Alleviating the Stresses of an Expensive College Tuition

By: Claire Bendig, Recent Graduate of Chapman University

Tuition loans can be a cause of student stress, especially with enough interest accrued to require repayment well into the future. Difficult to evade, only determined hard work will eventually pay them off.

As a college graduate myself, we enter a world of endless responsibilities, unsure of what to do. The debt that is carried over from an undergraduate degree is astronomical. education-2385117_1920According to Student Loan Hero, a blog that guides indebted students, “Americans owe nearly $1.3 trillion in student loan debt, spread out among about 44 million borrowers. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year.”

There are ways to alleviate the stresses of an expensive tuition. FAFSA, or Free Application for Federal Student Aid, is a government form that qualifies students for aid based on their particular financial situation.  The problem for many is the tedious application process. It has more than 100 questions, including inquiries about parents’ assets, taxes and net worth.

In March 2016, a group of seven students went to Washington, D.C., to help pass a bill to streamline the FAFSA process. Patrick McDermott was among those who attended. As a student working with college freshmen in dealing with these issues, he says, “The FAFSA process could be made a lot easier by not only implementing the IRS direct transfer as is done now, but by streamlining the amount of information required in determining the monetary awards.” (The IRS Data Retrieval Tool has since faced security issues, causing it to be shut down for now)

Even though the application can be overwhelming for students to fill out, it is well worth the effort to gain access to guaranteed school funding.

Credit unions can help students with financial debt as well (along with other perks like reduced transaction fees, online banking, debit and low-interest rate credit cards). Organizations such as Credit Union Student Choice lay out credit union options for students and mentor them on how loans work and ways to evade interest penalties. When joining a credit union, if the student has a co-signer, they can get a lower interest rate.

In line with their mission to help others, credit union loans will often allow the co-signer to be without obligations if the student has been consistent with payments for the past 12 months. Toni Jaroszewicz, Detroit Branch Manager of Lake Trust Credit Union says, “We offer credit counseling and work with our young folks to help get them on the right track to pay down debt and implement plans that will lead them to financial success.”

Counseling is the educational foundation that is needed to better understand the expectations of the college graduate, and because of the member-status of account holders, credit unions are willing to provide more financial guidance than they are likely to find at banks. My peers and I have graduation fears because so much is unknown. By expanding practical education, we can enter the professional world more confident in our abilities to succeed.

Claire Bendig is a contributor to the Millennial Voice column for CO-OP Financial Services, a financial technology company for 3,500 credit unions and their 60 million members. She is a recent graduate of Chapman University in Orange, California, with an Emphasis in Creative and Technical Writing.

College worries your customers: Here’s Why & What you can do to help them

When it comes to finances, what do you think are the two biggest areas of concern for adults with children?

Here’s what an April 2015 Gallup poll said:

  • More parents worry about how they are going to pay for college than they do about their own retirement.
  • 73% of those surveyed said they worry more about college than their retirement.
  • Even parents making $100,000 or more are worried.   61% said they were worried about having enough money to pay for their children’s college.

Grandparents are also worried and are helping their grandchildren like never before.  A 2014 Legg Mason study:

  • 2/3 of grandparents whose grandchildren are planning to attend college in the future are chipping in to financially support their education.
  • Nearly 40% contribute to the costs for grandchildren currently in college.

Why is everyone worried?

  1.  They may still have their own student loan debt and are concerned about how to help their children.  In 2013,  seniors age 65 and above totaled $18.2 billion, a 650 percent increase from $2.8 billion in 2005.  On the other end of the spectrum, Fidelity’s 9th Annual Study for College Savings told us that56% of Millennial parents are still paying on student loans.
  2. The sound bites and statistics are scary.  By the end of 2015, student and parent college debt rose to almost $1.3 trillion.  The average debt for students graduating with a bachelor’s degree is $37,000.According to the Brookings Institution, the typical new graduate is likely to devote 14% or more of his or her paycheck to student loans. For those with fine art or therapy degrees, it’s closer to 20%.
  3. The cost of college continues to increase.  According to the College Board, the average cost of a four-year, private college, including room and board has climbed 53% in the past 10 years to $43,921. Many cost over $65,000.  But it is also true that many are priced far below the average. And the sticker price is not what families usually pay.
  4. Parents feel overwhelmed and guilty that they are not doing enough to help their children.  Few feel that they can save enough.  So they do nothing.

Here’s what you can do to help them:

  1. Be the source and conduit for factual information, tools and services to empower families to take action: Here are some important — and often overlooked — points:
    • Saving for college will likely be only one part of the total college financing plan — but is the element that can be acted upon very early in the life of a child.  Saving a little now can have a significant impact later.  Read about how the “Rule of 70” simplifies compound interest for your customer’s needs.
      • 529 College Savings Plans are very effective for  many families:
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        Learn More: Contact Invite Education

        529s are very flexible; provide tax advantaged savings; permit grandparents, parents and others to contribute to to each child’s college savings plan; allow up to five years of gifting up- front and offer penalty-free opportunities to switch beneficiaries.

      • Currently, there are more than 12 million 529 accounts open in the U.S. with over $250 billion — that’s 1/4 of a trillion dollars — saved for college.  So we’re making some good progress in the savings area.
  2. Leverage Invite Education’s platform to provide a value added service to your customers while growing assets under management and cross-selling products to grandparents, parents and students

Invite Education’s College Center is a cloud-based tool that is seamlessly added to your public web site or to select clients who need the most help.  You likely do not have the expertise on staff to update and keep college related information current and fresh.  Invite Education offers a complete planning platform that’s perfect for families managing the college process as early as Pre-K all the way to senior year of high school.

Younger families are guided to a savings plan that is right for them to help families take control of their future plans. Along the way, as the student progresses grade by grade, admissions and testing criteria are highlighted in preparation for the academic competitiveness involved.  As college nears, scholarships and financial aid are highlighted along with cost analysis and comparisons to help finalize school choice.  Finally, after all other funding avenues have been secured, student lending insight is provided to help families make wise decisions about debt.

It’s good business to help your customers — and their children, (aka your future customers!) — with this very critical need.