Spoiler Alert: College Is Mostly Unaffordable
If you have children in college or nearing college, you're painfully aware of soaring college costs and how difficult it is to afford them. A recent study by the Institute for Higher Education Policy (IHEP) used a unique method to quantify the gaps in college affordability and offered suggestions to politicians and universities as to how to address the issue.
IHEP defines affordability in different terms — to quote the study, "not simply what the cost of a college degree is but what it ought to be" — and created an affordability benchmark based on the ability to save a percentage of discretionary income and to work 10 hours per week while being a full-time student. Ten fictional students of varying backgrounds and incomes were created for analysis.
The disparity was staggering. Only two of the ten "students" could afford above 5% of the sampled colleges, and both came from affluent backgrounds. Since the study is based on discretionary income, that conclusion should be no surprise. What is surprising is how unaffordable college was for students of limited means even after suggested modifications. Increased Stafford Loans and doubling the maximum Pell Grants could not raise affordability above the 30% mark. Only the suggestion that colleges reduce net prices by $10,000 approached the 50% mark.
IHEP also suggested that colleges with large endowments or other income sources establish compensation programs targeted toward needy students. Some universities do provide need-based aid, but even broadening this step does not address the basic gap in overall affordability for students with lesser means.
Take Matters into your Own Hands
While the IHEP study makes valid points, theoretical concepts don't pay your higher education bills — and the likelihood of the IHEP recommendations taking effect are about the same as President Trump releasing all of his tax returns and apologizing for his tweets. Even if they did take effect, a significant affordability gap would remain.
What tangible steps can you take? Start by creating a college fund as soon as possible, even if your children are very young. By making regular contributions and making good use of compound interest, you can put a significant dent in potential college debt. Look into 529 savings funds, state-run college savings programs similar to 401(k) programs.
As the time approaches and a particular school comes into focus, review both school-based and universal scholarships. You may think only of traditional academic and athletic scholarships, but many options are available for students with particular skills, interests, or traits. Conduct an online search to find potential options that fit your child's needs. (If all else fails, you will find some of the available scholarships an amusing form of stress relief.)
Make sure that your file your Free Application for Federal Student Aid (FAFSA) as early as possible, as it is the linchpin for virtually all student aid options.
Consider internships, where companies can provide partial payment in exchange for work or offer summer or single semester co-op experiences. Not only will this help pay for college, it also gives students great insight into the working world, and whether their degree course is truly leading to what they want to do in life. Your child could also consider the ultimate internship — a degree through one of the military academies in exchange for future military service.
All of these paths require preparation and planning. Don't wait until your child's senior year to consider options.
The IHEP study is an insightful way of analyzing just how pervasive college unaffordability is today, and it offers useful suggestions of how policymakers and legislators can help. Don't hold your breath expecting policy changes to emerge from this study. Take college costs into your own hands as much as you can. Preparation is the best step. Establish a fund as early as possible, make regular contributions, and search the scholarship options even while your student is in college.
Most importantly, your child must decide what he or she wants out of college and think in terms of return on investment. It's a difficult but important point to drive home. There's nothing wrong with a degree from an in-state school, community college, or a reputable trade school as long as it meets long-term needs. Having a diploma from something other than your dream school doesn't hurt nearly as much as having tens of thousands of dollars' worth of debt and no viable job to pay it off.
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