Part I: The Financial Landscape of Education Today

The financial landscape of higher education in the U.S. is vast. At one corner are educational institutions with endowments in the billions—money that connects them to hospitals, research centers, businesses, local cultural units, and job creation. At another corner are people who want to remain competitive in an economy where, it has been shown, a standard college degree means $450,000 more in earnings than a high school diploma. In 1975 it cost about $2,400 on average per year to get a four year degree at a public school. In 2015, the same education cost around $9,500.

Other notable things have happened around the country in the same time:

Anyone interested in a college degree today has to pay more money for it than they did thirty years ago. On top of that, the average hourly salary of an American worker between 1964 and 2014 increased by less than a real dollar. The net effect here is that individuals today have to work a lot more hours to build the capacity to pay for things like a college education.

To deal with this, Americans entering college over the last 20 years have taken out more and more student loans-- $250 billion in 2003 to more than $900 billion in 2011. The average student’s debt upon graduation in 2015 was around $30,000, and college grads aren’t finding it easier to obtain jobs right out of school. In early 2016 the unemployment rate among people 20-24 years old was 8.8%, higher than the national average.

There is no single explanation for inflation and the huge rise in the average cost of post-secondary tuition, but one thing is clear: if you want to get a college degree today, you have to deal with the reality that it’s expensive. If you are going to pay money or obtain debt for a college education, you need to make an effort to align your future financial goals with what is realistic today. It might mean that you forego enrolling in a four-year program for something cheaper and local. It might mean focusing on a “practical” degree rather than one whose graduating job prospects are very low or perceived as risky.

A college-level education is an investment. If you choose to go into debt for that investment, that is your prerogative. Financing your degree (and your desired lifestyle once you have it) should be a top priority when deciding what path is going to work best for you.

Defraying the Cost of Tuition

$30,000 is a lot of debt to pay off when it comes to your monthly bills—you could be paying more than $350 a month. Are you prepared to make that payment for 10 years once you graduate from college? If that sounds scary or like something you’re not willing to do, then you’ll have to consider how to minimize your debt as much as possible. At the end of the day, it is no one’s responsibility but your own to fulfill your desires when it comes to college. If your school or path of choice is too expensive, and you do not have any way of paying that expense, you’ll have to look for other options.

Student Loans

Student loans are a popular and readily available form of funding for school. Private organizations (like banks) and public organizations (like state and federal governments) offer student loan options. Public loans have fixed rates and maximums set by statute. Private loans are limited by banking regulation, but are much more flexible based on credit score and the terms of the loan.

In order to obtain any federal loans or aid, a prospective student has to fill out the Federal Application for Financial Student Aid (FAFSA), a document that profiles the student’s economic background and the background of his or her parents or legal guardians. These loans usually have single-digit interest rates (currently 4.29% for undergraduate students), and are among the most affordable available today. Filling out the FAFSA does not obligate a prospective student to accept any grants or loans offered.

Scholarships

Scholarships and grants are very similar to each other: in each case someone is awarded money that they do not have to pay back to the giver. Scholarship money is far from “free” however – it takes many hours to search for the right opportunities and to fill out applications, which in the case of highly competitive awards can entail essays and rigorous arguments to show why you’re deserving. There is no real limit to the amount of scholarships that a person can apply to, so anyone determined enough could apply for and win enough free money to pay for an entire degree.

Scholarships tend to be unique and focused on a specific demographic. There are scholarships for women, men, athletes, math whizzes, low-income students, writers, scientists, people of all races. . . . and many combinations thereof. To increase your chances of being awarded free money, the best thing you can do is make sure that the scholarships you apply for match your academic goals as closely as possible. Do you come from a low-income background and have a strong interest in math? Apply to scholarships that cater to your demographic. When you apply for enrollment in a college program, being awarded relevant scholarships in your domain of interest is one way to show you are serious about pursuing a higher level of education.

A few online scholarship aggregators are listed below to show the breadth of available options. You should also check with your guidance counselor (if you are in high school) or with local career centers and libraries for locally-based opportunities. There might be a business or an organization that offers scholarships specifically to people in your neighborhood that you can take advantage of. You can also check to see if there are national or international associations related to your field of interest – chances are they have both networking and scholarship opportunities for the right people.

