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HSFPP Update # 217—When Selecting a College, Look at Cost and How Much Debt You Will Owe Upon Graduation

Message from Flashman: This week’s update helps teens understand the reality of student loans and how to borrow smart to pay for college. Many teens think they can’t afford postsecondary education and the majority of them have no idea how they could pay for college and other postsecondary education or training without taking on overwhelming debt. As early as the 8th grade, teens need to begin thinking about how they’re going to pay for their education and training beyond high school. Kentucky’s Reality Store activity shows teens how much it will cost to live, as well as the need for a good education beyond high school. Teens also need to understand that good grades in high school and college really pay, as the KEES program rewards Kentucky students who achieve in school.

 

Academic Expectations:

Academic Expectation 1.2
Students make sense of the variety of materials they read.
Unit 1-7

Academic Expectation 2.33
Students demonstrate the skills to evaluate and use services and resources available in their community.
Unit 5

Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.
Units 2-6

 

Web Site Picks of the Week:

http://www.finaid.org/calculators/

The Financial Aid Web site is one of the best sites for a wealth of information on postsecondary education. One component you might find especially useful is their calculator page.

http://www.collegeloan-help.com/

This site provides current information on student loans.

 

In the New$...When Selecting a College, Look at Cost and How Much Debt You Will Owe Upon Graduation

by Claire Kimberly, family studies graduate student at the University of Kentucky

When I was a senior in high school, I decided that I wanted to attend a smaller university. Not being a very loud or rambunctious person, I knew I would feel more comfortable with the atmosphere at a smaller school. However, I didn’t realize the costs that came with this decision.

The price tag for a college education is steadily rising. Four out of ten students with a bachelor's degree face unmanageable debts upon finishing college, according to a report released by State Public Interest Research Groups. This is most likely due to the fact that the cost of tuition has risen by 439% since 1982. A study just released by the Project on Student Debt reports that “The average student loan debt for graduating seniors was [$19,646,] eight percent higher in 2006 than in 2005, while starting salaries only increased by four percent in the same period....” Furthermore, Consumer Action News states that student debt has increased 6% from 2006 to 2007. And the reality may be worse than that: the actual average is likely over $21,000.

What is causing this increase? One thing is the number of students. The “baby boomlet” has resulted in more people going to college. In 2008, some of the more selective schools have even doubled the number of students attending. Furthermore, the demand for a college degree to get a job has also increased. Another variable involved in increasing tuition costs (and the debt that results) is that financial support from federal and state governments has decreased in recent years. Budgets are tight, which makes it more difficult for governments to support education, though they don’t deny its value.

Reports show that Kentucky graduating students had the third-lowest average debt for 2006, an average of $15,406, behind only Hawaii and Utah. But, while we might congratulate ourselves on having such low debt compared with students in almost all other states, we are not actually that well off. $15,000 is a lot of money for anyone beginning a career to pay back. And, even worse, many high school graduates do not go on to college, or perhaps even for technical or vocational training, because those from low-income families think they cannot afford it. How many of you don’t even consider postsecondary education an option? Well, you should, as it could be within your reach.

Berea College, in Berea, Kentucky, is a private college that was founded to provide education strictly for families who could not afford to send their children to college. It is also one of the top private colleges in the South, where students are not charged tuition, but are required to work at least 10 hours per week at the school. Berea’s average student debt for the Class of 2006 was only $7,638, which many still needed to borrow to cover the cost of books and supplies, transportation, and other related expenses.

The report showed that average student debt for the Class of 2006 at the University of Louisville was only $10,906, probably because many students commute to college and live at home. It is noteworthy, however, that that figure is down from $15,128 for their Class of 2005. An increased commitment to helping low-income students could be the reason for such a large decrease in just one year, which might give us reason to hope that average student debt will experience a similar decrease at the University of Kentucky, where we have since instituted a similar program to help low-income students.

Another way to lower your student debt in Kentucky is to get good grades in high school. The Kentucky Educational Excellence Scholarship (KEES), funded by Kentucky Lottery proceeds, is available to students who earn at least a 2.5 GPA in high school. The better a student’s grades, the more he or she can earn toward college or technical school. A student who earned a 2.5 GPA in high school can earn $125 for each year of postsecondary study, and one who earned a 3.5 can earn $375 per year; while a student who earned a 4.0 can earn $500 for each year of postsecondary study. In addition, KEES-eligible students can earn bonuses based on their ACT score: A student who scored 15 on the ACT can earn a bonus of $36 for each year of postsecondary study, and one who scored 25 can earn a bonus of $393 per year; while a student who scored 28+ can earn a bonus of $500 for each year of postsecondary study. Keep in mind, however, that continuing to receive KEES money is contingent upon maintaining good grades. Failure to keep your grades up can result in your scholarship money being reduced or cut off for the next school year; you can get your KEES money reinstated, however, by bringing your grades back up. Add these figures up to see how much you can save yourself on educational debt over two years for technical school or four years for college. Do you see how earning good grades pays?

In addition to KEES, other scholarship money and low-cost financial assistance is available. Be sure to find out what options are open to you, as scholarships, fellowships, and other grants can save you a ton of money that you would otherwise owe after college. And be aware also that the right college degree will increase a graduate's lifetime income by more than $1 million. Do you want to be a millionaire? It is more than possible and you can to begin now by earning good grades in school!

Sources:

(1) “New Study Finds Student Loan Debt Increased More Than Starting Salaries in 2006” [News Release], The Project on Student Debt, 9/25/07. http://projectonstudentdebt.org/files/pub/2006_state_debt_NR.pdf 

(2) “Student Debt and the Class of 2006,” The Project on Student Debt, September 2007. http://projectonstudentdebt.org/files/pub/State_by_State_report_FINAL.pdf

(3) “KHEAA / Kentucky Educational Excellence Scholarship,” Kentucky Higher Education Assistance Authority. http://www.kheaa.org/prog_keeshome.html

(4) “Student Loan Debt: Mortgaging the Future,” Consumer Action News, Winter 2008 – 2009. http://www.consumer-action.org/news/articles/2008_2009_winter_issue/#Topic_10

(5) “Is College Still Worth the Price?”  CNNMoney.com, August 22, 2008. Found on: http://www.nasfaa.org/publications/2008/awworth082108.html

 

Discussion Questions:

1. What do you plan to do after high school? Do you plan to go on to college, technical school, or for further training? Do you have a field of study in mind, or a vocation that you think might provide you the kind of life you want to live?
   
   
   
2. What are you doing now to save money for postsecondary education or training? What are you doing to save yourself unnecessary educational debt?
   
   
   
3. Do you think your grades will help or hurt you as you make plans for postsecondary education? What can you do to improve your grades (and, therefore, your chances for getting into the school of your choice and not taking on too much debt)?
   
   
   
4. Are there other things you think you can do to save money for postsecondary education and to avoid unnecessary educational debt?
   
   
   
5. What can government, educational institutions, and other organizations do to make it easier for more students to go on for postsecondary education?

 

 

Follow-up Activity:

Go to the Occupational Outlook Handbook Web site: http://www.bls.gov/oco/

Choose an occupation that might interest you, but that you know little about, and answer the following questions:

1. Training needed: List high school courses, if required, as well as other types of training.
   
   
   
2. Job outlook: Will there be more jobs in this field, fewer, or about the same?
   
   
   
3. How much earnings to expect: beginning wage or salary; median salary; and apprentice salary, if appropriate.

 

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/hes/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:

The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/hes/fcs/HSFP/response.htm.