THE ALGEBRA OF PAYING FOR COLLEGE
This is not going to be a popular article. I am going to say that right off the bat. I am going to talk about things, and give advice that flies in the face of what high school guidance counselors love to tell kids. I’m going to give the advice that most people are too afraid to give because they don’t want to hurt any feelings.
College is expensive. The average cost for a year of tuition at an in state public university in 2021 is just under $10,000. To make matters worse that price is rising at an average rate of 8% per year. That puts the starting price of a four year education at about $40,000. That figure is before you start factoring in things like a dorm room, food, books, a car, and all of the other living expenses that come with moving away from home for the first time.
If you look through google, about how to pay for college you will find countless articles on scholarships that can be earned, grants that can be awarded, and even more links to student loan companies. You can find in formation on college savings accounts, and prepaid tuition programs. What you won’t find a lot of is advice about controlling the cost of college.
The current narrative in America, and that which is being taught in most high schools, is to apply to the schools you would love to go to, and then figure out how to pay for it (often times by using student loans. After all it’s good debt..). The problem with that logic is that it ignores the biggest variable when it comes to paying for college. COST. My recommendation to all parents is that rather than choosing a school and solving for cost, they should reverse that algebra. Determine what can be afforded, and then solve for school. I outline the steps I recommend to parents and students below.
1. DEFINE YOUR BUDGET
There are a few sources of funds to pay for college and it is important to consider all three when laying out your budget.
Savings - Any college funds from parents, grandparents and students. This can be 529 accounts, savings bonds, or leftovers from a summer job
The student’s income. There is substantial evidence that working 10-20 hours per week during school actually improves grades
Parents ability to pay - This is the amount parents can contribute from their own budgets to helping.
Scholarships
Using these primary sources of funds determine what the yearly budget for schooling will be. You do that by dividing any savings by 4, and adding tit to the amount the student and parents can contribute yearly.
You may notice that this list does not include student loans. I will be clear on this. I EVER RECOMMEND STUDENT LOANS. I know that is a very unpopular opinion. I know how many people will argue tooth and nail, that college can’t be afforded without parents helping, or student loans. IT CAN. It just might not be the college experience you always dreamed of.
2. DETERMINE COSTS
The difference in cost between an in state public school, and a private school is over $25,000 per year. Put simply, the reason I tell people to focus costs, is because it can literally be a $100,000 decision. There is also very little evidence to support that a private school returns any higher future income. (The biggest determiner of future income is the chosen major)
Tuition is just a pice of the puzzle. You will also need to do your homework on what costs of living will be at each of the schools in consideration. Can the student live at home or will they need a dorm? Will they need a car? Are they required to buy a meal plan? All of these things factor in to arriving at a cost number.
The ultimate goal here is to find a school, that when all the expenses are added up, still falls within your predetermined budget. If you aren’t able to find one, move on to step three. Or, if you do find one, but still want to consider looking for even more savings, move on to step three as well.
CONSIDER COMMUNITY COLLEGE
To some people that heading will sound like a dirty word. Community colleges over time gained a reputation for being second rate, back up schools for those who couldn’t get into “real” school. That reputation needs to change. The biggest opportunity in America for fixing our student loan crisis already exists, and it is community colleges.
The average price for a year of tuition at a community college is a tad over $5,000. Thats about half of the cost of a public in state school. Most Americans live within driving distance of a campus, making it possible for students to live at home, and for the most part, the credits earned during two years of community college can be transferred to the majority of public four year Universities.
If you are a student who is not fortunate enough to have help from parents, this is the route you need to go. Working full time in the summer, and part time during the school year, even at just $10 per hour, it is possible to earn about $15,000. If you are living at home after paying tuition, that leaves you with another $10,000 for expenses. If you are frugal, you could put away about $5,000 of that surplus into savings per year. If you do that for two years, you will have $10,000 saved. $10,000 just happens to be the exact amount you will need to cover the difference in tuition for your final two years at a University.
It will not be fun. You will not have the true “college experience”. You will be tired. You will work hard. But, you will come out of school with a degree, and not student loans. You will be in the position of watching countless peers send chunks of their paycheck every month towards their debt. You will put that chunk towards your retirement. You will see peers take public service jobs in the hope of getting loan forgiveness. You will take the job you love. You will see your peers struggle to buy houses because they have an existing debt loan. You will have savings for a down payment.
Graduating college debt free will be one of the most beneficial things you ever do. It is not easy. But it is possible