No. I’m not referring to the sex talk. The talk you need to have is about college. Not just about choosing the right college academically but also financially.
The college path is not right for everyone, even if the cost was free. Success, happiness and financial security can certainly be attained without a college degree. College diplomas don’t come with any written or implied guarantees of future fortune or fame…even diplomas from the most prestigious universities.
That being said, in our technologically sophisticated and complex society, advanced education and training beyond high school may be the best way to better jobs and higher lifetime earnings. According to The Center for Education and The Workforce, the average college graduate with a bachelor’s degree, will earn $2.8 million over his/her lifetime. The average high school graduate with no additional higher education will earn $1.5 million over his/her lifetime.
Before launching into choosing the right college for your child (or yourself), mention must be made about the college admission scandal currently in the news.
Let’s separate the parents who hire a consultant to assist them and their high school student on narrowing the list of over 4,500 accredited degree granting colleges in the US to a small manageable number of schools where their child will have a greater probability for success. Nor is the scandal about paying an academic coach to raise SAT scores. This can be a topic for future discussion concerning the opportunity gap from the growing income and wealth inequality in our country.
The scandal is specifically about a small number of wealthy parents who illegally gamed the admissions system to get their children into prestigious colleges. The investigation the FBI dubbed “Operation Varsity Blues” alleges wealthy parents paid William “Rick” Singer $25 million for cheating on entrance exams or bribing coaches to designate applicants as recruited athletes, even when the student never played the sport competitively.
My assumption is the readers of this newsletter have a moral compass and aren’t the target of Operation Varsity Blues but still want help selecting the best schools for their child.
After decades of working as a Certified Financial Planner, my approach to the college selection process is a bit more structured than most. Stephen Covey in his book “The 7 Habits of Highly Effective People” taught us to begin with the end in mind. Stated another way: “What do I want from this investment called college?”
We must ask the right questions. When one of my sons presented me with a list of colleges where he wanted to play soccer, I commended him for his research. I also asked him to put other criteria before soccer. He understood after I asked him to imagine attending college in his freshman year after one week of classes and soccer practice and he got the career ending injury. Would he still want to attend that school? Only then did the right questions come into focus.
- Areas of study – what major was he looking for OR did he want a school offering many choices of majors.
- Would he want a large or small school?
- Would he be on campus or commute?
- Was it a car ride, train ride or a flight away from home?
- Did he see himself in a classroom of 20 students or a lecture hall of more than 100?
- Where would he meet professors, mentors and new friends - the people and places he otherwise would not be exposed to.
- What non-academic activities and opportunities, including internships, would be available?
- Was his only goal monetary . . .to maximize his return on his investment for his time and efforts spent?
The final question for yourself and your child is what financial resources are available from colleges as well as all other sources? I have counseled parents over the years that there is no silver bullet for paying for college. It consists of:
- The money saved beforehand (use a 529 plan and start early)
- Scholarships and grants - $46 billion in grants and scholarships are awarded annually from the US Dept of Education and colleges and universities, $3.3 billion in financial aid comes from private sources including foundations, non-profits and professional groups.
- Income from the child working while in college
- Redirecting current income from parents while the child is in school
- Student loans taken out by the student and the parents.
A warning to parents: retirement savings should take priority over paying for your child’s college. According to a Fidelity study, 40% of parents of 10th graders have not discussed how much their kids will be expected to contribute to the cost of college. Forbes recently reported that 44.7 million people have $1.53 trillion (that’s Trillion with a T) in outstanding student loans for an average of $37,180 per person.
According to a recent article in Barron’s, 72% of parents say they have put their children’s interest ahead of their own need to save for retirement. 68% said they would be willing to delay retirement to pay for college. This has led more seniors (ages 65-74) to have more debt. Today the number of seniors in debt has doubled to 70% versus 1992.
Well-meaning parents who feel “a cultural requirement” to pay for their kids’ college may not only be harming themselves but also may be hurting their children financially and delaying their ability to mature as responsible adults.
So let me release you from this self-imposed mandate to get your kid into prestigious schools or any college that you can’t afford. One alternative is attending a community college for two years, which allows all credits to matriculate at state universities. This alternative would cost a fraction of what you would have spent for a private university.
I’ll let you in another secret: What your children do at college matters much more than where they go! The 2014 Gallup-Purdue Index studied 30,000 graduates and found NO correlation between college selectivity and future job satisfaction or well-being. It just makes sense that students who are engaged and study hard, will be the ones who learn and earn the most whether they attend an Ivy League school or a local community college. After all both Chris Lee and I are products of Meriden Public Schools and Connecticut State Universities! As Wall Street Journal reporter, Greg Ip recently noted, “The fact that smart, ambitious children who attend elite colleges also do well in life doesn’t mean the first caused the second”.
