by those numbers that some colleges like to “educate” students, but probably don’t care much about “graduating” them.
All of these issues have culminated into the “College Crisis” that we now face. Many parents are attempting to figure out how to pay for their student’s higher education without hurting their own current lifestyle or future retirement. But, I don’t believe that fearing the process is productive to solving the challenges that most of these families will face. I believe there is a great opportunity, especially if you know how to navigate through the process. And, now that you know some of the issues and challenges, we’re going to cover how to make college more affordable for many families… hopefully yours included.
For example, less than 50% of families are saving or planning for college… so I’m going to show you how to plan correctly. I gave you the bad news on four year graduation rates, and the dismal prospects of graduating even in six years… so we will cover how to find colleges that seem focused on “graduating” your student on time and additional steps your student needs to take to help ensure you beat those odds. And, even though the cost of college is outpacing inflation… and most of our incomes, I’m going to help you understand how to find public and private colleges that may award your child significant aid packages.
So, this series of articles should not scare or intimidate you… it should energize you! By knowing the problems and challenges that you face… we can try to find the right solutions for those situations. It is very possible that your family can afford college without taking on a huge burden of debt, without significantly sacrificing your lifestyle and without compromising your retirement. In the next article, I’ll show you “how to increase the chance of graduating college in four years.”
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