Debt Versus Education: What You Need To Consider Reply

Education savingsGail Marksjarvis of the Chicago Tribune wrote this article (which is now unfortunately closed off to most viewers on the Chicago Tribune website), stating that students should consider debt when they decide what college to attend. In the past, we’ve argued that college shouldn’t be all about the bottom line, how much money you can make versus how much money you spend. That said, though? Gail Marksjarvis is right — you should consider debt when you decide what school to go to.

Getting a college education is not a purely economic transaction, and it shouldn’t be. You get far more out of an education on a college campus than could be measured with dollar signs. The same is true for online education — it’s hard to measure exactly how valuable to the learning process it is to interact directly with classmates and professors, but the value shouldn’t be understated.

But in the end, if you’re coming out of your college of choice with an anvil tied to your ankles? Then you’re in deep trouble.

You should always pay close attention to how much you’re spending for your education, and whether or not it’s really feasible to pay that bill. The best education in the world can still cause you phenomenal problems if you come out of school with hundreds of thousands of dollars of debt. You don’t want to dig yourself into a hole before you’ve even begun your career.

That said, here are some great ways to both factor debt into your calculations, and improve your overall college experience:

#1: Pursue Financial Aid Like Crazy

A lot of the time when people see the price tags for colleges, their eyes will pop out of their heads. But that’s because they’re looking at sticker price, not the average price that students actually pay to attend. Most students receive plenty of financial aid from myriad sources, including scholarships, loans, grants, and more.

Whenever you’re looking at a school, investigate its financial aid offerings. Find out how much it can help you, and what you’d need to do to get that aid. Be sure to investigate the FAFSA thoroughly, too.

While you should keep in mind how much your college education will cost, you should also always keep hope — there are so many ways to find money to help you pursue your education that as long as you’re dedicated, you can probably find something to soften the blow. If you want to take a look at what’s out there, head over to the Peterson’s scholarship search tool — you can get a pretty good idea of some of the scholarships out there available to help you afford your college education.

#2: Look at College ROI

ROI means “return on investment,” and while you’re going to want to keep your debt low in general, you’re also going to want to make sure you can actually pay off your debt post haste. That’s where college ROI comes in.

Understanding college ROI should give you an idea of the amount of money you’ll be able to make after you graduate, and in turn it’ll give you an idea of whether or not it’s worth incurring a particular amount of debt in exchange for your college education. This tool from Payscale.com is a pretty useful way to sort through and examine different college ROIs, including 20 year ROIs and annual ROIs.

Making a decision of what college to attend should never be entirely about how much money you’ll make in the long run, but it doesn’t make sense not to consider it at all. So be sure to examine how much money you can reasonably expect to make as a result of your college education.

While you’re looking at ROI, make sure to look at college graduate rates, too. Your college isn’t going to give you much of a return on investment if you don’t graduate, and those graduation rates can give you an idea of how hard it is, in general, for students to actually come out of their educations with degrees.

#3: Understand the difference between list price and actual price

Part and parcel to finding scholarships and financial aid is understanding how those affect the price of college. For most higher ed institutions, the list price or sticker price is actually not what students wind up paying — instead, they wind up paying the actual price, or the net price, which includes the financial aid they earn. Here’s an excellent infographic that explains a lot about the difference between list price and actual price.

Understanding that the price you see from most colleges is not the price you’ll pay is crucial. Too many young students write off universities because they think the price is too high just based on the sticker price, not realizing that in the end, they’d actually wind up paying a lot less than that.

This isn’t to say you shouldn’t say no to a college based on its price! But you should understand what the actual price of that college will be, as opposed to the sticker price. You can’t make an educated decision until you know that net price. Ask people on campus, admissions officers, financial aid officers, and guidance counselors about the net price to try to get that information whenever you can.

#4: Investigate alternatives

You’ll be comparing colleges to each other throughout this process, looking at the ROI of one college versus the ROI of another, or the financial aid you can get from one college against the financial aid of another. But you should also be looking into other alternatives to college, to get even more of an idea of the costs involved.

Investigate online schools and courses. Their price tags will likely be lower, and you still might be able to get the education you want or need for your own purpose. If nothing else, you’ll have a better idea of how to weigh some of the costs and advantages of a brick and mortar school.

Investigate going straight into the work force. Get an idea of what you’d be able to do and how much money you’d be able to earn. Going to college doesn’t just cost you the tuition, it actually costs you the earning potential you might have from all the time you’re going to spend learning.

Be sure that you’re aware of everything else out there that might provide an alternative path to college. That’s not to say don’t go to college, but in order to make good judgments about how much you should be spending on your education, you’ll need as much info as you can get.

#5: Examine the incalculables

Not everything about higher education can be brought down to a calculated number or cost or equation. Are the faculty members at the college the best in their fields? Is the college located in a place that offers incomparable cultural experiences? Or is it close to your home so that you can visit family with ease? Does it have a large student body?

It complicates your decision-making process to no end to have to incorporate unquantifiable elements like these into your decisions about debt and cost, but you have to. You’ll only be hurting yourself if you make your decision based only on the numbers and how they work out. It’s not worth it to get a bit higher ROI, for instance, and go to a college that puts you in a location you loathe.

You want to get the most out of your college experience and your money — and that means thinking about the whole picture. It might be worth incurring a bit more debt to be happy during the next four years of your life.

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