What Cost And Is It Worth It?
There was a time not so long ago when Ferris Bueller took his day off, Saturday Night Live was actually funny, Detroit had a basketball team, and students didn’t cripple their financial future. They could afford an education and get this…their perms.
But that was over three decades ago, and here we are now in 2018. Things have changed, you wouldn’t be caught walking outside with a perm, and Detroit doesn’t have a basketball team. Oh, and Americans owe a lot of money. How much? Just a cool $1.4 trillion in student loan arrears.
We will look at some financial numbers that are scarier than the scars of 80’s horror legend, Freddy Krueger. We’ll look at interest rates, tuition costs, what jobs students should go for, advice on rates and be paying for school—to give you the answer as to whether or not paying for college is a realistic option of yours worth the expense.
The Ceiling Has Closed In On U.S. Student Loan Debt
If only the Property Brothers could swoon in and fix the debt ceiling that student loans have accrued over the past decade would be nice.
If you’re planning on going to college, and you still can, there are some numbers you should know about that affect you and the whole country.
Americans owe about 2.5 times more than they a decade prior when it comes to student loans. And most of the students who owe today are in the Millenial age group.
Four in ten or 37% of adults (18-29) have outstanding loans, forbearance, or have defaulted.
53% of those outstanding loans, forbearances, and defaulted loans are from students with bachelors or post-graduate degrees.
And to make up for that debt, these same students have had to take out further loans or even take a second job. 21% of adults between 25 to 39 with a bachelor degree or outstanding loans took a second job. Right now, you may be wondering what they are doing with their degree and how much sleep they’re getting?
According to Pew’s research, 45% of students polled, in the ages of 25-39, claim they are engulfed and burdened by the expense of obtaining that degree. Only 51 percent say that the note-taking, testing, and keg stands they did in college was worth the financial stress.
The average borrowed amount in 2016 was at $17,000, according to that same survey.
Debt is becoming more vicious upon student borrowers and even parents as well. The rise in interest rates and the growing costs of tuition isn’t helping that either. The government in 2007, instituted a program called, Public Service Loan Forgiveness, but it is looking slim that it will last for new borrowers as president Trump has signaled that he may eliminate the program in July of 2018 as part of his budget plan.
Currently, those (over 600,000 since 2007) who are submitting applications for PSLF, nearly 30% of those borrowers have $100,000 of student debt. If Trump ends the program, most experts agree, that those who enrolled when it started wouldn’t likely be affected. But for a new borrower, this isn’t reassuring news to hear.
So what does the average graduate pay today? According to the Institute for College Access and Success, the average monthly payment is $351. As of now, the same report by ICAS found that there is $536.6 billion loans in repayment, $177.9 billion in deferment, and $100.1 billion in forbearance value. Add this with 4.3 million borrowers who are in default with their loans that is worth $74.9 billion.
These numbers tell a horrifying story, but while student loan debt is one of the most nagging factors in overall consumer debt in the U.S.—the rising costs of tuition are also reason to be alarmed.
The Climbing Mountain Of Tuition
A recent report from CNBC found that students at a public four years institution paid an average of $3100 in tuition costs back in 1987-88.’ Those numbers were adjusted to reflect after inflation. What is it now? For the 2017-18 academic year, students can expect to see their bill increase by 213 percent from 30 years ago. The average total cost is $9,970 annually for a public four years school.
The private front isn’t much better. Private tuition, room, and board costs for four years were roughly a meager $15,000 in that timeframe. Now, the number has increased as much as the average point total per game by the Golden State Warriors at 129 pct. That makes the total average at $35,000 roughly.
The debt spiraling out of control, and the hill of tuition turning into Mt. Everest is one thing, but if you expect relief in your federal loan interest rates, you got some unwelcoming news earlier this year.
Tacking On Interest Rates
Here’s something something “interesting” about interest rates. Future borrowers received bad news about the interest rates for the 2017-18 academic year. Federal loans were to go up to 4.45% from 3.76%, while Stafford Loans for graduates were going to increase up to 6% from 5.31%.
Is There Any Good News?
The good news is that you can avoid all of this calamity to your financial future and most likely credit score, by reading a few of our suggestions below. Of course, if you’ve already taken out a loan and are nearly graduated, you will have some things to consider in keeping your finances and credit square.
Advice For Lower Rates
The good news is…if you aren’t locked in yet on a loan, there are ways that you can have a lower interest rate. There are savings measures you can take that will at least give you some relief when it comes to interest rates.
First, you’ll want to investigate the loan rates before they are set especially by the Feds. If the Feds change it in the Spring of 2018 for a lower interest rate, then you should jump on it. That’s because federal interest rates are set by Congress and they are protected for the life of your loan. The only exception is the Perkins loan.
Secondly, you will want to exhaust each federal loan before entertaining a private loan. Private loans are fine, but they don’t offer the same protections as government interest rates and loans. They also have higher interest rates.
