June 9, 2022

College: Financial Investment Or Financial Bust?

Students are strongly encouraged to attend college after high school. And that is about where the conversation ends.

Students are strongly encouraged to attend college after high school. And that is about where the conversation ends. The financial realities of college and degree choice is rarely, if at all, discussed. These days it takes more than just “so, where do you want to go and what do you want to major in” to make a sound decision. We need to be helping teenagers take a look at the financial investment for their particular situations. How much aid they may receive based on their situation, the scholarships at the schools they are considering, the tuition cost for their school of choice as well as degree of choice, what amount of debt can they expect upon graduating, and how much income they are likely to make once in their field. 

Knowing and evaluating these things is more important now than ever. Let’s take a look at a few facts first. Then I want to introduce you to someone who has experience in this particular type of evaluation to give you an inside look at how to calculate the financial investment. 

Approximate average cost for:      [ ValuePenguin.com ]

  • Private tuition - $50,900
  • Public Out-of-State tuition - $40,940
  • Public In-State tuition - $25,290
  • Community College - $17,580     
  • Financial aid - not including loans - $2,000-$12,000  [ The National Center for Education Statistics ]

The cost of tuition has drastically increased compared to the increase in wages over these past few decades. The chart you see below from procon.org illustrates this in more detail. This means two things. While in the 1960s and 1970s a person could earn their tuition money with a summer or part-time job, this is no longer the case. It is now a necessity for most students to seek loans. The Institute for College Access & Success tells us that the average student borrower graduates with nearly $30,000 of debt. This drastic increase in tuition along side only a slight increase in wages also means that the return on investment has decreased significantly as well. This combined with rampant predatory lending has made it nearly impossible for many to come out of the hole they are in when they begin their lives and careers. (If  you are a recent grad who is living with family after college, I recommend this guide on how to save up to move out.)

Valuecollege.com not only reiterates the statistics you see above, they also look at these statistics in various countries around the world. It may surprise you that over 40 countries around the world offer free post secondary education, including: Germany, Denmark, Greece, Argentina, Kenya, Morocco, Egypt, Uruguay, Scotland, and Turkey. Many countries even offer courses in English allowing international students to benefit from their free tuition. Some of the best places for Americans to do this are: Brazil, Germany, Finland, France, Norway, Slovenia, and Sweden. You would still need to cover living expenses, but tuition would be free.

So, you can see that to attend college here in the United States, one needs to think beyond just where do I want to be and what do I want to do. We should be helping our students learn how to calculate the return on investment for themselves. I recently interviewed Christine Perez who has experience helping families make this kind of financial evaluation. Pair this quick guide on how to pay for college with the information that Christine shared with us and you'll be off to a good start.

Here’s what Christine had to say:

Welcome Christine!

Tell us a little bit about the financial experience you have.

I began my career advising prospective college students at Full Sail University as an Enrollment Guide.  At Full Sail University, I helped students navigate the financial aid process including completing the FAFSA (Free Application for Federal Student Aid) and applying for student loans and grants.  Then, I moved on to a private firm, College Planning Experts, as a Financial Aid Specialist.  There, I worked with families, analyzed their finances and conducted various cost comparisons for prospective colleges. Eventually, I made a career shift and began working in Development in the nonprofit sector.  At CADA, the Council on Alcoholism and Drug Abuse of NWLA, I worked as a Development Director and was then promoted to Chief Administrative Officer.  In addition to fundraising, I worked closely with the Executive Director to ensure successful operation of the agency.  Today, I work for Camillus House as a Development Officer.  As a Development Officer, I write grants and solicit financial support for the agency. The common thread in all of these positions is all involved managing and analyzing financial costs.

Is there a straightforward way to analyze one’s investment? The cost of college vs earning potential?

"I tried to get students to understand the lifestyle their career would provide."

As a rule of thumb, I would guide students to understand that their choice of major played a big role in their career post college.  More importantly, I tried to get students to understand the lifestyle their career would provide.  For instance, if they planned to attend school for film, were they aware of the working conditions, hours, lifestyle, earning potential etc.?  If they craved stability and a routine schedule, a degree and career in film may not be the best option for them.  Once you add a price tag of $80,000 for your education (not including living expenses), is that major and school of choice worth the investment? There are so many factors to consider when choosing a major and school.  College is a huge investment that should not be taken lightly.  I would always advise students to look at all angles of their decision (cost, location, major, career choice) and make sure they know what they are "buying" for the next 30 years. 

