It’s official, the end of August is here and the fall semester is approaching. I believe that education is the key to upward economic mobility. In addition, a secondary education can help create opportunities that students might not have otherwise had. According to the Economic Policy Institute, in 2015 college graduates earned approximately 56% more money than high school graduates. Degree pay gap trends will be on the rise for years to come. Furthermore, since the 2009 Great Recession a college educated individual has more of a competitive edge in the job market. USA Today noted that since 2009 college graduates have captured a significant portion of job openings. Despite the obvious benefits of a college education, the rising costs of a four-year educational institution is creating one barrier to education.
The Rising Cost of College
In the 1970s the average cost of a public four-year college was $2,600 per year! Could you imagine that? I pay more than that for a three-credit class…ONE CLASS (in graduate school). In 2016, the average cost for a public four-year college was $9,650 per year. The economic burden increases when students want to attend a private (nonprofit) institution. In the 1970s a private four-year college cost approximately $10,680 per year and increased to $33,480 per year in 2016. * There are many reasons for the rising cost of college: a slash in public spending, high administrative costs, higher educational subsidies, and more students enrolled per year. According to an article in the NY TIMES, college attendance has risen by 50% since 1995. Consequently, educational institutions are operating with higher demands and thus higher budgets. Believe me, it is so easy to blame your college institution for the rising tuition, but if you take a step back and really think about what is provided for you at many colleges, you can see that it is not a bad deal (especially for public institutions).
The Real Educational Burden
First and foremost, an education is never a waste. Education can enrich you as a person, a student, and a working professional. Additionally, an education will aid in economic and professional development. Many government officials have recognized the importance of a quality education, thus creating loan and grant programs to assist students in financing their educations. In addition, private lenders have also increased financing options for students. These financing programs are usually a fundamental component in paying for college, which can be a necessary resource for many students. However, public (Federal) and private loans are adding a further burden to college expenses. Federal loan interest rates are tied to the markets and not set by congress. A recent Washington Post article reported that undergraduate students can be expected to pay 4.45 percent on their Stafford loans for the upcoming fiscal year, instead of the current 3.75 percent. For graduate students, the interest rate on new Direct loans will rise from 5.31 percent to 6 percent. The reason for the increase was the volatile reaction of the markets when Donald Trump was elected President. I guess I wasn’t the only one with a volatile reaction! THANKS DONALD! #MakeStudentsDebtFreeAgain. Congress has capped federal interest rate to 8.25 percent for undergraduate degrees and 9.5 percent. It’s so wonderful how the government is making more money from my education than I am right now! At least Congress did work to cap the interest rates, as they would have doubled (6.8 percent for undergrads) due to market fluctuations. Graduates are trying to keep their heads above water after earning their degree and obtaining employment. Many millennial graduates are putting their lives on hold by living with their parents, not buying a home, not getting married, waiting to have children, or not buying that second piece of avocado toast you know they want!
How to Rise Above the Interest Rates
High School Students
There are several steps that senior and junior high school students gearing up for college can take. First, they can really assess whether college is right for them. Are you making your parents happy or would you rather work in a trade profession? Believe me… we need our plumbers, electricians, builders, and hair dressers! So, really think about it and then go from there. Secondly, if you decide that college is right for you then you should weigh all your options.
It is important to create a “pro and con” list of your top and safety schools before you apply. This will help give you clarity on tuition cost versus possible financial aid packages, along with other important factors. Furthermore, it is extremely important to fill out a FAFSA application to even be eligible for federal grants and loans. The real evaluation begins when you have finally been accepted to the schools you applied to, as your financial package (includes: Federal/state grants and loans, institution scholarships/aid) and attendance cost are thoroughly outlined for you. Students can also attend a two-year community college and then transfer to a four year institution. Today, the average cost of a community college is $3,520 per year as opposed to $9,650 per year for a public four-year college. Some states like New York even provide free community college for qualifying students, but with certain stipulations. Making that switch can save a graduate a lot of money in the long-run. The hardest part will be your decision. Should you attend a more affordable state school instead of a higher ranked private university? Should students need more funding from private lenders, I suggest doing a lot of market review research on the best private lenders and loans. You can start with the good people at Nerd Wallet because they do a phenomenal job of breaking down the best private student loans.
Undergraduate and Graduate students
So maybe you have a few less options than when you were in high school, but don’t worry because there are still things you can do to get ahead of your student loans. If you truly need help making payments on your federal loans, then call them! Work with a customer service representative to lower your payments and assess all your options. I assure you that they want to help, it is easier for them if you pay a lower monthly portion than completely default on your loan. The same can be said for your private lender as well. Certain private lenders are willing to defer a loan or reduce monthly payments if you are not employed or while working toward another degree. For example, my private loan is deferred while I am in grad school. I am thankful that I am in a financially capable place to make monthly interest payments on my private and federal loans (this will definitely save money in the long run). Definitely take advantage of President Obama’s student loan reforms such as Pay as you Earn, Graduated payments, Income Bases Repayments, and etcetera. You can also take advantage of programs that help pay down your student debt like working for the government or a nonprofit organization. See there is hope for us after all…
There is a huge CAVEAT: Betsy DeVos under the Trump administration, froze Obama-era rules meant to protect student borrowers. Pero` Why? AGAIN: THANKS TRUMP! Read more about it here.
Its obvious that we need to be on top of everything that is going on during the Trump presidency. The Trump administration aims to counteract a lot of the Obama reforms aimed at helping middle and working class Americans. So, when you do your loan and college research, make sure to take a minute to let Secretary DeVos at the Department of Education know that we need these reforms… we can’t afford to repeal or remand, because it’s clear that republicans don’t know how or what to replace!