If you do sign up for a private loan, make sure you find yourself a co-signer that has a pretty good score. When we say pretty good, we mean 720 and above. This will go long ways in bringing your interest rates from a bank or lender down. Of course, the downside of that is, the co-signer (usually a relative or parent) will be on the hook.
Lastly, lenders like College Ave and Citizens Bank tend to offer an automatic enrollment payment system. You sign up for that and have your payments automatically paid, the lender will lower the interest rate. Citizens Bank offers a lower interest rate for those who have an existing account with them.
Now that you have a few options in what you should look for in an interest rate on a loan, the final question you ask yourself (if you aren’t enrolled yet) is this: will it be worth going to college and racking up debt? Are there jobs in demand?
Careers In Demand
One of the misconceptions about degrees is that you have to get a four years degree. While that may be appropriate for some jobs, and other jobs may require longer tenure degrees, you can find good paying careers with associates or less.
Diagnostic Medical Sonographer
Median Salary: $64,280
Degree Needed: Associate
Growth Outlook: 24%
This first example shows you that you don’t have to go to college as long as Chris Farley did in Tommy Boy. And look at the average income, which will help play a role in repayment.
Median Salary: $66,120
Degree Needed: Associate
Growth Outlook: 27 %
With the growing need for a business to invest in the digital space, you can see why this job is in demand, and better yet, you only need two years of schooling. This will help eliminate your debt and provide savings.
Median Salary: $58,670
Degree Needed: Associate
Growth Outlook: 12%
Typically, the medical industry is a wise choice to entertain for a career. The demand is almost always there. You want to do what you want to do, right? But, at what cost? You should try to find a balance at something that will pay and is in demand, but also something that you can enjoy.
Furthermore, Forbes published an article citing a study that looked at what businesses valued and needed most from graduates. Here is what they found for bachelor degrees, businesses needed those who studied finance, business administration, and management. For a masters degree, they valued the need for accounting, mechanical and electrical engineering, marketing, and information sciences and systems.
Ways To Pay For Those Degrees
You’ve made it this far in the article. You know more about the debt problem, the rising costs of tuition and interest rates, and the job demands on the market. The fact you’re still kicking around must mean you’re serious about obtaining an education.
This article isn’t meant to deter or discourage, rather, it’s meant to inform you so that you make a sound decision. Will an education be worth the tradeoff?
Paying for it and getting the money for an education can be stressful. But did you know most people have the money right under their noses and aren’t grabbing it? You’d be surprised at some of the most traditional ways you can pay for college that isn’t being utilized.
Okay, so this was listed first because this would be something a parent would have to set up. Most people aren’t even aware of this plan. 7 out 10 Americans don’t know it even exists, according to U.S. World News.
Yet it’s a great tax-advantaged savings plan, that is best started when a child is just born. The amount of money that can be earned during those years makes it easier to manage, also, some states have programs that match funds. Each state is different, so you would have to research a 529 plan for your state.
The money from the 529 plan can go right into books, technology, and other expenses. The money used in the 529 plan isn’t subjected to a federal tax and most state tax systems.
We highly recommend if you are in college, make your scholarship search a full-time summer position for your upcoming senior year. There is literally a scholarship waiting for everyone.
Some students played it smart and received a free ride of an education because of scholarships.
Here’s an example of how wide the scholarship market is:
Vegetarian Resource Group Scholarship
National Rice Growing Scholarship
Twin-Triplet Dorm Room Waiver Scholarship
Asparagus Club Scholarship
The list is endless, and a simple engine search will pull up some excellent results. Get your pen and creative cap ready.
This is a biggie. The Free Application for Student Aid helps is an application that students and parents can fill out together. This will determine if you qualify for loans or Pell grants.
Keep this in mind: -$2.3 billion was left untouched and uncollected because people didn’t bother filling it out.
Live With The Rents
This is actually a common but smart plan. According to Debt.org, you can save as much as $37,000 by living with your parents for the four years by eliminating room and board.
Eliminating that kind of debt is substantial when you’re looking for savings anywhere.
Private Loans To Consider
And if you aren’t going the federal railway, there is always the bank you can depend on. Of course, you will need good credit and a job (co-signer will need proof of income that is suitable for the bank’s requirements) that you earn enough to repay on your loans.
No origination or application fee
Interest rate reduction if you sign up for auto payment
10-15 year options on paying period
Undergraduate and graduate options
No fee for early payment
No origination or application fee
Student and parent loan options
10-15 year options on paying period
Interest rate reduction if you have an existing account
Loan amounts from $1,000-$295,000
The Final Say
It’s a bit intimidating when you’re looking towards the future. The pressure to obtain a degree and get a good education will always exist. But this is an investment that you must have a sound plan for. You must seek ways to limit the amount of debt that will accumulate by researching different options in paying for your time in college.
That’s the tricky part for many parents and future college students. But getting an education isn’t impossible. And there are many rewards of going to a good school and getting a degree. If you pick the right career to get into and find what’s hot on the market.
There is a lot of costs associated with education, but is it worth it? It depends on the amount of hard work you plan on doing before and after you obtain that degree.