11/3/2011 4:33 PM ET|
Costly college myths, part 2
Higher education is expensive enough, but if you believe these 3 falsehoods about college, you could be making some costly mistakes.
Our vision of college no longer matches the reality for most people. Consider that:
Only one in four students attends a residential college -- the kind with dorms and fraternities. The rest attend commuter schools, community colleges and trade schools.
Forty-five percent of students attending four-year schools work 20 or more hours a week, while 60% of community-college students work at least that much.
Twenty-three percent of college students have dependent children.
Given how different most people's college experiences are from the myth of toga parties and ivy-covered buildings, maybe it's not surprising that so many other college fables have taken hold.
Over the summer I dealt with three common misunderstandings in "3 college myths that will cost you":
- "Saving for college will hurt my child's chances of getting financial aid." (Reality: If you can save, you should.)
- "College costs too much." (Reality: Not attending could cost you a lot more.)
- "A public school will be cheaper than a private college." (Reality: Budget cuts and crowded campuses mean it could take you years longer to complete a degree at a public school.)
Now I'll tackle three more higher-education myths that can set you back financially. Starting with:
1. "There's no point in filling out a financial-aid application, because we aren't needy enough."
"Most families underestimate their eligibility for need-based aid and overestimate their eligibility for merit-based aid," said Mark Kantrowitz, a financial-aid expert and the author of "Secrets to Winning a Scholarship."
In other words, your kid probably won't attract full-ride scholarships even if she is a whiz at basketball or math. But your family may qualify for need-based aid, even if your income approaches six figures, if the school is expensive or you have more than one child in college at a time.
"The financial-aid formulas are complicated enough that you can't tell whether you are eligible for financial aid without applying," said Kantrowitz, the publisher of Fastweb and FinAid.
"Middle- and upper-income families might qualify for financial aid if they have multiple children in college at the same time or their children are enrolled at higher-cost colleges," he said.
If you're sure you don't qualify for need-based aid, though, you still should fill out the Free Application for Federal Student Aid, or FAFSA, if you want access to federal student loans. Federal education loans are typically much better than private student loans, since the federal version offers fixed rates, flexible repayment options and the possibility of forgiveness.
"The unsubsidized Stafford loan and the Parent PLUS loan do not depend on financial need, so you don't have to be poor to qualify. Even Bill Gates could qualify for these loans," Kantrowitz said. "The federal government requires families to file the FAFSA to get these loans, however, in order to ensure that they get all the grants and other gift aid for which they are eligible."
Filling out the FAFSA takes about an hour, Kantrowitz said.
2. "Borrowing for an education is a bad idea."
Overdosing on student loans and other debt is clearly detrimental to your financial health. But excessive suspicion of debt could keep some people from getting degrees that could justify the costs of borrowing.
A Public Agenda study of high school graduates who didn't go on to graduate from college found they were far more likely than college graduates to:
- Be unfamiliar with the financial aid process. Only three in 10 high school graduates recognized the term "FAFSA," the gateway application for financial aid, compared with seven in 10 college graduates.
- Be unconvinced that borrowing for a college degree can make sense. Fifty-four percent of college graduates strongly agreed that "even if someone has to take out a loan to go to college, it is worth it in the long run," compared with 37% of those who didn't graduate from college.
- Believe that "there are many ways to succeed in today's work world without a college education" (57% of nongraduates versus 40% of college grads).
These optimists may be counting on a world that no longer exists. The jobs that once provided stable middle-class incomes for many people without college degrees -- such as union manufacturing jobs -- are fast disappearing. Currently, 59% of jobs require some college education, according to the Georgetown University Center on Education and the Workforce. By 2018, the proportion is projected to reach 63%.
Obviously, a college degree doesn't guarantee a great income or lifetime employment. But even in today's lousy economy, college graduates have half the unemployment rate of high school grads, and on average will earn far more over their lifetimes.
