The prospect of paying for college can be quite overwhelming. Because we love our children and want the best for them, sometimes as parents, we are not rational in how we plan to pay. So let’s take a look at a “payment plan”.
Of course every family is different. There are families who cannot afford to contribute any money to the college experience, and others who can write a check. So let’s start with the family who cannot contribute at all.
There are ways a student who has no financial support can go to college without incurring a massive amount of debt. Let’s take a look at the community college. The first community college was founded in 1901, and was created to provide associate degrees, certificate programs, developmental programs, vocational programs, and liberal arts classes that could transfer to 4 year universities -all at an affordable price. There are nearly 1100 community colleges in America and they cost about $3500 per year to attend. A student living at home, and working at minimum wage for 20 hours a week could pay this amount. Can’t work 20 hours a week? Student Federal Loans are $5500 for a freshman. This would leave a balance of about $750 per year and even less the sophomore year. Students must be very focused and pay attention to the classes they take in order to be eligible to transfer in two years!
So at the end of two years, a student can transfer to Fresno State or Cal State Bakersfield and continue to live at home. The state university system is a system that provides local institutions so that students can still live at home and keep college affordable. Fresno State tuition is about $8000 per year. Student loans the junior and senior year are about $7500 per year. Once again, we see that college is currently accessible to anyone who wants to go to college even if the family cannot contribute any financial support.
Over a 4 year period, if a student chooses not to work, he/she could borrow about $29,000 to get through college. If he/she lives at home and give up Starbucks (tongue-in-cheek), it is possible to get a 4 year degree with no financial support from the family and minimal loan debt. While I am not a big fan of loans if they are avoidable, a reasonable amount of debt is acceptable when looking at return on investment. The payment on $29,000 would be about $300 for 10 years, or $600 for 5 years-less than some car payments.
So why do we have a $1.5 trillion debt in this country? The answer is simple. Loans are easy to get. Parents want “the best” for their children and sometimes take on unreasonable debt to be sure that “the best” happens. They are paying for “the college experience”. So how does a family avoid this? There are several steps.
1. Make a budget and determine how much you can afford to pay for college.
2. Figure out your Expected Family Contribution (EFC-the minimum amount a college will expect you to pay)
3. Find colleges where your student will get the most financial aid-could be need-based aid or merit-based aid.
4. Be sure student is on a 4 year plan. Sometimes it is difficult to finish the public universities in 4 years.
5. Be sure the amount you can afford to pay matches the amount you will be expected to pay!
This sounds like a logical plan. The problem is that families let emotion creep into the decision. There are ways to budget for college so that a family does not take on too much debt. Even if you are one of the lucky families who can pay-as-you-go, wouldn’t it be better to pay less?