Did you work with high income families as well as low income families? Are there other companies around the country that do what yours did? In other words, about how much access does the average American have to the kind of financial guidance you all offered?

In both Financial Aid positions, I worked with families of all income levels.  Unfortunately, the overarching issue with 99.9% of the families was they were unprepared. Even those that saved money found it more expensive than anticipated or their child had little to no idea of where they wanted to attend or what to do.  Most families often would assume that there was a plethora of grant funds available.  However, grants and scholarship are not as expansive as one would hope.  In a nutshell, to receive a decent amount of "free money," students need to come ABOVE the basic entrance requirements for scores and GPA.  Free money is also available if the student's family is lower income.  While the amount of financial aid will vary from student to student, the bottom line is, most families are unprepared for the cost.  

Additionally, most families and students do not have access to the necessary financial aid guidance.  In a perfect world, students would begin exploring collegiate options, majors and cost comparisons as early as the 9th grade.  In my experience, it takes a long time analyzing and weighting options before one can make such a big financial decision. 

In your experience, how much financial knowledge about college did your clients have when they first came to you? In other words, did you have to educate them on everything including basics of financial aid?

When students came to me at both jobs, most were very unprepared.  Most assumed the costs wouldn't be as high as they were.  Also, I found that thought into what they wanted to study was limited at best.  I would often talk through the financial aid application and the different types of loans.  Those that received scholarships were still left with a hefty portion to finance.  I recall once sitting with a student and trying to explain to them that they would have a minimum of $80,000 in loans when they would graduate.  The student didn't even flinch or think that was a big deal.  We spent 20 minutes together until they did.

Are there particular instances that stand out to you? The good, bad, and ugly?

In my career, I have had many interactions with multiple students. Some received lots of financial aid, knew exactly what they wanted, and their parents had money set aside for college.  Unfortunately, that "type" of student was the exception and not the rule.  Most students were flippant at best, "sort of" wanting to go to this high end private school, because it seemed "nice." Most, also had no clue of what they wanted to be when they grew up, something I would argue most adults still struggle with.

One student that stood out to me was “Matt.”  Matt enjoyed theater as a hobby and made some money doing it while still in high school.  With limited thought, he decided he wanted to major in theater and become a professional actor.  After countless applications and auditions, Matt chose to attend the prestigious NYU.  Even though he was offered a generous financial aid package, he and his family were still left with $30,000 in expenses to cover for the first year.   After one semester at college, Matt realized that he didn’t want to be an actor or spend 14 hours a day rehearsing, acting and analyzing scripts.  Shortly after, Matt made the difficult decision to transfer back to California, his home state, attend a local college and major in engineering.  I like this story because even though Matt’s change of heart cost his family some money, he discovered and explored what he wanted to do and made that move.  The thing to take from this story though, is if Matt and his family began talking and exploring collegiate paths early on, he could have discovered then that a career as an actor didn’t match with his true desire.  And, he could have his family saved some money and hassle. 

Would the guidance you provided be something that could be easily adapted into a year or semester long class at a high school?

"All around, students NEED to complete cost comparisons when looking at schools."

A semester of college preparation would be great for high school students.  It would be ideal for them to explore career paths as well as the cost of various colleges.  I found a lot of students needed help exploring possible career options and what majors would help them get there.  All around, students NEED to complete cost comparisons when looking at schools.  Time and time again, I witnessed students begging their parents to let them attend a school that cost $40,000 a year with little to no reason to warrant the price tag for their desired career.  Unless a student was working towards the medical field or law degree which could result in higher income, it simply didn't make sense to get into THAT much debt.  When you are going to make $40,000 a year, it’s hard to rationalize getting into $80,000 of debt for a Bachelor's Degree.

Is there anything that you would like to add?

The most important thing that students and families can do is begin talking and exploring potential career paths.  Having an idea of what you want to do takes time and soul searching, something that won’t just happen overnight.  Once that piece is taken care of, families can then explore college choices and make more educated decisions.

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WRITTEN BY EMMA B. PEREZ

CAREER COACH FOR TEENS AND YOUNG ADULTS
Founder of Be On Purpose, LLC, Emma is a mentor who specializes in helping teens and young adults craft who they want to be and how they will impact the world.

As the author of "What's the Point of School: Ed Transformation, A Matter of Life and Death" Emma is pushing the education transformation movement forward. Her work seeks to redesign our school system from its industrial structure to one that serves our students by giving them the tools they need to thrive in all areas of their lives, internal and external. 
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