VIDEO ON MSN MONEY
1. Don't just focus on going to school, working and graduating. Get to know your peers and professors. You need to network, especially if you come from a modest family without a whole bunch of connections in the business world. Many times getting the sweet gig has as much to do with who you know as what you know.
2. If you can go look into private colleges. You will be able to graduate in 4 years because you can actually get the classes you need when you need them. Your education will be far superior...and before I get attacked on this hear me out. I went to LMU for undergrad. My general classes averaged 25 students. My major classes were 15 at most. You get far more out of your classes with 15 kids to share time with as opposed to sitting in auditoriums with 400 others.
3. Apply for every scholarship you can. Do your homework. You would be amazed at how much money is out there for free and almost nobody is taking advantage of it. You just need to focus on being the kid to find it.
4. Enjoy your time during college. You only get to do it once. It is your last chance to still be a kid before entering a long long long 30-50 year career. Once you are knee deep in a career, traveling, spontaneous Vegas trips on a Tuesday, etc aren't practical anymore.
5. If you aren't motivated to succeed in business then don't waste your time with college. Too many people run to college because they were sold on the idea that college is automatic success. It is not. College isn't for everyone. Think about who you are, what your goals are and if college aligns with those goals. Otherwise a skilled trade will do you far better.
The writer actually forgot two myths that kids going into college are fed that are far more important than the financial impact of the experience:
1) The mere fact that you are at college leads to the conclusion that graduates will be "the leaders of tomorrow". Really? Actually, you are just one of several hundred thousand annually and you will have to bust your a$$ to stand out and fulfill that suspect prophecy that every single graduating class is fed.
2) Being a college graduate means the world will be beating a path to your door to hire you. Wrong. It improves your chances, but when everyone you are competing with also has an equal education (or better by pedigree!), the first thing you will hear is: what else you got, kid?
Education is simply an investment, so treat it accordingly. People that complain about how much debt they have should have either: a) picked a cheaper school, or; b) found a way to reduce the amount of money they needed to borrow.
These little whiners at the "Occupy this or that" parties demonstrate a clear case of the entitlement mentality reflected in the 'myths' I cite above: the world is supposed to be my oyster right now, dammit, so why should I have to pay for the last four years when I didn't get what was promised to me!
The current most previous generations of kids (and parents) are living in a "dream world." Any degree is only as valuable as what the market dictates. So, your darling kids want to major in drama, or dance, or German literature, or whatever... and you, with your rose-colored glasses say, "Follow what you love and it will all work out." NOT! Get a grip, people, both parents and children!
I came from a dirt poor (and highly disfunctional family), worked my way through a now-nonexistant trade school, and now make 90K+ as a design engineer, by way of apprenticeship to a trade that was indicative of my natural talent. Most of all the result of a pragmatic and practical decision on MY part; I could have been a great artist or dancer. But that would not have paid the bills.
Liberal arts education as is promoted in this country is a waste of time in terms of making a living for the most part.
Some have already talked about this option but I will add my two cents anyway. I took advantage of GI Bill during the Korean War and it paid for 4 years of college. Another related option is ROTC
which pays for college if you agree to serve as an officer after graduation. For those who don't have a desire to sink a bayonet in the belly of a commie or terrorist, there are many necessary service support fields which are available. A third option; The military will train you in may fields
which can lead to well paying civilian careers. Truck driving, mechanic, medical tech, fireman,
police, etc,etc. Remember JFK? He said "Ask not what your country can do for you, ask
what you can do for your country". At 80 it still sends shivers up my spine.
God Bless America!
I will be graduating in May 2012 with a Bachelor's of Science in Mechanical Engineering. I already have job offers in the mid $60k/year range. I attend the South Dakota School of Mines and Technology where your starting salary is more than a 4 year education costs. I have already made close to $30k while in college from Co-op's and Internships. I have also had the traditional college experience and I wouldn't trade it for anything. College is worth it...you just have to pick the right college and the right major that is the best investment. And there is no way a high school graduate will be nearly as successful in a career dealing with Finite Element Analysis, Solid Mechanics, Vibrations, Gas Dynamics, etc...
