Student Indebtedness

I've been involved in several discussions lately about the benefits and dangers associated with students borrowing money to pay for their college educations.

Comment #1: My niece is crazy. She's borrowed $90K to finance her doctorate in Physical Therapy.

Comment #2: What's the maximum an undergraduate can borrow in educational loans?

Comment #3: Where can a family go to find out the starting salaries of various occupations so that the student can see what % of his salary he'll have to pay each month to pay off his student loans?

These are all important and pressing issues for students and families. Paying for college is one of the puzzle pieces necessary for a successful college search. It has many components and can be confusing. A great primer for learning about student loans can be found on a website we regularly recommend.

A few complications related to the comments listed above sparked my interest.

First, what would the PT student be doing if she hadn't borrowed money to pursue her education and preferred career choice?

And, of course, most of us have read articles in newspapers or magazines periodically decrying students who have been duped into borrowing over $100K to finance their educations. To be a 23 year old with $100K in debt is an alarming situation. The government allows students to borrow about $23K in guaranteed student loans during their undergraduate years. Above that amount, the kids are getting their money somewhere else. Where? Banks? What bank do you know that will lend a student 10s of thousands of dollars with no collateral? OK, so maybe they need their parents to co-sign. These may be some of the same parents who borrowed money for a home with no down-payment, no ability to pay and no concept of indebtedness. We'd hope that the practice of lending money to people with no ability to pay has ended.

Where else can unemployed young adults pursuing college borrow money? It seems that some colleges may have funds they lend to students with few questions asked.

However, some of the $100K writers claim student's have borrowed is actually debt in the parents name. Parents can borrow up to the cost of attendance through the PLUS loan program. That debt is in the parents name, not the student's name. This term is very clearly stated in the borrowing documents. So it doesn't matter what arrangements, understandings, or agreements parents have with their children, if a PLUS loan doesn't get paid back, that debt is reflected on the parents credit rating.

This situation is exemplified in an article from the New York Times. Some readers think that NYU is terrible for allowing this to happen. Others blame the government for allowing a family to borrow this much money. Others think it's ridiculous for a student with this major to borrow any money considering her earning potential may be limited. Others think that it's reasonable to assume that the mother, a business owner, would understand credit, and hold her responsible for her and her daughter's plight. Still others blame the University for not holding their expenses down and allowing their costs to explode over the last 10 years.

Some conclude that paying for private education is ridiculous and all students should attend their state universities. The trouble with that idea is that there aren't enough spots at public universities for everyone who wants to go to college. One current trend worth watching is that as public university applications increase as families look for more affordable options, the selectivity of those schools increases, making attendance at public universities unreachable for average students.

College is expensive. There's no doubt. It's really up to each family to decide, based on their values, what's reasonable. This is definitely one instance where "ONE SIZE DOESN'T FIT ALL". It's generally accepted that families should not use their retirement funds to pay for college. It's also generally accepted that a person with a college degree has a much greater earning potential over a lifetime that someone without a degree.

The purpose of this post is to raise issues. There aren't easy answers. Selecting the right set of colleges considering the Student, Success Factors, College Characteristics and Affordability is likely the best approach for making reasoned decisions about college.

Solving the College Admissions Puzzle - Seminar

Parents have lots of questions about college admissions and how to best help their teen find and apply to the right set of colleges. You can search the internet, read blogs, watch TV shows, listen to your friends and neighbors, and still have questions specific to your situation. You want the personal attention of an experienced college counselor.

Valerie Broughton and Donna Kelly, College Connectors consultants, are presenting a workshop for parents on June 23 at Hopkins High School at 7:00. The workshop will address a complete array of issues that concern families as they approach the college admissions and application tasks: admissions tests, references, essays, choosing the right college, and high school curricular decisions. The seminar is free and in conjunction with an opportunity for your teen to take a PSAT/SAT/ACT practice test. There will be a follow-up session the next week, June 30, focusing on the Top 10 - What Colleges look for in Applicants and College Scholarships and Financial Aid.

Here's more information on the seminar series. Get your questions ready.

See you Wednesday night!

8 Habits of Successful College Students

Dick Light, Harvard Professor, talked to us at the HECA convention earlier this week. He reported the results of years of research investigating what makes some students successful in college while others struggle. Here's the list:

1. Establish a relationship with at least one faculty member each semester.

2. Take one course each semester that covers something new and interesting to you.

3. Make friends with students who have different backgrounds, beliefs and experiences than you do.

4. Connect what you're learning in class with what's going on in your life or in the world.

5. No matter how successful you were in high school, you need to develop better study and better time management strategies.

