College has always been a recommended path for teens headed to adulthood, and for good reason. Studies show that college graduates earn more than individuals without a college degree, develop more independence and confidence, create a better network of friends, have better communication skills, are more likely to move up the socioeconomic ladder, more likely to make healthy lifestyle choices, and are more satisfied with their jobs.

Despite these great benefits, there has been a growing concern over the cost of college. Currently, college tuition and fees are rising faster than inflation. The average annual cost for tuition, room and board at a private four-year institution is $42,419, and many students leave their college burdened with heavy debt. Of graduating seniors last year, approximately 70% had some amount of student loan debt.

The Wall Street Journal recently reported that the class of 2014 had the most debt of any college graduating class, with the average graduate with student-loan debt owing $33,000. Student debt is straining millions of students’ and families’ finances. A Sallie Mae report found that the typical American family paid for nearly a third of college costs with scholarships and grants, another third with loans, and the final third with their own income and savings.

With a price tag so high and the debt burden rising, is college worth it?

Experts say yes.

Labor Department statistics show that the pay gap between college graduates and high school graduates is at a record high. The unemployment rate for people with a bachelor’s degree was only one third of the rate of people with only a high school diploma or GED. Studies confirm that college graduates are more likely to be and stay employed and earn a larger wage than those without college degrees.

Experts caution that there are a couple factors that impact your return on investment:

• Graduating on time. Teens who take more time to get an undergraduate degree are more likely to be burdened with debt. Complete College America, a nonprofit organization, published a report last year that said the majority of college students don’t actually graduate on time, with rates as low as 19 percent at most public universities. An extra year of tuition and fees, plus the lost wages from potential employment, makes graduating late an expensive proposition.
• Choosing certain majors. While it’s true that all college graduates tend to make more, teens who pursue careers in the fields of science, technology, engineering, and math have a much higher return on investment than other majors.

Even though college graduates enter the workforce four years later than someone with a high school degree, the US News & World Report states that college graduates make an average of over $1 million more over the course of their lifetime. College is still a wise investment.

How can you figure out what you can afford?

The key to making college worth the money you spend on it is to determine what colleges your family can actually afford. First, you must figure out how much a degree will probably cost and the average salary of the student’s intended career field. You can find both of these figures online.

• Visit the National Center for Education Statistics College Navigator website to:
  • research a college’s average net cost (the actual price paid, not what they say the full price is – it’s similar to never paying the sticker price when shopping for a car)
  • discover how much families in different income brackets paid for a particular college
  • calculate the total cost of their child’s four-year education, with tuition inflation
• Visit the Department of Labor’s Occupational Outlook Handbook (bls.gov/oco/). This free resource details earnings for almost every career available , as well as what schooling is needed, what workers actually do on the job, working conditions, and expected job prospects.

 

Experts agree that as long as the total debt at graduation is less than the annual starting salary, your child should be able to pay back his/her student loans in 10 years or less. If you stretch beyond that rule of thumb, your student may find their debt burden overwhelming.

How can you minimize your teen’s student loan debt?

There are several ways your teen can ensure their debt doesn’t expand beyond their means:

• Fill out the Free Application for Federal Student Aid (FAFSA), since your teen may qualify for grants, which are free.
• Search for scholarships.
  • Use online sites like Scholarships.com and FastWeb.com.
  • Ask about scholarships from the college you plan to attend, community organizations, churches, clubs, charities, and businesses.
  • Do not assume that scholarships are awarded solely on academic achievement. Thousands of scholarships are based on other criteria, such as athletic ability, artistic talent, community service, or plans to study in a particular field.
• Have your teen pay as much out of pocket toward college that they can, by working part-time.
• Encourage your teen to graduate faster to avoid more tuition and fees.
• Compare loans. If your student does need to get a loan, then look for loans with the lowest interest rates, which tend to be federal student loans instead of privates ones. Additionally, pay attention to the loan requirements. Federal student loans come with crucial consumer protections like income-based repayment plans, while private loans offer little or no relief if you hit a difficult time in life.

 

Final Thoughts…

College is worth the investment of time and money because it can open the doorway to a more successful adulthood. But as with anything worthwhile, parents and teens need to do research to make sure they minimize the potential for a burdensome debt load. While we should encourage students to go to college, we should add that they should go to one that they can afford. Work with your teen to ensure that their total debt at graduation is less than their annual starting salary.