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.

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Let’s help college students land on their feet like Fearless Felix

Meet “Fearless” Felix Baumgartner (“Jump” image from Flickr) – an Australian daredevil. Fearless Felix participated in the Red Bull Stratos Project. He rode a helium balloon into the stratosphere – 24 miles up and should be an inspiration for all of us to ask why all college grads can’t be more like him and land on their feet after their diploma hits their hand.Felix_Baumgartner_2013 Wikipedia

After saying,  “I’m coming home,”   Felix casually leaned forward to begin his descent from the high altitude balloon. And what a descent it was:

  • He was in free fall for 4 minutes and 19 seconds.
  • Reached a speed of 843.6 miles per hour – that’s Mach 1.25.
  • He caused a sonic boom – by himself – the first person ever to break the sound barrier without the aid of a vehicle.
  • He also came out of a death spiral. The engineers who modeled his free fall realized that at some point he would start spinning out of control, which had to be stopped in order to deploy the parachute on his back. So they taught him how to right himself if this were to happen.

Watch the You Tube videos of this. It’s mesmerizing and was motivational for me.

After:

  • two years of planning,
  • 2 test jumps,
  • many visits to a sports psychologist to overcome his one fear – claustrophobia, and
  • 1 delayed jump due to bad weather

On October 14, 2012, Felix:

  • jumped from 127,852 feet
  • controlled his in-flight wobble that could easily have resulted in his death
  • and proceeded to land on his feet.

A perfect landing. An Olympic gymnast would have been in awe.

So I have to ask you: How is it that we can dedicate that kind of ingenuity to accomplish such an audacious goal, but we can’t seem to find a way to have our college graduates land on their feet: with a degree, a well-paying job and if they need some loans, with a debt burden that is manageable.   It boggles my mind.

We’ll discuss this in more detail in later posts, but here’s a start for families trying to achieve their dreams of a college education for their children.

Parents and students should recognize that colleges are a business with two primary goals  for admitting next year’s class:

  • Maximize net tuition revenue
  • assemble a diverse class that competes favorably against peer institutions, is well-balanced with a talented pool of matriculants, and will make the class, the administration, the faculty and the alumni proud.

Too often families take a “damn the torpedos” approach and borrow whatever they need for “the best” brand name college    Families that resist basing this important decision mostly on emotion and instead act like traditional consumers — in this case of education — have a much better chance of a college graduate who lands on their feet.  Here’s a simple formula for success for families:

  • Be realistic, college is not for everyone.  Is it the student’s dream, or at least strong desire, to attend college?  Is the student properly motivated to be successful or are they fulfilling what they perceive to be someone else’s dream: a parent, guardian or guidance counselor?  Sometimes delaying college of a year or two, or not attending, is a a better choice than starting, only to drop out.
  • Determine what type of school best fits the student’s needs. Cost aside for this moment, a  4 year private college may be the right answer for many, but not all – particularly the very most selective which admit fewer than 10% of the applicants. Community colleges give many students a terrific start.  Public colleges offer excellent learning environments that are the ticket to success for many students.  The key is finding the best academic and social fit for that particular student.
  • Select a school in that spectrum that is affordable.  There is no magic formula for affordability but a one litmus test:  will the student and/or parent be required to take debt in order for the student to attend?  If so, will the student’s potential post-graduate job prospects likely pay enough to repay the debt. Likewise, is parental debt affordable based on income?  Is the parent’s debt burden affecting their retirement savings?
  • Have these conversations early and over time — starting as early as ninth grade with general thoughts and become increasingly concrete as the student’s record of achievement in high school takes shape, test scores come in, college visits are made and the student’s desires sharpen.  The earlier you start and the franker the discussion you can have, the greater opportunity you  will have to manage expectations and provide our son or daughter with practical advice that they will hopefully listen to.

Following these steps will help high school seniors select a school that is right for them academically and financially ,and will substantial increase the odds that they will land on their feet with a degree, a well-paying job, and student loans, if necessary, that are manageable.

John’s Jots #3: Helping H.S. Seniors Pick Their College

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.