The number of students that graduate in four years is less than 40% nationwide (2014 Report). One study found that an additional year at a four-year college costsover $22,000 (including tuition, fees, room and board, transportation, books, etc). And only 60% of full-time students finished their degrees in less than six years. The cost of college can be staggering, especially if students and their parents aren’t prepared financially to spend thousands on one or two extra years of education.
In addition to students taking more than four years to graduate, the national transfer rate is over 33%. One of the major reasons that students decide to transfer is because of finances. Scholarships can run out or student loan packages change over the course of 4+ years. And switching schools can oftentimes extend a student’s college education, because credits do not always directly transfer to the new school.
Unfortunately, the current culture for some students is that attending college is about the “college experience” instead of a pathway to a career. Parents and students need to discuss their expectations, especially when tens of thousands of dollars of debt are at stake. This is where a college financial advisor can be helpful. They will help facilitate a conversation about the return on investment you’re hoping to receive from a college education. They can help the family understand how monthly loan payments fit into their post-graduation years – for the student and possibly retirement years – for the parents.
A recent study shows that more than half of former college students regret their borrowing decisions during college: “54 percent of student loan holders did not try to figure out what their monthly payments would be before taking out loans. And 53 percent said that if they could go back and redo the process of taking out loans, they would do things differently.”
Student loan debt is now the second largest consumer debt category behind home mortgages (ahead of auto loans and credit card debt). Student loan debt is at $1.3 trillion in the US alone with over 44.2 million US borrowers. According to The Institute for College Access and Success, “In the U.S., the average student loan debt per capita is $4,920. Pennsylvania ($5,690), New York ($5,570) and Michigan ($5,330) have among the highest student loan debt per capita in the nation.”
The recent study from the Financial Industry Regulatory Authority (FINRA) had several conclusions, but one was that better financial education is needed for students and their parents before student loans are accepted. According to Robert Schmansky, founder of Clear Financial Advisors, “Most students are looking ahead to their future with rose-colored glasses. They’re not worried or even thinking about future costs.” A simple way to better understand the basic components is for a student to calculate their payments upon graduation. This will help a student decide which loans to take and which they can do without.
In addition, students need to have a strong idea of their future career plans before exploring different areas or possible interests while racking up student loans or on their parents’ dime. Graduating in four years is possible, but students need to be realistic about the hard work necessary to achieve that goal.
At the college level, the universities and colleges need to do a better job of giving students a direct route to graduation. Oftentimes, there are too many courses to choose from and students end up having to re-take similar courses to meet their major’s requirements. Complete College’s report suggests that an agreement is made: “Students will pledge to stick to a structured schedule of courses and elective offerings that represent the shortest distance to completion, eliminating the semester-by-semester uncertainty and huge expenses that often accompany a college career. In return, institutions will provide clear degree maps, closely monitor student progress, and guarantee that the necessary courses will be available when they are needed.”
If you need help preparing for the challenges of college, contact John at Christianson Tutorials for help.