How to Handle the Cost of Higher Education: 2 Major Questions

 

On average, millennials who physically attend college will leave their school $29,800 in the hole. That’s a $16,000 jump compared to the previous generation, who averaged $13,000 of student loan debt after graduating in 2004. While this number is troubling, it’s just the tip of the iceberg. With seemingly no sign that this trend will reverse any time soon, a couple of questions become clear.

  • Is college worth it?
    • Yes, it is. Despite rising costs, the social stigma of a college degree alone is worth the price once you enter the job market (depending on the line of work you are looking to go into). College also provides a number of unique educational, social, and professional experiences that help develop professional prospects and define personal goals. While the cost is great, a college degree can be akin to gold (in value and weight) after graduation.
    • No, it is not. The tradeoff simply isn’t the same as it used to be. Gone are the days when you could pay for an entire semester with paychecks from a part-time job. Even if a degree is a hot commodity in your job market, it is probably not worth nearly $20,000 in debt right out of the gate. Building a resume through real life experience can set you up ahead of your peers while idyllically leaving you entirely out of debt.
  • Is it possible to further my education without signing up for a lifetime of debt?
    • Knowledge is expensive, but it’s also an investment in yourself. We respect the courage it takes to embark on that journey and are always ready to help make it happen. As a First Financial member, we can help you shoulder the burden of financing education related expenses and supplies with a personal loan.*
    • If attending college isn’t in the cards for you or if you’re just putting it on the back burner for a little while, there are still cost-effective options out there for you. Many students are considering forgoing the traditional higher education experience altogether. The verdict is in and the latest trends show that enrollment in online classes is on the rise from traditional pursuits, like university master’s programs to new platforms, like MasterClass. Combine that with the undeniable practicality of technical schools – and it’s easy to see that there have never been more opportunities for alternative learners to chart their own paths and spend less money doing it.

The Takeaway

Getting a college degree is paramount in a number of professional fields. This is a fact that will remain true for the foreseeable future. In some cases, it is absolutely necessary to take on those costs. Luckily for you, when this is the case, you have a dedicated team of financial experts at your disposal to help you make the numbers work for your budget. If you’re ever feeling overwhelmed about financing the cost of higher education, talk to one of our experts before you make your next move. From the campus to the keyboard, we are here to help you make it happen!

*APR = Annual Percentage Rate. Actual rate will vary based on creditworthiness and loan term. Subject to credit approval. A First Financial Federal Credit Union membership is required to obtain a Personal Loan, and is open to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties. A $5 deposit in a base savings account is required for credit union membership prior to opening any other account/loan. Federally insured by NCUA.

College Saving Secrets

college-savings-plansThese days, it’s probably a toss-up who’s more nervous about college: you or your child. Graduates leave school with an average of $26,600 in debt — but you don’t have to leverage your 401(k) if you want to contribute. All it takes is a little planning and help from your teen to cut costs and minimize loan payments.

Do Prep Work

Assess your retirement savings. Invest in yourself first: Start putting money into a 401(k) or Roth IRA before contributing to your child’s college bills. “You can’t take out a loan for your retirement,” says Carol Stack, coauthor of The Financial Aid Handbook. “And you don’t want to end up relying on your kids to support you.” Use an online calculator like the ones on our website to find out how much you should be setting aside each month. By keeping your savings goals on track, you may have more leeway to fund your child’s education.

Discuss your contribution. It’s not easy to talk about finances with your children, says Stack, but if your teen is counting on you to help pay for school, he or she has to know whether and how much you plan to give each year. First Financial provides a College Savings Calculator, along with many other financial calculators, than can be found hereYou’ll also want to check our blog post about the new standards for teaching your kids about money.

Save without budgeting. If you’re maxed out on what you can set aside for college, consider signing up for a rebate plan. Sallie Mae’s Upromise program offers as much as 8% back on your purchases, which can then be applied toward tuition. Before your teen enrolls in school, the rebates can be transferred into a 529 plan; after your child graduates, the reimbursements can be put toward loan payments. (Grandparents and other relatives can also sign up).

