Hooray — Finally. For the first time that they can remember, most high school seniors (and their families) now have the power in the college selection process. With college acceptances having been received and the May deposit deadline looming, the shoe is on the other foot. Applicants have morphed into accepted students and most colleges are now the ones sweating. What will their yield numbers and net tuition dollars look like once the Class of 2020 forms? Seniors are very close to the end of a long journey. However, as Yogi Berra said: “it ain’t over till it’s over.” And it ain’t over yet.
Here’s what high school seniors and their families should consider:
- Which college is the best academic and social fit? To get to this point, the college made some favorable impression but now it’s time to dig in a little deeper. This is the time for a revisit, discussion with a current student or a little more research into majors offered, internship opportunities, job placement rates, social activities — is greek life important? — and other areas of student interest. Can the student visualize her/himself on the campus?
- Which college is most affordable? For some, this may be the first and most important question. No more theory about paying for college, it’s nut cutting time. In the summer, a tuition bill will arrive. For some with lots of merit and need based aid, the bill may be small or zero. For most, the cost of attendance less free money (grants, scholarships and gifts) may leave a gap that needs to be filled. Take that gap amount and reduce it by the amount of savings that can be used for the first year and any other gifts or projected income to be kicked-in. Parents may allocate some earnings, while students may contribute from a work-study or a part-time job. Now that all of the free and earned money had been exhausted, the college with the smallest remaining gap is arguably the most affordable. If a gap still exists, you will likely need to borrow from the federal government or a private credit student loan lender. Here are a few important tips when it comes to borrowing student loans:
- Borrow as little as possible. Whatever is borrowed needs to be repaid with interest. And remember, college may last 4 or more years. Think seriously about how much will likely need to be borrowed over the course of the entire college experience, not just the first year.
- Pick a loan that makes the most sense for your situation. The federal Direct Loan program is most often, not always, the very best for student borrowers. There are up-front fees but the interest rates are relatively low and for lower-income borrowers, the government pay the interest while the student is in school. After graduation — when it’s time to begin repaying the loans, all federal borrowers are eligible for repayment plans that are more favorable than private credit loan plans. There are also parent loans available from the federal government (PLUS Loans) and from private credit lenders such as banks, credit unions, finance companies, and some colleges and state agencies.
- Figure out your monthly payment NOW — before you take the loan. How much will the required monthly payment be once it’s time to start paying? Repayment usually begins six months after separating, i.e. graduating or leaving the college early. Does the projected monthly payment (most loans require minimum monthly payment of $50) make sense based on what the monthly earnings might be? The Bureau of Labor Statistics and others offer earnings statistics by job and sometimes by major. Look them up. One rule of thumb is that college loans should not be more than 15-20% of income. And remember — there may be need to borrow for more than one year. DO NOT PUT YOUR HEAD IN THE SAND AND THINK THAT EVERYTHING HAS TO WORK OUT FAVORABLY. BE REALISTIC. WILL THE POST-GRADUATION JOB PRODUCE ENOUGH INCOME TO PAY-OFF THE DEBT? No one starts out with the goals of becoming the next headline of the poor student who took a ton of debt and wound up with a low paying job.
The pot of gold at the end of the rainbow looks like this: a student graduates from college in 4 years having enjoyed a great campus experience with a job offer in hand and manageable debt that will enhance their credit rating as they make repayment. For a nation that put a man on the moon in less than decade after President Kennedy’s inspiring call to action, the goal of college graduates without mountains of debt does not seem to be much of a reach.
High school seniors should enjoy these heady days of having the power on their side but should use them wisely to set the stage for great success in college. The decision high school students and families make in the next 20 days may well determine if the promise of their college dreams become reality. Those who pick an affordable college that offers the best academic and social fit will be on the road to success.