 

  • Fastweb – One of the largest scholarship aggregators, Fastweb also helps students find colleges and navigate financial aid opportunities.
  • GoGrad – Are you interested in a graduate degree? GoGrad is useful in searching a narrow field of graduate-level scholarships and fellowships. GoGrad also provides lists specifically for MBA programs, veterans, LGBT students, and women.
  • Unigo – In addition to scholarships, this aggregator lists student loan and college reviews.
  • Federal Student Aid – This site provides information on the various forms of student aid that the government provides, including both grants and loans.
  • Scholarships for Women – This scholarship website focuses on opportunities specific to women.
  • The Christian Connector – If you have a Christian background, this site will help you find religious-based scholarships and degree opportunities.
  • National Science Foundation – The NSF offers several scholarship and other funding opportunities for students interested in science, technology, engineering and mathematics (STEM) disciplines.
  • Military.com scholarship finder – If you are a veteran who needs funding beyond what is available from the GI Bill for an out-of-state college or specialized program, Military.com’s scholarship finder can point you in the right direction.
  • SchoolJournalism.org – Interested in news, journalism, or investigative reporting? This site’s scholarship section shows some of the best opportunities for people interested in journalism and communications.

Grants and Forgiveness Programs

Grants are like scholarships, but are usually attached to a nonprofit body or a public organization and tend to focus less on merit and more on established need. One common example is the Pell Grant, which helps lower the cost of college for students whose families cannot give much to their children for education. These government grants can be upwards of thousands of dollars per year, and every student that is eligible will receive one as a typical part of their financial package. The Post-9/11 GI Bill is like a grant, and is money reserved for those who have spent time in the armed forces. It is the largest program of its type, and pays complete tuition and fees at in-state schools.

Forgiveness programs discharge the value of loans that you’ve already taken out. Many federal loans can be discharged if a graduate teaches or performs public service in an area that needs library science professionals, social workers, or other civic workers. These programs usually require a student to remain current with loan payments in the meanwhile, but are a good way to start a career and get rid of debt at the same time. Some companies even offer graduated loan forgiveness plans designed to help ease the burden of debt on employees and give them incentives to stay with the business long-term.

A Looming Debt Crisis?

Some economists and academics contend that there is a crisis building in student debt. Large increases in post-secondary tuition rates lead to more debt and more defaulting on that debt. When people can’t pay back their loans, they sometimes find themselves in a downward spiral. Interest gets higher; any wages they make and need for basic living can be garnished heavily by the government; they can even be sued. Student debt is serious and it stays with you until it is paid off. But there are two unique changes to the borrowing situation that can make things even more complex.

Bankruptcy Changes

Private student loans generally cannot be discharged in bankruptcy. A change in bankruptcy law initiated in 2005 gave private student loans a privileged status among financial instruments, allowing them to follow students through a bankruptcy filing. Students who find themselves drowning in debt can discharge other forms like credit card debt and personal loans, but student loans are only forgiven in the direst circumstances.

This has led to two major problems. Some people believe that this change has damaged the bankruptcy system altogether, as those severely in debt leave bankruptcy without any incentive to work since it will provide no new income. Others say that this churn could lead to a bubble, similar to the housing bubble of the late 2000s, which could burst in the economy with big consequences.

Non-Selective Schools

The rise of defaults also stems partially from the rise in students attending schools sometimes described as “non-selective” or “predatory.” These educational institutions encourage students to take on large amounts of debt to study despite weak educational outcomes. Students at these schools often come from poorer families and are released back into the job market with few connections, a degree of dubious value, and a lot of debt—a recipe for disaster. Accreditation has become an extremely valuable tool in filtering out predatory educational opportunities, especially with the growth and proliferation of online distance education.

With no means of getting federal or state loans, low chances of finding a job with appropriate pay, and a degree that seems unattractive to employers, students in these situations often default. When coupled with bankruptcy changes, students end up worse off than before they started college.

There have been many high-profile cases against these institutions, but they still exist. Anyone looking for a non-traditional education should be especially cautious about programs that cannot show evidence for any guarantees or claims they make about the value of the degree you would get from them. And above all: minimize your debt as much as possible.