Have “the other talk.” Choosing a university requires thought and planning. Most teens don’t decide on their top colleges until junior or senior year of high school, says Scott Weingold, cofounder of College Planning Networking. Even then, many make choices based on where their friends are going. “Starting at the beginning of their sophomore year, talk to them about what their strengths and interests are and what they like to do,” he says. “College is obnoxiously expensive enough — now add on that it’s not uncommon for kids to take up to six years to graduate.” So get them thinking in advance about schools, majors and potential careers.

Win the Scholarship Game

Start early. Even if your teen is years away from college, they should apply for scholarships. “You’d be surprised how many there are for elementary school students,” says Mark Kantrowitz, publisher of FinAid.org. Some examples are spelling, art and writing awards — not to mention a seriously lucrative $25,000 Jif prize for the most creative peanut butter sandwich. Find a list of possibilities at finaid.org/age13. Some school assignments (like a science fair project or an essay) can even qualify.

Search online. College students earn an average of $2,800 in scholarships, according to one report, making it among the best ways they can save for school. “Every dollar they are awarded is a dollar less they have to borrow,” says Kantrowitz. The best sites include ScholarshipAmerica.org, Fastweb.com, and CollegeBoard.org.

Here’s how your child can maximize their efforts:

  • Rule #1: Fill out the entire profile. Scholarship “matching” sites find awards for teens by asking them to complete detailed questionnaires about themselves. Answering all the questions, including the optional ones, says Kantrowitz, will yield more results.
  • Rule #2: Apply for (almost) everything. If a student isn’t eligible for a scholarship — let’s say, they just barely missed the GPA requirement — then they can skip it. Otherwise, your teen should pursue all potential matches, says Kantrowitz. “Many applications are essays that require personal statements. The first half dozen or so will be labor intensive, but after that kids can start recycling answers,” he says. Teens should set up a Google Calendar with due dates for all scholarships and make sure they’re aware of how much time they’ll need to complete the paperwork.
  • Rule #3: Beware of scams. The biggest red flag is being asked for an application or processing fee. “Legitimate providers want to give you money, not take it from you,” says Kantrowitz. “Never invest more than a postage stamp.” Also be wary of sites that ask for personal information, like a bank account or Social Security number.

Encourage community service. Schools aren’t the only organizations that value teens who volunteer. “It looks good to many scholarship providers too,” says Lauren Segal, CEO of Scholarship America. “And it can be the tipping point for winning.” Keep in mind that colleges like to see a history of service — not just a few stints started in junior year.

Go door to door. If they’ve exhausted paper and online searches, students can visit local organizations like the Rotary club, church groups and nearby businesses to ask about scholarships. You and your spouse should also check with your human resources departments: “I’m amazed at how many companies offer grants to the children of employees,” Segal says.

Keep your teen’s Facebook account appropriate. According to a new report, about one in four scholarship providers check their finalists’ online profiles. “Companies want to find students who reflect well on them,” says Kantrowitz. “They search for inappropriate behavior and offensive language, and even look at students’ natural writing style to see whether their parents probably wrote the essay for them.”

Strategize Your Search

Target a range of colleges. Include a few options that won’t leave your family or child with too much debt. “You don’t want your teen to fall in love with a school they can’t afford,” says Stack, who points out that the number of students defaulting on their loans within two years after graduation is now 9.1%. (One reason: It’s becoming harder for current graduates to find jobs). But you don’t necessarily have to rule out all private schools, which may have more money to offer than state ones, says Weingold. “Some colleges have generous aid-giving policies, so you never know what you’ll get until you apply,” he says. To estimate how much tuition and living expenses will come to — and to get an idea of how much assistance your family may receive — visit each college’s website and look for the “net price calculator”; all U.S. schools are now required to post one.

Barter for a better financial aid package. You don’t have to accept a college’s first offer, says Weingold. Call the school’s financial aid office and explain why your family still can’t afford the expenses. If your teen has received a better package from another university, write an appeal letter, including the offer, to her first-choice school, which may match it.

Cap your borrowing. Ideally, your child’s student debt shouldn’t be higher than their yearly starting salary, says Stack. The average income for college graduates is about $42,000 and varies depending on career; visit naceweb.org to see a range of salaries. Another strategy: Keep debt below $31,000, which is the maximum you can borrow over a four-year-period through federal Stafford loans. Unlike private loans, government ones have fixed interest rates and more safety nets, plus they offer some income-based repayment plans and loan forgiveness.

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