I'm not saying college is for everyone and if you only want to complete high school then so be it.
If you are smart with your education then it will pay off and it can take you anywhere.
Students should be smart in the way they pick a major and selecting the lender to pay the tuition. There are quite a few agencies that lend you money with high variable interest rate and those agencies need to be avoided. Back in 2008 it was the home mortgages that ruined the economy, and if the student debt isn't controlled properly we will see another hit to the economy. I think there need to be laws that govern what students can borrow based on the major they choose (I know I sound terrible for saying that), but not everyone deserves or needs to be educated beyond high school.
@Obama must go - your comment might just be the dumbest thing I've read in a long time. Not surprising coming from someone who doesn't value a college education. Let's start with the random idiocy you spew about the decision making processes of PROSPECTIVE employers. Really? Show me a company or hiring manager that uses those hiring criteria you mention and I'll show you a bankrupt (or soon to be bankrupt) business. Resumes come across my desk all day and before I ever meet a person to judge (as you say) height, sex appeal, affluence (You're probably going to need to look that word up), method of transport, social status, and if I'd like to go to dinner with them - what I actually do is look at their experience and relevance to the position for which they are applying, consistency, skills/intangibles, AND EDUCATION. Why education? Because a degree represents both a commitment and either specific or foundational skills to build upon. "We live in a temporary workers atmosphere where employers hire based on experience..." Well, which is it? Do companies hire people long enough to allow them to gain experience, or do they fire them quickly and hire the next person who was just fired from their last employer so they lack the experience you claim companies seek but somehow can find because while companies want experience, all of them are too busy firing people in the "temporary workers atmosphere..."? That comment should be quarantined for contagious stupidity. Lastly, "take that college money and by some franchise or small business..." Maybe at private NY tuition rates of $200K a person could instead buy a franchise, but if the average loan debt is around $25K as mentioned in the article, please show me a solid franchise than only requires $25K in seed money. On top of that, only a small percentage of people are smart enough or lucky enough to launch a business that succeeds - the rest of those people who go that route either work for years to gain experience or GO TO COLLEGE to learn business. Look, if you have convinced yourself that a college education is a waste that's fine. But let's be honest about why - you did this to try and make yourself feel better about the fact you were never willing to invest in a college degree, or never qualified to get into a program. Either way, you shouldn't try to cast shadow on the value of a degree especially when it's so very obvious that you would have benefitted from at least a course or two. Your comment against the value of a college education only served as one of the best tools to promote the need for college education... …because you sound like an uneducated redneck – by your name tag, I can only assume I’m right on both counts. So please STFU.
Having paid for the Undergraduate degrees for both of our children (our personal choice and one many financial advisors say is not wise) I agree with all points in this article.
- Investigate private colleges as the net cost at these institutions were less expensive than public universities for our children due to HUGE scholarships they received.
- Apply for any financial aid for which your child might qualify.
- Go easy on the loans and scale them to your future income potential, remembering that only colleges consider loans to be Aid. To everyone else long term loans are an albatross around your neck for years to come.
Our oldest son complains about his $80K in Law School debt for his JD from a Tier 1 Law School. I tell him "too bad", and ask if he would rather owe the $80K for a degree that provides him with a $100K income, or $80K for a BA degree from a mid-level public school that qualifies him for a $35K income - like so many students find themselves upon graduation?
3. "A college degree always pays off." <- Not nearly emphasized enough. Unfortunately there is a mentality in this country that everyone needs to get a college degree. But why? The politicians and economists always talk about lagging US manufacturing. Well....who wants to make widgets in factory if you're sporting a college degree and have, on average, $23K in student loans?
I heard a figure recently that there are approx 80 openings for new anthropologists (fresh out of school) every year yet there are some schools out there that issue diplomas in anthropology for well over 100 students by themselves. Add in the hundreds of other schools also churning out grads with that same degree and you have a recipe for unemployment. Oh sure those grads with their anthropology degrees do not HAVE to work in the field of their chosen degree. But then why get the degree in the first place?
