Today, the greatest financial challenge facing middle income Americas is how to pay for college. College costs are rising at twice the rate of inflation and student loan debt has ballooned to $1.3 trillion. The challenge with college debt is that it forces parents and students to delay their lives. Parents are forced to delay retirement and put off their hopes and dreams while students struggle to buy a car or house. Many students even delay getting married and starting their own families. New statistics show that 7/10 graduates have an average of $30,000 of debt. This means that for every $10,000 borrowed, they will owe $100 per month over 10 years.
The financial benefits of a college education are proven. In 2014, the median earnings for young adults between 25 and 35 with a bachelor's degree were $49,900. This is a 66% increase over the same group who only has a high school education of $30,000. So how do you help pay for college and not sacrifice you or your student’s dreams? Early awareness and planning!
Understanding these three questions early will help:
What is the true cost of college? It is far more than families ever thought! The sticker price for a college diploma is $100,000 at an in-state school and up to $300,000 for an elite or private school.
What will college costs you? This number is far more than families ever thought! There are equations that the government uses to determine families aid eligibility. Family’s aid eligibility is determined by several factors but the parent’s assets, income, and age are the predominant factors. Put in simple terms, the government expects families to pay 25% of their gross income. They will also assess assets as a way to pay for college.
What is financial aid and how do I get it? There are two types of financial aid; need-based financial aid. This aid is based on mom and dad's economics. Merit-based financial aid is based on student’s academics. Students must have very high academics in the hopes for any type of merit-based aid. As the word scholarships includes “scholar”, your student must be a “scholar” to receive scholarship money!
Once you have answered these three questions, you can begin to look at your overall wealth to determine the best way, the most efficient way to pay for college and not sacrifice your future.
I have walked thousands of families through the financial roadmap of the college planning process and I am confident the best recipe for success is early planning. College planning is really financial planning and I encourage you get started ASAP!