6. Try new activities to develop new interests while continuing with activities you know you enjoy and are good at.

7. Be sure to find something to participate in, some extra-curricular activity or community service project.

8. Remember YOYO - You're On Your Own.

There are lots of ups and downs the first year of college. Here are some additional tips.

College Visits - shopping or buying trips

Parents often ask, "When's the best time to take my child on college visits?" My quick answer is, "Whenever you can". Fall or summer or spring or winter, whatever works into your busy family schedule, that's the best time.

College Visits fall in to two categories, shopping or buying visits.

Shopping visits take place during the sophomore and junior year and are best designed to help students clarify the criteria they want in a college. Here are three helpful questions students can be asking themselves at this stage in their search:

1. What do I like about this college?
2. What do I dislike about this college?
3. What questions do I have about this college?
   

Students limit the value of visits when they ask themselves the single question: Do I want to apply here?

Criteria can be clarified by visiting colleges that may or may not make it to a student's final college list. That's why I recommend that in 10th and 11th grade, students and their families take advantage of local college visits. Even if a student has committed herself to the "2 state away rule"*, visiting colleges in her back yard can help identify college characteristics that will make a campus a good match or not.

The importance of the idea of shopping visits is exemplified by the recommendation we make for all of our Minnesota students. We recommend that they participate in the Minnesota Private College Week. This year, June 21-25 is the week. During this week, all of the private colleges in Minnesota open their doors to prospective students. There's a variety of schools in this group: rural, urban, suburban/religiously affiliated or not/selective to vary selective/liberal arts to programs with career options...... Throw in a visit the the University of MN and a mid-size public university and students will have visited a very wide variety of campuses. With this knowledge and experience, they can move towards clarifying the criteria that are important to them, based on experience, rather than just based on assumptions. This investigation period is crucial to a successful college search.

Buying visits take place once a student is admitted to college. That's during the senior year. By this time, students should have in mind clear criteria of what they want in a college. During their shopping visits, they compare the colleges on the criteria important to them.

*2 state away rule - I'm going to a college at least two states away from where I live.

Happy Trails!

Pieces of the Financial Aid Puzzle

A recent poll found that families are making decisions about college based on inaccurate information. There's lots of information available, but it may be hard to find and confusing to understand. Two articles in the Wall Street Journal recently help families sort through costs/financial aid and paying back student loans.

From the poll article, we hope families learn that the government has begun to require that colleges provide information comparing the "sticker price" to the "discounted price". The sticker price is the total cost of attendance as published by the college and includes tuition, room & board, books, travel and other miscellaneous expenses. The discounted price takes into account all of the scholarships and financial aid that colleges award to students. The specifications of how to calculate the discounted price so that families can compare the data across colleges are vague at this point. We'll be blogging about this further as new approaches are developed. The goal is to find an affordability index comparable across colleges that provides accurate information.

One of the most important items included in the Wall Street Journal articles is the notion of "Professional Judgment Review". That's a phrase that every family should know when talking with college and university financial aid officers. They have lots of discretion and it behooves families to have frank and open discussions with the financial aid office personnel.

Parents - College Admissions has changed. Tips for remaining calm.

Parents are bombarded with information about how college admissions has changed since they were in school. True enough. For some folks, that news creates a hysteria. Macalester College advises their alumni to calm down and think ahead.

Donna Kelly, College Connectors consultant, offers helpful advice on how to navigate the maze and stress of finding the right set of colleges for each student and getting into them. Even more importantly, she advises.

The article discusses current admissions topics like: 'pronoun confusion', 'sticker price', and 'matchmaking'. How many applications should a student submit? The Understanding the Numbers heading in the Admissions Mania article addresses this topic too.

Congratulations to freelance writer, Laura Billings, and the Macalester Today editorial staff for providing helpful information to parents.

Unhappy with your Financial Aid Offer?

Every family we know is considering college cost as an important factor in their child's college decision. Regardless of a family's ability to pay, they're all considering cost and value. As I mentioned yesterday, Net Cost is the most important number.

Families want to know what options they have when the Net Cost still seems impossible. Should they negotiate with a college to try to increase the amount of scholarship money offered? We discourage people from thinking of the discussion with financial aid officers as negotiation. Actually, what you want to do is ask the financial aid officer to reconsider your case and ideally you'll provide the college with new or additional information clarifying your situation. Including information about scholarship offers from other colleges may be part of that clarification.

Here's a great article - great, because I agree with all of it's points!