"The world needs ditch diggers"
To re-state a big point: get a college degree that will lead to a job. A college degree in basket weaving, or similar like art history, will not see the return that a degree in a science will have. And don't take out loans for those, you should just save time and go join the occupy protests and complain how there are no jobs despite you having a degree.
Bottom line: use common sense when picking a major and sometimes more important, use common sense when selecting the education institution before deciding on whether or not to claim personal responsibility by taking out a loan.
"That debt was created by our parents and grandparents and guess what......ALL of it will be paid back by their kids, grandkids, great grandkids and on and on.please don't blame your parents and grandparents unless they were members of Congress -- we worked hard, paid our dues, saved and invested; and watched Congress p1$$ it away coddling illegals, Wall Street cheats and foreign heads of state ad infinitum. If we have anything left we count ourselves fortunate. If we spend what we have left carefully then maybe our children and grandchildren will have something to inherit and maybe they will realize that to have a great country you have to invest inside it's borders and build a lasting infrastructure, educate your citizens and accept that it will require some sacrifice in the form of higher taxes (spent wisely) for the common good.
The total college debt in America as of this week rose to over one trillion dollars, more than all the credit card debt in this country. Having said that, however, and because I work in the higher education system, I do see first hand the need for a college degree, more now than ever before. With a college degree, an average earner will earn more than a million dollars more than his non-college educated counterpart.
The "other" issue here is in choosing a major. IF you are going to incur a large amount of student loan debt, you need to have the ability to "service" that debt and pay it back over a reasonable amount of time. Folks majoring in English who incur over a hundred thousand dollars in debt, can only expect to earn around 24,000 a year starting out. The problem there is pretty obvious and why nearly 20 percent of recent grads are having to move back home with Mom and Dad.
College education is still a pretty good deal, provided you are level headed in selecting both the college to attend and the major you wish to study. I agree that people don't need to major in a field just because it pays well, but by the same logic, one should not chose a college that is overly expensive and major in a field of study that will never result in a salary that will pay off any debt they might have to incur.
I do think that there is going to be a bubble burst for higher education in the next decade or before, and thankfully there will still be reasonably priced colleges for student to continue their education with. Good luck.
As far as I'm concernedd, the "tacked-on" comment of "Choose a major wisely" should be in first place on this list, because it can have THE most lasting effect. In fact, it can totally negate the entire rationale for even going to college. Has there EVER been a job market for Philosophy majors...??? Do students who want to major in Psychology know that their BA is absolutely worthless unless they tack at least an MA on after it? How many law school students do we have in this country who weren't History or Poli Sci majors? (Those two degrees are also worthless at the Bachelor's level, and new lawyers are starving because law schools keep pumping out thousands of new ones every year to match only a handful of openings in established firms - since your elders can lawyer easily into their sixties or seventies.) There are too many Majors whose only backup for after graduation has always been, "Or I can just teach." "BEEP! Sorry, but thanks for playing." Schools are actually laying off veteran teachers in this economy, and they want Education degrees for any openings they have, not subject degrees. Knowing what to teach can come out of a book once you have the job; knowing how to teach is what gets you the job.
One of my sisters has a degree in Philosophy, and another one a degree in Sociology. And both of them had no choice but become low-earning cubicle-drones to make ends meet. My third sister, on the other hand, got her undergraduate degree in Environmental Engineering, and she was down in Louisiana during the oil spill - earning $199 a DAY....! An undergraduate degree can end up being totally worthless - unlike yesteryear, college grads are a dime a dozen on the unemployment lines today. But it doesn't HAVE to be, if you just rub two of those high-SAT brain cells together!
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
RECENT ARTICLES ON COLLEGE SAVINGS
Start of summer already? Better get shopping. But give the grills and new electronics a miss for now, according to the experts at Dealnews.