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Is a College Education Worth the Cost?

It depends.  Traditionally pursuing a college education has been a worthy endeavor as it 1) presents the possibility for higher earnings in life; 2) leads to personal development through intellectual discourse and 3) leads to a better society as an educated society is a more productive one.  Recently, however, the pursuit of such has been challenged with the increased costs of schooling paired with the decrease in financial resources available to students.  This has led to a significant increase in students acquiring debt to fund their college education.  While there is no value or price tag on intellectual development, there is a financial case to be made for mitigating a debt burden on students graduating college.  The increase debt burden on recent graduates has 1) led students to have to stay at home with their parents longer after graduating, 2) deterred young families from pursuing their dreams (i.e. starting a family, buying a house, etc.) due to large and long term debt payments and 3) led to frustrating career decisions in pursuit of higher paying jobs to be able to pay the debt rather than careers in areas of personal passion and talent.  So how can upcoming college students and their parents manage the paradox of pursuing the value of an education without taking on debt?  The key, as with many success stories in life, is to have a plan or a strategy.

Good ‘Ole Fashion Savings

There are various vehicles to save for college.  But even this requires a strategy as one has to consider: 1) how much money to save, 2) where to save this money, 3) how to maximize the use of this money, avoiding potential tax or financial aid snafus, etc.  Please go to the following link in order to find out more information about various savings vehicles for college.  https://www.allgenfinancial.com/college-saving-vehicles/

Among the several options of vehicles to save for college, the Prepaid College plan has specific deadlines for enrollment.  In Florida, the enrollment period for the plan ends on February 29, 2016.  Missing this deadline means waiting until the following year’s open enrollment which usually begins sometime around November closing at the end of February.  In addition, waiting to enroll means potentially paying more based the following year’s price schedule.  For more information please visit www.myfloridaprepaid.com .

Alternate Ways to Find a College Education

Sometimes life gets in the way and saving for college does not happen.  Or perhaps by the time life afforded us the ability to save it was too late to save enough.  At this point, one has to consider alternate ways to pay for college in a debt-free manner.  The first and usual method is by applying for financial aid.  Persons seeking financial aid typically need to fill out a Free Application for Federal Student Aid (FAFSA).  Many educational institutions use this online form as a tool to determine the financial aid package they will offer to students. The deadline for the State of Florida to submit the form is May 15, 2016.  However, certain schools may require an earlier submission in order to calculate aid packages.  For more information visit www.fafsa.ed.gov .  If one is eligible for financial aid, that aid may come in the form of grants and/or loans.  It is important that in applying for college, one learn about the resources and financial aid policies of various educational institutions. These can vary significantly from one college or institution to the next.

Other ways of paying for college include working through school or possibly working for an organization that will pay for your education.  Many have worked as waiters, bellmen, etc. while attending college in order to supplement whatever shortfall financial aid was not able to cover.  And finally, consider attending an in-state or community school initially as the cost to do so is much less than an out-of-state education for a similar caliber degree. It often does not make sense to pay more for the initial core classes of a college degree merely to attend a school out of state.  Many students have alternatively attended an in-state school or community college for the first two years, then transferred to another school of choice once their career path has been more defined.  In addition, depending on the particular field of study, graduate studies/institutions often have more of an impact on future potential earnings than the school of the undergraduate degree.  That being said, graduate degrees can lead to more student debt and less earnings during your college years.  An alternative is to get your undergrad, pursue your career, then once you have a “foot in the door”, go after designations or certifications that are more applicable to the field.  For example, in the financial field, you could get a Chartered Financial Analyst (CFA) designation as opposed to a Masters in Finance. Designations and certifications are far less expensive than a master’s degree while also being more applicable to the field.  Often the company you work for will reimburse you for the designation.

Keep in mind that not all careers depend on a college education.  There are many vocational career choices that may appeal to the student and also provide a great standard of living.  The demand for many of these is increasing: airplane mechanics, health care technicians, beauty services (aestheticians), etc.  These technical degrees can be achieved in a short time period (1-2 years) and they are far less expensive.  This gives you the benefit of saving money on your education and earning money sooner.

The ideal goal is to plan a course of action whereby one obtains the proper education with no debt.  Recently we counseled a young couple who just had their first baby, the husband makes $60k a year, and the wife desires to stay home with their new baby. Unfortunately, $110k in student loans makes this dream unattainable, and to make matters worse, the husband had to leave his dream job to earn more money at a job that is not fulfilling. The stress of graduating with tens of thousands of dollars in debt accompanied with an entry level salary could have detrimental effects on the graduate and his/her family. In addition to the challenge of figuring out where to work, where to live, managing a new career, and potentially a new family, a monthly debt payment for student loans that lasts for decades serves as a severe deterrent to starting and nurturing a family’s future.  Worse yet, is taking on student loans and then not graduating, which happens all too often.  Is a college education worth the cost? Yes, if it propels one into a fulfilling career and does not saddle one with years of debt.  The college experience is typically a young person’s transition into adulthood.  As such, we suggest students be allowed to experience the challenges of working, strategizing, being diligent, and developing good financial habits as part of choosing/shaping a college path.  These skills can ultimately translate into successful decisions later in life.

Life is happening, shouldn’t your financial plan be happening also?  Talk to your Allgen advisor.  We’re here for you.

Written by Paul Roldan, Chief Executive Officer with Allgen Financial Advisors, Inc.

 

Advisory services are offered through Allgen Financial Advisors, Inc., a registered investment advisor.

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