Monday, October 1, 2012

The Real Cost of College

On Friday, September 28th, the Wall Street Journal reported that a study released by the Pew Research Center...showed that 40% of households headed by someone younger than 35 years old have student debt. 

Take a moment to think about what this actually means for the people behind these numbers. The 30s are supposed to be a time for This statistic tells us that 40% of the households in America who are supposed to be laying the foundation the rest of their lives will be built on are basically building on sand that keeps getting washed out from under them!

How did they get there? Were they just irresponsible? What were they thinking? You might be surprised.

Let's take a look at a student who graduated high school in 2004 and headed off to college. Most of us would agree that the following scenario is actually a pretty good situation for launching into college*:
  • A student decides to go to an in-state, public college for a four year degree to the tune of $68,000.
    • After securing two grants for a total of $11,000 in assistance that does not have to be paid back, the total cost is brought down to $57,000
  • This diligent student also decides to work part time to help pay his/her way and manages to earn $30,000 over those four years. Bringing the difference still outstanding to $27,000.
  • Loans will have to cover the rest--not ideal, but a reality for most college students.
    • Maximum Stafford Loan for four years--$23,000
    • Remaining Nellie Mae EXCEL Loan--$4,000
That is typically as far as most students and their parents think when it comes to going to college. After all, we've all been told how necessary it is to get a college degree. So you do what needs to be done and you commit to figuring out the rest as it comes. But here's what they are facing having worked this plan, successfully graduating and launching into their adult lives:
  • Interest kicks in
    • Stafford Loan Fees & Deferred Interest--$3,576
    • Bringing the total Stafford Loan Balance at Graduation to $26,576
    • EXCEL Loan Fees and Deferred Interest--$1,274
    • Bringing the total EXCEL Loan Balance at Graduation to $5,274
  • Thankfully, monthly payments are possible and set up on a 10 year term
    • Stafford Monthly Payment--$260
    • EXCEL Monthly Payment--$60
    • Total Student Loan Payment--$321
That seems manageable, right? So, this graduate of the class of '09 is committing to the following for the next 10 years of his/her life:
  • Projected Starting Salary in 2009--$40,000
  • Projected Take-Home Pay (70%)--$28,000
  • 12 Total Monthly Payments--$3,848
  • Percentage of Take-Home Pay immediately consumed by student loan debt repayment--14%
It's not pleasant, but possible. However, we know looking back that the job market and economy was also becoming very challenging at this point. How did they fair? Did they get that average pay or better? Did they marry someone who was in the same position? If they did, now almost 30% of the household income is going to Student Loan debt repayment. What does that mean for housing, cars, children, daycare, school, etc? 

And if this is a "good" scenario from 2005-2009, what would it look like for the students who are starting college today? The same four year degree will run them about $80,000, but they are not likely to be graduating in as friendly of a job market. They are not even as likely to be able to finish in four years. What will these students be facing when they are 35?

Thankfully, there are options out there that don't have to result in immediately handing over 15% or more of your income for the first ten years after college. Consider this: 
For less than the amount most college students will pay for their freshman year at an in-state public college, Accelerate University clients will complete their entire degree.

In the time that most college students will complete their freshman year and take a summer break, Accelerate University clients will complete their entire degree.

For half the price of a junior college course, you can give the Accelerate University method a try to see if it might work for you! What do you have to lose?

To find out more about the Accelerate University Program, view our Informational Webinar today!

*Wightman, Scott & Kris. College without Compromise. St. Louis, MO: Cenveo Plus, 2005

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